First time landlord looking for advice with major property issues

[James C.]

Hello,

I am a first-time landlord who has run into some major issues with my first purchase. I am looking for advice on how to proceed. Below is the series of events that has led to now.

I found an apartment building with 10 units for around $110k. It’s not in a great neighborhood and the building is old, run down. No problem, I was looking partially for a fixer upper to gain experience and to have a “test run” of sorts. I was not prepared for what happens next.

Started talking to the landlord and tenants, there are things that need to be fixed (various water leaks, other misc things) but nothing that seemed to serious. This is important, no one told me what was about to happen next.

I had a local inspector come out and inspect the property, he once again found some things but none of it was serious, some appliances needing replacing, leaking faucets, etc.

Then because I knew there were a number of water leaks, I had a local plumber come out and do a second inspection on the plumbing of the building, including the sewage and water lines in the crawl space. Once again, he came back and said there was nothing serious.

Now the landlord was pretty unresponsive to questions, and secretive about his previous billings, other maintenance issues. But because I got two good inspection reports back, I didn’t think too hard about it.

After I got some quotes for repairs and a new evaluation of the property, I countered with 85k, he said he’d accept it if he got to keep the security deposits. (What?) I went back and forth and eventually landed on 95k, with him paying closing costs. Then I never saw the security deposits. Completely dropped communication, and I still don’t have them to this day.

This is where the fun begins. I find out AFTER purchase the tenants don’t have gas. It was disconnected. I call the gas company to get it hooked up, they come out, and say the lines don’t hold pressure. Great. I call a company to get the gas lines repair for $13.5k. Okay fine, I can do that.

They start work and I get a call the next day. While they were under the building, one of them almost passed out and got really sick. They find that the sewer lines are leaking sewage under the building, and are so old that they need to be replaced. The sewage is what made the tech sick is what I was told.

So now I’m looking at $32k to replace the sewage lines, plus the $13k for gas, plus whatever the cost to get the sewage cleaned up is. I’ve thought about not renewing all the leases (they are month to month) as I can’t get the sewer lines fixed while people are living there anyways (so I was told). This would also give me an opportunity to fix up some of the units and start charging more for rent than what was.

My question is for those of you who have done this for a while, what would you do in my situation? I have the funds to cover these expenses but it’s still a lot.

I’ve already started a small claims to get the security deposits back, and I’ve already paid for half the gas lines to be repaired. Am I getting screwed over on the costs of these repairs?

If you made it this far, thank you. Any advice you can provide is much appreciated :-)