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I've noticed during heavy rains that I get water leaking through the wall of my foundation, about 2 feet below grade, where an old capped off gas line enters the basement.

Looking around online I've seen these kits: http://www.appliedtechnologies.com/home/waterline_and_pipe_penetration_leak_kit.html

It seems reasonable but in the video there is actually a void surrounding the pipe to fill with the poly compound. In my case, the foundation surrounding the pipe is intact and painted over, with the painted sort of bubbled off and some crumbing right around the pipe.

I guess my question is, are these kits a good way to repair this, and what kind of prep do I need to do beforehand? I was thinking of using a wire brush attachment on my angle grinder and trying to clean off the paint and loose concrete / efflorescence. How do I actually clean around the pipe? Should I try and remove more material around it with a dril and masonry bit? I'd like to have some confidence in what I'm doing so I don't just end up with a bigger leak!

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I would chisel out around the pipe a little about 1/4" wide 1/2" deep. clean it up good. Pipe and concrete. Then use a concrete sealant. $75 is overpriced.
This is under $10 and makes a flexible water seal.

Sikaflex 10 fl. oz. Crack Sealant

Sikaflex 10 fl. oz. Crack Sealant

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