Is this for investment property or owner occupied.I'm not licensed in your state, so I can give you some natural third party advice.

In old buildings, we see trim that was actually not painted until relatively recently but with a multitude of poorly done layers so that it's still more cost effective to remove and replace rather than to adequately prep for new paint.

If we were to put in new units, they would have to be up to code in regards to amount of natural light in units, parking, ceiling height, etc… But since we are connecting to the existing studio, all that is taken care for.

ok I think you get my point here.Option 2 generally pops up on the second or third turn, because human nature steps in and you get very tired of spending $2-5k a turn when people don't take care of the nice things you offer them. 

Cap Rates are dynamistic in nature, so focus on how you can increase Cash Flow potential now and in future projections. 

In the mean time getting adequate living arrangements is my number one objective, so if you know of inexpensive and temporary student rooms send them my way.Thanks again!

Make sure they have a solid amount of reserves in their account and an adequate reserve study in place. 

The electric supply will need to be adequate to allow enough outlets and lighting.

Assessment of where you're buying and its 'frothiness factor'2 - Your need for cash flow vs longer term appreciation/equity building, mainly will depend on your time horizon with owning the asset3 - Your skills/ capabilities - some people are more naturally geared towards handling lower class areas, tenants, and usually the items that come up maintenance wise with this.The advice I usually give to 'youngins' (I'm 36 by the way) is to take the long view - which means the equity building, and your TIME to continue focusing on your career, building skills, etc - would lead me to be biased towards the property that you felt would hold / appreciate in value more over time.....

A cheap but perfectly adequate deadbolt costs ten bucks.