Need Advice on what to do next- nightmare property

[Brad Clarizio]

Hi folks,

I had a very unique situation happen to me and truthfully, I'm unsure where to take it next.

3 years ago, in October of 2012, I bought a duplex in South Linden (bad area) of Columbus, Ohio for $16,000 cash. It was my 3rd property and the idea of owning a duplex was so exciting to my 22 year old self, I simply couldn't refuse. Unfortunately, like many young investors, I let me excitement blind me and I bought the property site unseen...you can see where I'm going. 

Long story short, my insurance wouldn't cover the property because it had a slate roof (State Farm), and they required me to replace it all. I could not afford that at the time, so I made the decision to sign the property over to my property manager who was looking to obtain a rental, and I had a mortgage note put on it where he agreed to pay me $400/month for 54 months, including interest (I believe we agreed on 3.25%). 

Fast forward to this past December (2014), he filed bankruptcy and did not put the house in his filings, but he had to surrender it. Currently, there are people living there, he is not collecting rent (or so he says), and I have not received a payment in nearly a year. He indicated that any time I want the house back, he'll sign the deed back to me and it's mine, free and clear. My dilemma? I want don't want the house. Bad area, bad situation. The house is in decent shape, but will need 10-15k worth of work for it to be up to my standards. In another year, the house becomes mine anyway when the bankruptcy is finalized, so I'm stuck. 

To me, my options are:

Donate the property to the city and take the tax write off

Sell the property to a wholesaler for 4-6k

Take the property back, invest 10-15k in a house that's only worth 20-25k to begin with and hold it for awhile

Fight this in court to get him to pay me back for it as part of the bankruptcy or garnishment

Looking for advice- what I want is out- if there's an option for me to recoup some cash without a huge investment, I'm interested in that as well.

Thoughts? 

[JD Martin]

Based on what you wrote I would take the house back, if it's legal to do so (i.e. not considered an asset that he owns by the bankruptcy court). If you're going to end up with the house back anyway, why would you wait another year to get it back? Take it now, evict (or collect rent from) the people who are there, and either try to cut your losses or put a little work into it to make it worth renting. Look for another insurance company, as they are not all equal on these things; in fact, you may want to aim for an online insurance company, as they are less likely to come out to inspect the house. When you say it is a slate roof, is it because you know that for certain from an inspector or having the material in your hand, or is it because it looks like slate? If you don't know the answer to this for sure, then when you go to get insurance you answer honestly when they ask for roofing material composition: "I don't know, I have never been on the roof". If they ask further, tell them it looks like slate, and leave it in their hands to determine if that's what it is. A lot of online insurance companies, writing property insurance on a house that isn't worth much anyway, won't bother to spend money verifying whether you have vinyl siding or a slate roof. 

You probably need to consult an attorney on this since he has now declared bankruptcy to see what your legal rights are to the property.