With building cost as high as $200 per sq.ft. the appartments have very smart layout, but are kept small.

I would not try to reduce your bid by the demo cost as it could cost you the entire deal. 

These days I checked several threats in this nice Bigger Pockets forum and found several people have already asked about investments in Costa Rica.I know how real estate investing is done in the U.S. and I also know, that you can't use the same approaches and strategies 1:1 for Costa Rica (some strategies just don't work here).In Costa Rica I am specialized in high-yield investment deals (8%+) in the San José area and also in high-end luxury properties with great ocean views and good rental income potential in luxury tourism.One of my projects right now is providing a larger investor client/partner of mine with 8%+ yield p.a. real estate investment deals (in the 200k asking price area per unit) in great neighborhoods in growth zones in and around San José.

The property sounds like a Cape Cod style adding a bedroom upstairs and installing a heat source will definitely up the value and rental rate but is it worth the cost, a good manager will be able to advise you of that too as they are licensed in real estate and can give you an opinion of value.

If you feel they are a good tenant and decide to cover the cost as a good will, that is your choice.

I have an opportunity to purchase 2 multi family apartment buildings. 12 unit with 9% cap rate, $400K and ~$110 per door monthly cash8 unit with 10% cap rate, $300K and ~$110 per door monthly cashSeems to be after all cost a ~3% return on debt investment.

I would imagine furnishings could cost a bit to do right.  

I would at a minimum make this a separate line item to be added to the purchase price to determine your total acquisition cost.  As

YOu can set up your LLC in any state....and this way you could find one that only takes 24 hours to set up and that doesn't cost  a lot of money. 

Turnovers cost a lot.Last, inevitably there are capital items.