Inspection done; not sure whether to purchase property

[Henry L.]

Hi folks, an update on the place I've been looking at.  I have a 3 family, 3 story home (built in the 40's) under contract.  The ask price was $355K, I negotiated it to $302K.  The rents are at about $2800 currently, but market prices show I could raise them $3600 or more - one issue is whether the current tenants will leave (they are not under any leases).

I got the inspection done, and there are 4 major things I need to get fixed.

1) There are 2 chimneys in terrible condition. The first one, I heard I can take it down, as it's not being used. The second one, there are 2 gas boilers and 3 water heaters running their exhaust through it. The inspector says most likely the chimney doesn't have the capacity to handle that and will need to re-lined.  I estimate $1000 to fix the first chimney and $4000 for the chimney lining of the second.

2) We found a lot of termite damage in the basement -- can't see the extent of it, but the inspector says the seller definitely needs to treat the house, or show that he's already retreated it.  Also, I need to get someone in there to estimate the extent of the termite damage.  Not sure how much this will cost.

3) There are 2 Federal Pacific Panels that I need to take out and replace ~$2500.

4)  It looks like someone did a shoddy job with the sump pump, so I'll need to get that checked and repaired.  Don't know how much this will be.

Are there too many risks here for me to take on, or is this all normal?  How serious are these issues?

At first, with the $3600 in rent, I was definitely CF positive. Depending on whether the tenants leave, I could be left with about $2800-$3000 in monthly rent only. I had estimated only $5K in repairs, but now I estimate about $20K. I'm pretty sure the seller doesn't want to concede any more on the price, even with these newfound issues. My CoC ROI was about 4% with the higher rent -- now it will be lower.

However, I also want to take on a property so that I start learning and dealing with issues, rather than just looking for and analyzing deals.