Should I keep or flip rental that needsCast Iron Plumbing Repair?

[Jason Gore]

I purchased a SFH in Dallas 2 years ago. So far I've made 15% cash on cash return after repairs and vacancy. However, the house has cast iron plumbing and has been having sewer problems ever since I got it. Both toilets, shower, kitchen sink, AC drain line, and laundry drain line all have been clogged up at least once. I have cut down 2 trees near the toilet, and have used rotor rooter which seems to have stopped toilet drain problem for the past 18 months. However, the kitchen sewer line is not so lucky. According to a plumber isolation test, the kitchen drain line is completely corroded that the bottom of the pipe is gone. The plumber's recommendation is to replace the 34 feet of kitchen sewer plumbing with PVC through tunneling, which would cost $13k (This cost is the equivalent of flushing 2 years worth of cash flow down the drain.) The sewer line is in such bad shape that cured-in-place-pipe without digging is not an option anymore. Due to the location of a drive way, rerouting is not an option either. The tenants are understanding and plan to stay for another 3 years, although I am only counting on 1 year at a time, as that is our least term.

My concern is how will this impact foundation? Does this mean the toilet drain line will need replacement too at some point? Should I be better off just selling it? I assume these are issues that require disclosure though.

I am really scared of the money pit potential although it's been making $7k a year right now. What would you do? 

[Brian Ploszay]

First thing, get another opinion from a sewer contractor.  I own lots of older housing stock (typical of older cities) and I have lots of experience with drain issues.  

Your diagram is helpful.  Something seems wrong here.  Did you put a sewer camera into through the whole kitchen to see precisely where the breaks are?  I find it unlikely that the whole thing is rotten.  That long distance to the main sewer line is an inherent problem as there is grease and foot particle buildups from kitchen sinks.