Old Midwest brick multi-family cap ex concerns

[Mark Soreco]

I'm investigating replacement properties in anticipation of doing a 1031 out of our current property.  In looking at some Midwest metros,  I see quite a few older (1910s-1940s) multi-story brick construction apartment buildings available.  Are these buildings potential cap ex nightmares moving forward?  Many that I see have beautifully renovated interiors and claim to be in desirable neighborhoods, but I'd be concerned about the building's age and potential major repairs.  What are typical major capital expense items for these buildings?  Would these properties be too risky for someone like myself who needs reliable cash flow heading into retirement within 5 years?

[Richard F.]

Complete plumbing and electrical replacement, often to the street. Lead pipes. Asbestos containing materials of all types, dependent on construction materials. You need to be careful to not UNcover something previously encapsulated. Roof---how many layers? Plaster and lathe ceilings can be deadly if they have had current or repeated water intrusion from above. I actually had one entire ceiling come down, effectively in one large piece. If someone had been in their bed, they would have critically injured, if not dead. Brickwork, tuck pointing a MF can get pricey if it is in poor condition. You need to closely check the parapets to ensure they are not ready to topple. Exposed iron work, such as porch railings, and exterior stairs and railings, may have serious corrosion, visible or not, creating serious safety issues. 

If most or all of those issues have been addressed, and documented, it likely attracts some quality Tenants, but thorough annual inspections are critical.