Looking for advice on a unique inheritance situation

[Wayne Popelka]

Hey everybody!

My wife and I are just starting out on our journey. We're gearing up to buy our first property and we've also a unique situation surrounding a property on my wife's side of the family that we're looking to unravel. Here's our understanding of the situation thus far: 

My wife's father died in 1998. At that time he had 25% of a duplex on the far northwest side of Chicago (Irving/Harlem area) that had originally been owned by his mother. The mortgage was paid off at some point before then and, as far as we know, nothing has been borrowed against the equity. Everyone believes that ownership either was transferred to his 3 children (including my wife) when he died or that the deed was updated with his wife's name (my wife's mother). In any case, they believe that 25% resides with them in some form or another. Since 1998, they haven't had any involvement in the duplex. The other party (an uncle, I believe) who owns 75% has managed the property and, I believe at times, lived in one or both of the units and also had both rented out. The Cook County Assessor shows that all of the taxes have been paid. My wife and her siblings have had no communication with this side of their family over the past 20+ years. When the subject of this property comes up my wife's siblings' and mother's gut instinct is to worry because they haven't been paying the property tax and I've been trying to explain to them that, as an investment property, the rent should be covering that. I played with the numbers and here's what I'm seeing: 

Assessor lists the property value at $362,000, so I'm just using that as a potential selling price. With 100% equity and minus 9% for closing costs, I believe my wife and her siblings would be entitled to around $82,000 if the property were sold. 

In terms of cashflow, here are my numbers: 

Rentometer lists the median rent in the area for a 3 bedroom at $1725, to be conservative I'm using $1600 a unit. 

$0 owed on the house

2017 Property Tax - $6769.64 ($564.13 monthly)

Vacancy rate in Chicago is 3.8, I'm using 5.0 ($160).

Property management - 10% ($360)

Capital Expense and Maintenance - 15% ($480)

564.13

160.00

320.00

-480.00

$1,524.13 Monthly Operating Costs

Subtracting the monthly operating costs from the monthly rent:

3200.00

-1524.13

$1,675.87 Cashflow ($418.96 = 25% of the monthly cashflow) 

I feel like, at the very least, my wife and her siblings should be getting their portion of the monthly cashflow. I think they're also owed quite a bit. So, anyone have any thoughts? Is my line of thinking correct? What courses of action might be available to us or recommendations on how to proceed? Does anyone have any idea how I could compute the cashflow they may have been missing out on for the past 20 years? 

Sorry about the length! Thanks for reading! I look forward to everyone's feedback!

Wayne