If you don't know how deep the water is, you may get more than just your "feet wet".Third Lesson.Cheap and discount are not the same thing. 

Property was on market for about 170 daysI originally started the STR plan for tax benefits and plan to do cost segregation as i fall into high income bracket (37%+ 11% state) saving around 50k for 600k property.I have no plan to personally use the property and this is purely investmentI thought i found a great deal because properties in the area are selling for 205-220 per sqft.

Also, the water could have entered from other areas and traveled along a beam and exited the kitchen ceiling.

You are talking about a new water service line upgrade right?

Water, trash, internet, and fire wood make up the rest of the utility allocation.  

We are local contractors in the area looking to get our feet wet in the real estate investing waters.

This house had 12” of water/ice in the basement... there’s a nice sump pump set up just sitting there with no power...

So at the end of the 5 years, you are just treading water with the lower price point home, while you made headway with the other one. 

If it is, I would do whatever I could to get good paying tenants in there right away,  If it is vacant, you are going to be running through cash like water through a sieve. 

If I buy a house for $400k, and the market drops and the house is now worth $300k, I am under water.