Rental Property Advice!

[Steven Cherry]

Hi all.  I am close to closing my first rental property but some issues came up and I wanted to get everyone's advice.  The house is a duplex, which I am in contract for $160,000.  There are tenants in both units paying $2100 per month.  The house is from 1950 and needs some touching up.  I'm estimating approx 10k.  There was sewage backup in the crawlspace that I required the owners to fix.  They said it was fixed and wanted me to continue with inspections.  I went back to check the crawlspace and it was not resolved as required.  I told them that I will only proceed if they use a company I need to professionally correct the issue and they ended up hiring them to take care of it.  The owners have not been transparent so I am trying to be extra careful.  Now, the final hurdle was the septic inspection.  It turns out that there are 2 septic tanks, both from ~1950.  They have never been upgraded and after requesting info from the township, one of the drainfields were simply widened in 2007.  The tenants told me that the one tank needed to be pumped several times in 5 months since human waste was coming up in the shower.  The tenant said it has been okay since the last pump several months ago.  The septic inspector estimated  ~30-40k if I wanted to bring both septics up to code or ~15k if I wanted to repair both drainfields if needed.  There are plans in place to break ground for sewer at the end of the year or early next year.  The incentive to hook up to sewer would be a $5,000 loan to cover all expenses required to hook up.  The loan would be reduced to $0 over 30 years.  Final permits and financing are still being finalized.

I asked the seller for a $15k credit to cover the cost of the septic repairs if needed.  They said they are not looking to give any credits.  I said I need a credit and they offered $2,500.  I countered at $8,500 to help cover the repair of at least one septic.  They now countered at $3,500.  Although sewer seems likely and the area needs it, it is not guaranteed.  If it was guaranteed, I would be comfortable with this.  If sewer does not come, I would be stuck footing the bill of either repairing the septics to properly work for however long or upgrading the septics. Since many have much more experience than me, I'd greatly appreciate your opinions and suggestions!  Thanks a lot.