Some of the renters have been in since it was built without a rent increase.

It can be argued that making that unit legal will increase the value of the property.

You have to figure out instead what you can be doing that you are passionate about to increase your money 200k,300k,500k a year etc.I want to live for today.

Sometimes if people do not like the evaluation then they can try and stiff the appraiser with paying for it.With an appraisal for a bank, construction loan,etc. the appraiser has standards to meet and can be held more accountable so those reports tend to hold more weight on accuracy although an appraisal is just an opinion and not an absolute.No legal advice given.    

They are willing to pay more than the standard 20%.

He said that they purchased an asset with rents that have not increased in 5 years (can't remember exact amount).

Come to find out the courthouse has standard forms for this.

I was able to work with them to get a 5% rent increase put in place within 2 months of closing.

My question is if it's always better to purchase properties in cheaper market where it takes less capital and the rent to price percentage is easier to get above 1% or if it's worth investing in a city like Denver where it's very hard to get the rent/price ratio over 1% but the cost of the real estate increases much quicker than it does in other less desirable places to live?

Tell them filing of the eviction papers is simply standard policy.The eviction process takes time and you do not want to waste a minute.