Please review and let me know your thoughts.The 3,804 (heated) SF home was taken for back taxes and the government selling at auction soon.

This tells me that submetering might drive all tenants out (almost all units on the rent roll are $25-125 below average rents, including the competition) and that even if I underprice the competition by $25-$40 or so, I'll likely loose to them (as the winter heating bill will easily eat that up. 

When rehabbing the house I have considered tearing out the baseboard and wall heaters and adding central air/heat, which I'm thinking will increase the value.

Hello BPMy clients are looking to purchase a property for 65k without a working heating system.

If not, the cost of utilities you'd need to pay should be factored into your assumptions (it'd be surprising, for example, if heat and hot water were separate for all units).

Or whether it would classify as improvement to the house, as oil tanks are part of the heating system.  

They come, look at the furnace and say the heat exchanger is gone. 

http://ca.reuters.com/article/domesticNews/idCAKCN...Ontario will be spending $5.4 billion to cut the carbon footprint and phase out natural gas for heating. 

I guess, If I can't handle the heat, I better get out of the kitchen. 

Also, there may be some common area electrical / heating that you have to account for.Occupancy - Perpetually full is great and using 5% for vacancy gives you a bit of buffer / wiggle room for the unexpected.