They counter-offered at $425,000, but they are saying it only needs $75k rehab costs. 

Hint to buyers agents- don't let your clients show that big of a tell at an open house, because the "we have lots of other properties and this one isn't really one they're interested in," doesn't work when their entire family has came in 5 times to look at the home.I received multiple offers and one came in at $210,000 and I advised my client that we can get more, shortly after we received a counter offer of $215,000.

Still awaiting rent rolls before I make my counter offer.

If you have access to the ducts, replacing them is relatively easy or get an estimate from an HVAC contractor and factor that into your counter offer. 

Your counteroffer was extremely reasonable.

Any thoughts or suggestions on counter offer and negotiation would be great.

Perhaps look at this counter offer as a way to tie up the property and then look for the capital, rather than vice versa.

I am seeking anyone's insight on how should I counter offer the proposal.

So for the short answer, you can negotiate...to an extent.As far as what documents are required, you will need to provide income documentation (tax returns, pay-stubs, P&L if self-employed, etc), identification, and purchase documentation (purchase contract & counter-offers).

The seller's counteroffer is $128,000.My COC calculation is 25.17%.