@Jonathan BonckAs mentioned by others, you need to make sure you're getting a good discount off the appraised value of the property.  

Give Ben Leybovich's blog post here a read, but even more so, read Brian Burkes comments on the blog.Your CAPEx reserve is not an operating expense, it is a reserve and is deducted from NOI.Instead of looking for a specific CAP rate which will get you in trouble, you should be carrying out a discounted cash flow analysis over your {initial} hold period and determine the IRR or MIRR ... use these to anchor your underwriting, then look at things like Cash-on-Cash return to help determine the composition (some might say, quality) of the return.Frank Gallnelli's "What Every Real Estate Investor Needs to Know About Cash Flow" is a good primer to get you started.  

When we rehabbed our home we pulled permits but didn't add any bathrooms or bedrooms.

What sort of discount can I get when I buy this house, and how much will it cost me t fix the problem?

Deceide what other electrical work you need like hanging any light fixtures and putting in n exhaust fan in the bathroom and adding any light switches and get  package price for everything ekectrical that you need to get done.

The downstairs bathroom shower doesn't work at all.  

No problem go to the bathroom real fast and call the office for a showing!

Is it the case you get a discount for paying off the whole thing, i.e, don't have to pay fees?  

If the bathroom on the third floor is used before any water demand on the second floor, it can take quite some time to draw hot water.  

Bathrooms: People expect custom.