The ARV on small multifamily can be a bit tricky as most appraisers will like to use the comparable approach as to an income/NOI approach typically used by larger (5+) multifamily properties.

These properties typically turn over once a year as they are mostly student rentals. 

Typically homes in-between tenants, or a new purchase with intent to have renters within 30 days this is allowed. 

Sometimes hard to find this happy medium in rate sheets, though.Another consideration would be taxes - points are typically treated as interest, so if your tax obligations are high this year vs being higher in the future, then this could also impact buying down now vs paying a little more in interest in future years. 

Deduct NEW property taxes after you buyDeduct home insurance costsDeduct maintenance percentage, typically 10%Deduct vacancy+tenant nonperformance percentage(we recommend 5% for Class A, 10% Class B, 20% Class C, good luck with Class D)Deduct whatever dollar/percentage of cashflow you wantNow, what you have left over is the amount for debt service.Enter it into a mortgage calculator, with current interest rate for an investment property, to determine your maximum mortgage amount.Divide the mortgage amount by either 75% or 80%, depending on the required down payment percentage - this is your tentative price to offer.If the property needs repairs, you'll want to deduct 110%-120% of the estimated repairs from this amount.Be sure to also research the ARV and make sure it's 10-20% higher than your tentative purchase price.As long as the ARV checks out, this is the purchase price to offer.It is probably significantly below the asking price.

Has she even received a supplemental tax bill yet? 

You’ve received some great responses full of valuable information, but I believe you may be missing the BEST market.  

I've been receiving more quotes than in the past containing endorsements excluding coverage for condominium/PUD construction.

"-  Section 8 rentals typically follow a purchase and rehab project. 

If the property were owner-occupied, would I only receive credit for one rental unit's income, while the non-conforming basement income wouldn't count?