The reason I pose the question is I constantly read and hear podcasts saying it's unacceptable to allow chronic late payments.    

At $400/month that's a pretty weak rental when you figure the overhead, taxes, insurance and maintenance involved in it so without a rent increase I wouldn't buy that unless somebody was giving it to me.

Give me a mediocre to poor location typically mom and pop tenants only want to go in at weak rental rates per sq ft.Someone else mentioned hotels.

Weaknesses?

After meeting with the three inherited tenants we soon realized that one seems to be a "professional tenant" (only has a verbal lease, pays $100 less than market rent, and works for a local property management company; which leads me to believe he knows his rights as a tenant and won't budge on anything unless it directly benefits him)The second tenant appears to be a chronic complainer, and the third tenant seems to be no problem at all.I received a call today from the second tenant notifying me that the "professional tenant" who lives below him, is smoking weed and cigarettes in his unit and the smell is travelling to the upper unit and has been affecting his health and quality of living.Apparently in Ontario, smoking in a unit is not grounds for eviction, even if it was stated in a signed lease agreement.

With the model I feel I have made assumptions on the weak side and that the true payout would be closer to 12% for the investor.Before I try raising capital and pursuing the plan I would like to see what folks in this world think of the idea.  

A satisfactory explanation for why the business had a weak year will be needed.

Most markets are seeing flat growth, big boxes are becoming smaller, office building demand is weak, mom and pops are going away, or gone....and only the strong are surviving.

Unfortunately, weak years in 2007 and 2008 lowered the value.

I confess to a weakness of spending what should be emergency reserves to buy new properties...