Would you want a junker that either will get turned into something nice and creat a profit, or would you rather have a decent property that was simply bought at a discount?

I'm simply trying to take the equity out of that and use it to buy a rental property. 

If it is simpler to simply raise the rent amount to cover the water and continue to manage that bill, that may be an equally acceptable option.It wasn't clear to me based on your post if you transitioned the tenants to your own lease or if you are simply using the previous owners lease agreement.

This not only builds trust and credibility, but is simply the easiest way to ensure everyone’s questions are answered.

What needs to be taken out and what can simply be capped?

I am not sure if my particular lender is just slower to adjust, or if I am simply being greedy, as I am lucky to have seen such a decrease in the first place. 

I was simply asking a tax question.

In high asset classes you can simply ask for the water from the tenants and always get the money obviously as you get lower asset classes the unreimbursed utilities spike up..

@Paul Bickle similar to what John said, some companies simply don't have a great appetite for helping investors. 

It all boils down to costs vs benefits