While these expenses don’t provide an immediate tax benefit, they increase your property’s depreciable basis, allowing you to recover them gradually through depreciation deductions once the property is operational.

When including maintenance/cap ex, vacancy, pm, misc he will have little, and possibly negative, cash flow.if he invested almost $250k to add less than $150k of value (assume some of the current value came from the home appreciation), there is no cash flow until the initial negative equity position is recovered.  

If there’s no response, consulting with a real estate attorney would be wise to determine how to terminate the agreement and recover unpaid rent.Once they’re ready to switch PMs, I can recommend some reputable property managers here in Indianapolis who are responsive and trustworthy.

How do you think I should go about recovering the $3,600 owed? 

You could very easily find yourself broke and homeless with no way to recover. 

@Hitanshu ShahDon’t expect to recover losses—it’s usually not worth the time or cost.

If you miss on fence, landscaping, etc, these are small and you can recover. 

Lots of experience, has some reserves, good market and flipper has a healthy income to recover if things go wrong (probably Not a problem in this situation)4.

This negative position can consume years of cash flow to recover.

We were also able to recover $1,550 in liquidated damages from that resident which meant that you were not out of pocket at all for that property turn.