The way I plan on presenting this is that it would a) spare them from having an actual rent increase and b) give them the ability to control the cost as they can control their water usage (in case they have been more wasteful than they could be).

@Paul Winka  Assuming this is sheetrock I would cut out the damaged sheet rock, check any wood behind it for mold. 

At this point that is cutting into cashflow and I am only finding deals that make around $200/mo which is still OK by me.

Putting a low rate looks like you're just looking for an excuse to get out of contract, in which case "why waste everyone's time?"

Or do you feellike that $700/month is absolutely worth it, and I’d just bewasting my time trying to cut things out?

I purchased the property for 235k and on the listing it shows it sold for 210k after the wholesaler took their cut, I didn't notice it when I got the insurance but the insurance only covers the 210k and not the 235k +40k + holding costs, etc. 

I feel bad because I have tenants in the house and at least once a month the water is an issue for them as I have to cut off water.

This being said, don't waste a contractors time with walking a property with you unless you are serious about purchasing and already have financing arranged.

As everyone has stated already, since its over and done with nothing to focus on since it will be wasted energy that could be put in a positive place. 

Every new investor entering the market buys at a higher price point, cutting into their profits.