thoughts on buying older properties?

Question

I have heard from of few seasoned investors that i should try to stay away from properties that are 15 years or older unless the property has been previously renovated.  My game plan is to hold and rent and with that i was told older properties tend to have a lot more maintenance issues and that will ultimately eat my cash flow.  Any thoughts?

Bill Patterson · Answer

Jason is right....figure the capital improvements into your purchase offer.  One other thing to consider is the RRP lead based paint issues that you have with a pre-1978 home.  That increases the cost of painting and renovations, so I might tend to stay away from homes older than that unless you are getting a real good deal on a real nice property!
Bill

Lee G. · Answer

Asbestos issues too... find a top notch home inspector and pick apart the property so you know what you are getting into... The rest is just numbers.

Jimmy C. · Answer

I think you still have to handle it on a case by case basis.  I mean, what if the roof, windows, siding, and ac are all new or newer?

In a case where everything is covered, the original construction of the house should be less relevant.  Especially if the price is super cheap and cash flow is what you are after.

J Scott · Answer

If you're going to buy properties that are 15-30 years old, you should figure the cost of several capital items into your overall purchase cost, and ensure the deal makes sense anyway.

For example, a house that is 15-30 years old will likely need a new roof, new HVAC system, new hot water heater, siding repair, etc.  This can run upwards of $10-20K, depending on area.

But, if you factor in that extra $10-20K and the numbers still make sense, I see no reason not to proceed, assuming the condition of the property is otherwise good.

Bill Gulley · Answer

LOL, been there, done that! Buildings built in the 1800s (if they are standing today) are likely very well built and the materials are really quality stuff, like oak studs. Problem we have had is that you'll need more saw blades, you nailer will need to be set so high you'll bend the nails when you shoot them (so get a heavier hammer!) And you'll see that plaster and lath is not as easy to repair with sheet rock mud and tape. Adapting materials used today to older materials can be a problemand it's easier to change more than first appears to be necessary. If you can find one with good bones and can update them to be marketable, they can cash flow very well and you'll find that, depending on the style, you could have a waiting list for tenants!

Michael R. · Answer

All my houses are pre 1900. I have no issues. Most houses this old already have had electric upgraded as well as other items. I do not provide ac to any of my rentals. Biggest issue is windows, roof and siding. All the issues can be fixed if you purchase right. I buy most houses that need major repairs for less than 5k. However I am not a flipper I buy and hold so these types of older houses give me the best return on my money.

Bill Gulley · Answer

Great points and only 2 cents. Saying "older" properties really needs to be judged as to condition as pointed out.

Homes build it the 20s for example are generally money pits unless completly updated. That can go for a property built 10 years ago too!
I know my market well enough and have been around long enough to pretty well know who built in platted subdivisions and their reputation as builders. Here, that's probably an unfair advantage. If a home has been properly maintained and updated along the way, buying a house built in the 50s or 60s is not a problem other than the LBP issue pointed out.

You can really get a much better home built 30 or 40 years ago than many built in the past 10 years. All things are not equal.

Bill Patterson · Answer

Tom has a good point....What buyers want and making sure the numbers work is more important than the age of the home.  Make sure you know your market (as Tom seems to!), establish an accurate ARV and accurate rehab costs.  You will do well!
Bill

Tom S. · Answer

Here in Vermont most houses are typically older, with many in the 1870 - 1900 time period.  We purchase and renovate them completely, and haven't had any issues as long as the numbers work.  Most were really well built back then (post and beam construction).

As long as you can buy them for $40k, renovate for $70k, and comps are $170k, it works out well. As a side note, we typically avoid houses from the 1950's and 60's.  It seems the ranch style house was all the rage back then, but prefer classic Victorian / New England styles.

- Tom

Kyle Meyers · Answer

I have 2 older properties that I rent out. One built 1966, the other 1920. I did large renovations on them when I bought and had factored that into the numbers before purchase. I had to replace the AC, furnaces, water heaters, etc. One of the properties also needed asbestos abatement. I don't know if there is any lead paint, but everything has been freshly painted and lead disclosures are part of my lease.

thoughts on buying older properties?

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