Keep in mind rent control is 1 thing, its a laws for existing tenants but some city's like Newark are so strict that you must get approval for what rent can be even after a tenant moves out and new ones move in. 

How long will they have to cover property taxes etc for the decision they make?

Today, that building generates enough passive income to cover his annual retirement contributions.You mentioned taking the 10% penalty, which I’d only recommend as a last resort.

Denver and its surrounds have particularly active markets and a lot of active individuals offering ancillary services so I'd suggest you research those available services you're looking at offering to help you get an idea for what is well covered, what is lacking and what your competitor's pricing looks like.

The deal was a long time ago and it was a quick-close, pre-foreclosure, all cash deal. 

Can try to reposition to Class B, but neighborhood may impede these efforts.Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.Tenant Pool: majority will have FICO scores of 560-620 (approaching 22% probability of default), many blemishes, but should have no evictions in last 2 years.

@Matt WeddonLegally, you’re covered as long as you stick to objective, non-discriminatory reasons for rejecting someone (things like personality or ‘vibes’ don’t cut it in Fair Housing law).

Alternatively, you could split it between House 2 and 3 in a way that covers your building budget for the apartment.

After they asses what all needs replacing or what they feel needs replacing they'll submit to you what they're willing to cover and deductibles and payments etc. 

Invest in some awesome parking facilities, like garages or covered spots.