if the property is not placed into service yet(still under rehab) and you are not in a trade or business, the costs would be capitalized.I recommend the app 'MilesIQ' to keep track of your business miles.

I'm a property insurance adjuster by trade with a background in construction (mostly framing, but have experience with flooring, windows, drywall, trim, tile, electrical, plumbing, etc.).My father, who has been in the construction industry for 40 years and owns his own company, and I recently completed and sold our first flip. 

But at least there are consequences/remedies if they do stop.

As you know mid west upper rust belt they trade houses like we trade used cars so dollars are not as critical and there are far more derelict homes than we have in our markets..

Spell out exactly what they have to do, when they have to do it, how you will verify, and the consequence of failing to comply.

I always do my own work and have people who I know to do the trades I am not expert in. 

As a consequence, my current home bought in 2011 and paid off 2 years ago, has appreciated by 150,000 minimum.

It could be events in their lives that require them to need money, they could be close to retirement and not want the hassle (they could be young with growing families and not want the hassle), they may think the market is fully valued, they may have read that New York City class A rents are falling and take that as a bellwether for the market, they may want to trade up into a larger deal, etc.Regarding your question about why the prior owner did not complete the upgrade program and capitalize on the higher rents, it is very common that the existing owner is undercapitalized and there is not enough cash flow (after the owner takes their draw) to pay for improvements.

We are GC’s by trade and have been working with the city for 25 years. 

I did a trade show one day and was glad I was next to them.