Though, if that price doesn't fit your budget at all, this place might not be worth it to buy.

I'm in a small market and know it wouldn't be worth my time.

If you are going to say your loan down part of your return for your net worth -- it should also be discounted, considering it is money leaving your pocket.

HiI am looking for investing in my first STR property. Can someone provide some insights on these markets? what is the average yield or CAP for properties around 400-500K in the area?

Most of these small business owners live hand to mouth and are not worth chasing.

If the builder doesn't add any cash, but puts in his labor, you need to agree up front what his labor is worth, how much he puts in, any limits to what he charges, etc. 

It's always best to invest in your backyard, you have the homefield advantage and that is worth a LOT.

There are other retail sites that are worth looking at including Home Depot, Lowes and even McDonalds. 

If I'm already going to be having to fix a lot of the main living area drywall, flooring, and balcony tiling, should I consider options to “enhance” while I’m at it to make the expense more worth it?

@Konstantin Boubev The removal cost sounds way out of line, typically well known companies like Brinks will remove the tank for a couple of grand.