End result it seems we are getting the upset price of 236k, so not a total disaster , but still a far cry away from the 100k per year NET I would be getting or sales price of 600k or more.   

Portland has a pretty strict code for airbnbs in residential zones, requiring a long term resident to live there for 275 days per year.

Talk to a local attorney about the risk as per the laws in Your state.

So after construction you're into the property for $363k.You now have 5 apartments with an average cost of $72k per unit.

Again this is not the end of the world, and you could get a much better deal if he can't show any income.I would personally prefer this purchase over a skilled owner...I will get this property for pennies on the dollar versus the .75 cents on the dollar that I would likely get from a semi-skilled owner.

One of the houses is selling for $25,000 that is rented at $650 per month.

All the negatives you mentioned are a big red flag for me plus I personally see that at $350 a month, its hard to make enough reserves for future capex (per unit).

This would help me in 2 ways, 1) My property manager would be only be getting $400 of the firsts months rent instead of $900. 2) I would save around $700 per year on fees.

Near me, it's around $700 per year.

Owners tend to always think fees are too high for services offered.Maybe the management company was too big,too small, too far away for the type of tenant base and rents per door,etc.