The seller responded that we should increase this that is typical for a single family.The house consists of 4 single bedroom apartments that are each 4 rooms.

After 5-plus (if I recall correctly) years of 10%+ increases in price and single-digit days on market a drop to 5% price inflation and average 30 days on market would feel like a dip.

Certainly the margins are decreasing due to both increased government regulation and market saturation.But professionals like Neil Collins here in Portland, who self-manage effectively, and can deal with government wonkage effectively still have profitable margins.  

As for existing tenants, I would maximize the rent as soon as possible, whether that is receiving the property vacant or increasing current rents.

The latter options may not appear to be as attractive, but they could possibly increase your cash flow on the quad, and allow you to purchase another property with an FHA loan a year from now.

By doing it this way it drops the cash on cash return (below 10-12%) because it is increasing the expenses.

When times are good, you have the ability to increase your principal.

Having a couple of credit cards, student loans, car payments, home loans, etc. and paying them ON TIME every month will increase your credit score. 2.

I gave them 45 days notice of the new lease and rent increase (5/15).

That is an easy way to increase the value.