However, the risk of significant repairs is not to be taken lightly. 

I got a very good price on the building (about $25k per door), but it was a ton of work as in addition to tenant issues, there was TONS of physical distress (foundation repairs, sewer line and water line repairs, electrical upgrades, new roof, and apartment renovations needed for all units). 

You may need to disclose that you repaired this to buyers and want to include more detailed information about what was done.

I've since had to do a service call for the fridge and had to replace the oven recently as the repair was going to be about as much as a newish used one that was in great shape. 

Deductible expenses include a proportional share of mortgage interest, property taxes, insurance, utilities, and repairs.

@Yents Ybrimovic If the 203k loan only requires 3.5% down and you can finance all the repairs in the loan - then what exactly is your friend contributing?

Total hands off, perfect property, with awesome tenants who pay on time or early and never ask for any repair. 

You are best off getting a plumber out there ASAP to identify the leak and repair it.

If you are going to add value to the house you might be able to get an equity line against the property to use to fix up the property or negotiate some repair money from the seller that you get at closing.

When the transaction closes, the purchase is funded, and we set aside additional funds in an escrow account to pay predetermined professionals to make any required or desired repairs or upgrades to a property AFTER the buyers settle on the purchase transaction.