Also, your screening process either needs major improvement or your units are in a Class D neighborhood - and this is the tenant pool you have to deal with.Why don't you "shop" your local competition and at least see what competitive units look like?

We made several improvements to the property when we got it - a totally new gas line, a totally new water line including all the lines from the street and pex plumbing installed.

Either close to water/beach, or in scenic/mountain area.

The demand for homes with a bit of land and a shop is high where I live, leading to a larger buyer pool and quicker sales.

But this 5 bedroom 4 bathroom house with swimming pool and everything else was well worth the price differential. 

Expenses: Mortgage: $3655.55,Property management: $470, Water: roughly 100/month.

When she went to the basement, she saw that the water was pouring very rapidly.

My house seems to be a better pick than the ones on the market (new kitchen, pool, etc.), but still.Given these factors, I'm questioning whether I should sell the property and look for better investment opportunities.

Find out the life expectancy of a hot water tank, then bill the tenant the difference.

In my area garbage and sewer are the most common examples, but I have seen places where water and electric are municipal utilities as well.