Investing in properties that show construction date in 1920's
What parameters should I consider while investing in properties that show construction date to be between prior to 1950? I am worried about unforseen CapEx (2-3 year down the line) which would eat up the cash-flow that would have been accumulated.
Here is an example property based out Milwaukee, WI. The property seems to be in C+ neighborhood with need for rehab post-buying. What parameters would be helpful for me to consider while analyzing this property?
https://www.zillow.com/homedet...
About me:
I am based out of Seattle and new to real estate investing and researching potential markets for investing. My niche is small Multi-family and the strategy I want to go ahead with is BRRRR.
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@Vishnusai Yoganand In older properties sometimes updates have already been done-or not. Wiring can easily run into thousands if you need to update due to obsolessence. Older plumbing may need to be replaced. Heating systems are liable to failures etc. A good inspector can generally identify what has been replaced and what may need to be done. Maintenance is generally more important than age. Nothing wrong with older buildings often they are much better built than the new ones!
Knob and tube wiring anybody? Insurance companies love those!
@Vishnusai Yoganand, the assessment is like all other properties. Granted, I live in the inner rings of Cincinnati, where many properties (personal and investment) have been built pre-1950. My current house (built 1961) is the newest property I have ever owned.
As Bjorn notes, you need to go through it and understand what you are buying. Plumbing and wiring are two main potential issues. Maybe box gutters or boiler with radiators, as these are harder to find service techs for. Basements are also prone to leaking, but also have floor drains, typically, and as long as they aren't flooding, I have not had any issues renting houses in these neighborhoods with leaky basements. Locals are typically used to it. But the end of the day, you look at purchase price, immediate updates, and inspections on systems for any reserves during your anticipated hold.
Beyond that: a 20 yr old roof is going to need replaced in 5 yrs, typically, whether it is on a 2002 construction house or a 1920's house. A furnace wears out, appliances, cosmetic upgrades, etc.
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You just need to have a really good Home Inspection. A lot of these older homes will already have the most important (and expensive) items done. @Bjorn Ahlblad has it right, the big $$ items are Electrical, Plumbing (esp Sewer), Foundation, Window/Doors, and Structural.
If you are unlucky enough to buy s house and be surprised by most or all of these items, the costs can easily run over $100k just for these extras...
So make sure you know what you're facing going in......
Price seems high if you're planning a BRRRR but that's just my opinion.
Most of the homes in Harambee and City of Milwaukee in general are older. I'd check for basement repairs needed since there's no photos....and the age of all big ticket items such as roof, windows, mechanicals, etc.
Maybe think about hiring a local realtor to represent you on the buy who is also an active investor themselves.
Pay for a home inspection, including a sewer cam.
Pay particular attention to the wiring, has it been upgraded from the rat tail type to Romex? (check for permits for this)
Fuses or breakers, Stablocks(???)
How bad does the basement flood, and when (ask the renters).
Plus the example you provided has paint peeling off, splitting dry wood, and siding in need of repairs.
And is that a paint color you want to rent.
It looks like it might be a "Matchy Matchy" block with similar roof line houses.
Look at the home to the right of it, soft colors with a white trim, looks much more "CLEAN" to me like it would draw a better renter, and a few dollars more a month.
If it's a "matchy matchy" look for the most visually appealing home that matches and base new color choices on that.
Dose the rest of the neighborhood have "Jail doors" on the front? If not, maybe the problem that caused their need has long ago been "handled".
Also age of heating system and type (forced air vs steam vs coal).
A property inspector will give you a written report of what is found out of line.
Good Luck!
Rat Tail type wiring
Romex type wiring
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these kinds of houses in Milwaukee is famous of having a plumbing issue , roof/gutter destroyed by animals, and yes outdated electrical. you can find more track records in the city online database related to this house. I can see eviction in the past in this house. The city of milwaukee wants you to treat the $100k house like a $500k, just be aware of that, including permit, construction,etc. Property managers like these houses as a lot of repair bills can be made to the new owner :)