This impressive 7,000 square foot property is situated in an upscale Boston neighborhood.

Anyone been in a similar situation?

Once you have a financial base then invest. 

The more rentals you have the more risk there is to having a bad situation crop up.

These are done between the buyer (you) and Seller.The situation that is most common to find these properties are in a foreclosure proceeding, or pre-foreclosure. 

-------------------------------------------------------------------Recommend you first figure out the property Class you want to invest in, THEN figure out the corresponding location to invest in.Property Class will typically dictate the Class of tenant you get, which greatly IMPACTS rental income stability and property maintenance/damage by tenants.If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.If you buy/renovate a property in Class D area to Class A standards, what quality of tenant will you get?

Besides the financial liability, I would not want the mental trauma and anxiety of knowing a kid had died in my pool. 

Consult with a qualified tax advisor who understands these limitations and can help develop a comprehensive strategy aligned with your specific situation.Remember: The best tax planning looks beyond immediate deductions to your complete financial picture.

I would underwrite buyers based on stability of income, financial payment history & ability to pay.

It sounds like you've absorbed a bunch of problems already and a new sewer line and the current basement situation will cost you way less than the $50K in fees to sell it.