I did a mistake by 100% trust the realtor and end up with a nightmare

[Summer Dechanukul]

Hi everyone!

I'm Summer (Newbie for real estate) 

My stupidity was I 100% trusted the realtor when he said the house (duplex) is a good and I don't need an inspector and I did believed him. Then I sign everything and took this deal with no inspection. Later I got the violation letter , a long list of what needs to be fixed which was a lot. I have done changed the HVAC for both unit, brand new and for HVAC the inspection was already passed. and I changed all windows for both unit. also I changed the new electric panels and changed all outlets for both unit but the inspection said I needs to run all electric the whole house which means I have to pay more for run the electric and replace all drywalls, that means I have to put lots more money into it.

the question is should I go further or should I cut loss? It's very tough decision for me.

- If I should cut loss. I got offered $120,000 with no inspection now

  but  I already spent $107,900 and I have mortgage balance $119,000 that I have to close 

  which means I'm going to lose around $115,000

- if I should go further 

  I have to pay more for run all electric $15,000

  Replace all drywalls $3,000 

  Plumbling $3,500

  and after I got all these done. I have to do the building inspection which I'm not sure how much more that I have to put the money into? Any Idea about the foundation?

  If I can make it done. the rent around that area for 2 units will be $1,700 monthly 

Option 1 = Cut and loss around $115,000        (which is so painful T_T)

Option 2 = Put more money $30,000 or more and get a rent $1,700 a monthly 

Please help me with my stupidity. Please give me advice. I would like to get away from this nightmare.

Thank you so much for your help.

[Greg M.]

Everything you've spent so far is a sunk cost. Take all that out of the equation and you have two options. Option 1, someone takes the property off your hands and your mortgage goes away. You're guaranteed a loss of $115K. Option 2, you risk $30K with the belief that the unit will begin generating some free cash flow. 

Some rough numbers, a $119K mortgage is about $800/month. I don't know Cleveland, but let's say that taxes and insurance total $200/month. Rent will be $1,700/month. Therefore, the unit has the potential to free cash flow $700/month right now. Are you willing to risk $30K for the potential to free cash flow $700/month? 

You'll recoup your $30K in 3.5 years. You'll build another $5K in equity in the place over that time. The unit may also appreciate in value. 

You bought a lousy investment. However, given the mortgage and the rent levels, you have the ability to let time dig you out of your hole. With the level of free cash flow, you can easily be paid back all the money invested in this place, all the while building decent equity. It won't happen over night, but it will happen. 

I'd spend the $30K and keep the place.