And by the way, just last week Cuomo signed into law a bill making it illegal to collect rent from any tenant or evict a tenant residing in a property without a valid certificate of occupancy, so plan on bringing anything up to code before collecting your first dollar of rent, even if the prior owner was collecting.  

But if that block is mostly owner occupied, then this is trying to get an owner occupant buyer, and trying to get them to pay what sounds like an exorbitant price, in order to get the lease/option terms.I sense and have experienced some of Eddie's frustrations in trying to buy REO properties - and I think most REO buyers at some point encounter the same things.

The best bet out of all this would probably be a short sale, but since your friend appears to be a non owner occupant that may be difficult.

They don't realize that fixing these sorts of problems in the future will be a LOT more costly than just doing the right thing today.I guess when the OP gets asked for a Certificate of Occupancy by his end-buyer, he has a plan for dealing with that.

Some owner occupants will walk away, but many can see past messy paint and stained carpets.

Rather, as a consultant, I attempt to discern the source and then write a protocol for removal - designed to keep occupants and workers safe and to remove the mold damaged materials in their entirety.If that's the only corner that shows that type of damage the remediation costs may be small.

The grey area is the reason you have to move, and the length of occupancy.

Why did an owner occupant buy it?

I've negotiated jv agreements down to who does what and when, like Party A will pay for all development costs, party B will pay for all operating costs after construction is complete and certificate of occupancy is issued, party c will contribute the value of land as imputed capital (as determined by an appraisal) and zero cash.You'll do the same for returns.

The answer is a big no you couldn't rent a 300k house for 8,400 a month in income minus expenses of course.As the rents increased some over the years along with appreciation you could get very nice returns.If you had 300k to invest you could also buy a distressed asset such as an apartment complex with deferred maintenance and occupancy issues for cash and turn it around or use hard money and once the property is stabilized refinance in a year or sell off for a profit.What you can do depends on how much money you have to play with without bringing in another partner or raising capital.Hope it helps.