Few comments here…
Being that we have actual numbers , lets try and shy away from rule of thumb ratios…
check out the property tax bill. 20k. Whats it on the tax rolls at ? Whats the tax rate? You may be able to get this reduced especially if you have proof of purchase showing amount. But really say the assessor says its 450k and rate might be 2-2.5 % (could be more could be less) , then 9k sounds a lot more reasonable here. If you can share any details on why its currently so high you might get a better answer.
In theory you can bill back water and sewer over time ( maybe even trash ?). You can manage this in a plan where you work to bring rents to market.
I personally wouldn’t place value on the rent below market on POH. Your goal should be to get out of them. Whats the age of the homes? If you have 13 homes and can extract some money out of those as you get out of them , it can reduce your cost basis on the deal ( depending on how much you might have to put into them)
All in all, this sounds like it could be a great opportunity, below mkt rents, utility bill back , vacant lots ( market is probably decent with a 350 lot rent) .
Sure its not perfect on the surface since you are overpaying based on caps but in theory, you get out of the POH just at 25 lots that are TOH, get to market rent, utility bill backs should get your gross rents to about 100k and if you are 60% NOI at that point so about 60k noi at a 9 cap 666k value . Get the remainder of the lots filled and maybe get the NOI closer to 70% ( based on how much room you have to spread fixed costs…) closer to an 88 K income almost a million dollar valuation .
This is as good as deal as any when you evaluate the probable path. Get it under contract, get the diligence rolling.
I would just advise a little caution about offering him too much less than asking. Its great to negotiate but don’t lose a deal over 20k like this. If you have confidence in your ability to negotiate go for it. ( i missed out on a deal for being cheap about 85k (which equated to around 20%) . I think it still was a good deal but in hindsight, i regret it )