Should I dump or fix??

[Troy P.]

I recently acquired a small bungalow (ranch style I think some call it?) home in Rome, GA for about $80k with tenants paying $800/math. Got it for a reasonable when compared to the comps in the area and the condition it was in. I knew the AC would need replace which would be about $3k but when I sent someone out to do an estimate it turns out that there were rusted pipes under the slab leaking raw sewage into the crawl space. I don’t know much about the hook up so I can’t provide further details but the estimate to fix the pipes properly, replace the duct work, and the actual unit is approximately $16k. Should I sell this place or do the repair?

I recently upped the rent to $900 so my cash flow will be good but essentially a year or so worth of profits will be wiped out by the repair. This is my first investment property in the US. Would the tax deduction for performing the repair be worthwhile? I have a high income from my 9-5 so I’m thinking this deduction would wipe out any taxable income from the property and lower my taxable personal income and therefore be worthwhile. Am I wrong for thinking this? If I do move forward and bank on the deduction, should I finance to preserve my cash flow? Would that mean I couldn’t deduct the full repair cost and only the interest on the financing?

I wouldn’t mind keeping the property because of the cash flow but I’m not sure it’s worth an immediate dumping of $16k. 

I would love to hear the thoughts of the community!!!! 

Thanks in advance!