Help me get out of this bad investment
Ok BP, I have a sticky property I'm not sure what to do with. This is my first time asking for help so bear with me.
My mother had purchased a house in Houston 3 years ago at an inflated price (around $100k cash), it came with rental guarantee for 2 years so for two years neither of us paid attention to it. When the guarantee ended the rental income dried up, and that's when I took over the management and realize the place had been trashed and needed major make over. Being a newbie that I was, we have spent over 17k rehabbing a remote property as per instruction from the property manager, the local realtor estimated it to be worth about 70k now after rehab. We've had a hard time finding renters presumably because of the neighborhood is very trashy. Anywho this begs the question what should I do with it?
The unit is now rented at below market rate, but it's considered rented nonetheless. My mother wants out of the business so we are left with a few options
1. Deed it over to me, and I cash out refi it to access its equity. This is risking the current tenant is decent or it can actually attract good stable tenants going forward, obviously 17k turnover cost is way too high to consider again. (On this note, anywhere I can do cash out refi under a year's worth of ownership?)
2. Sell it as it is, cut losses and use the money for future deals. There shouldn't be capital gains but I heard there is 20% withholding due to her being a foreign investor? Can she get it back when filing taxes or is it just gone?
3. Deed it over to me and 1031 it to something else, avoiding the capital gain tax I'd have to pay since my cost basis would be $0.
Any other ideas welcomed!