Old house - how much to budget for major repairs + maintenance?

Question

Hi everyone,

I'm considering investing in an older multi-family (~100 years old) around the Boston area. I only have experience with significantly newer properties and want to make sure I run the numbers correctly. Does anyone have experience with (very) old houses and how much to budget monthly/annual for
i) general maintenance
ii) major repairs (e.g. roof, plumbing etc.)
?

I've found some related articles online but would love to hear about the experiences in the knowledgeable BP community. Thanks for your input!

Bob Ebaugh · Answer

@Palmira Angelova

How many units?   I have no idea about true apartment buildings, but I own 2 duplex's and one triplex built in 1925,1925 and 1930.   Most of our SFH are similar vintage, the oldest built in 1918.  All purchased in 2014.

We mostly spent funds (and budgeted for that) on purchase to get them in good condition.   Same as any other property.   Paint, flooring, roofs and normal deferred maintenance.  For rentals, it doesn't seem to pay to upgrade kitchens and baths if the existing ones are functional.   Save that for consideration at sale time.   The one exception was electric wiring, we had one with knob and tube which required a complete rewire.  Have also had a few window replacements.  And a couple sewer line replacements.

Once rented out, there doesn't seem to be a big difference.   One of our exceptions to being old was a 1978 duplex.   That thing was built on the cheap and has cost more than we planned based on age.   No formal stats...and nothing newer than 30 years old...the difference between 30 years and 100 years old hasn't been significant.

We've done several roofs and replaced lots of air conditioners.   But with maybe 15 year service life here in FL, age really isn't a factor for these unless your looking at brand new builds.

The biggest thing to consider, in my way of thinking, is the neighborhood. Here it's trendy to live in the close in older neighborhoods. Property sells for way more per sqft in the upcoming older neighborhoods than in the further out suburban areas. But this isn't universal. Has to be in the trending neighborhoods, it's not equal. So to some degree, you really need to understand the local market. I know this is RE 101, but worth the emphasis when looking at renovating and managing property in older neighborhoods. For example, I looked at some really cool row houses in Baltimore City with a friend. They have tremendous potential, but I felt like investing there would be trendsetting. That's risky.

Lien Vuong · Answer

Have you looked at the file share portion of the site? That might be helpful for you to look at what people have budgeted in the past. Your agent might be able to give you some insight for figures also. Good luck!

Derreck Wells · Answer

I just wanted to drop you a note on the new lead paint laws in MA; They now only give you 90 days to delead when you buy a rental. If you don't delead within 90 days, you can be held liable for any lead poisonings that have ever happened at the building, even if it was before you owned it. They basically hold the building liable rather than the owner and that liability transfers from owner to owner until someone deleads it and breaks the chain. If you delead, and maintain the standard, you will be in the clear. I recommend a Post Compliance Lead Determination (PCAD) every 5 years or so.

Here's the law (emphasis added by me):
460.100: Duty of Owner(s) of Residential Premises 
(B) Whenever any residential premises containing dangerous levels of lead in paint, plaster or other accessible structural material undergoes a change of ownership and as a result a child younger than six years old will become or will continue to be a resident therein, the new owner shall have 90 days after becoming the owner to obtain a Letter of Full Compliance or a Letter of Interim Control, except that if a child younger than six years old who is lead poisoned resides therein, the owner shall not be eligible for interim control, unless the Director grants a waiver pursuant to 105 CMR 460.100(A)(3). 

Note it says "a child younger than six years old will become ... a resident therein...". It is assumed by the state that any rental larger than a 1 bedroom will fall into this category at some point because of the anti-discrimination laws that prevent landlords from refusing a family because they have a child. The law specifically excludes rentals under 250 square feet. Basically this is their way of getting all rentals lead safe. If you don't delead, you will be putting yourself in a dangerous position.

This isn't a bad thing! You can use this knowledge in your negotiations. Assume $5k per unit and count the exterior as a unit. So a 3 family is 4 units = $20k for your negotiations. They rarely cost that much, they're usually half that, but if the property needs windows and exterior doors, it can get expensive. Like I said though, most come in about half that (windows are usually already upgraded), so use $5k to negotiate and even if you get a 50% concession you could still potentially get it all paid for by the seller.

I can run any addresses through the database for you and see if they've been inspected or deleaded. Right now they’re behind on updating it though, so it may have been inspected and I just can’t see it yet. Sometimes they get inspected but not deleaded and this creates a whole other set of problems. If that's the case, you can't do any renovations until you have it professionally deleaded or it would be flagged for Unauthorized Deleading and you can get fined and the property would never be able to get a Lead Certificate, only a letter of Environmental Protection that states you did illegal work, got caught, then had to pay a professional to clean up the mess. You don't want that.

If you don't already have a lead inspector you like to use, I recommend Anderson Lead Inspections, www.andersonlead.com. No, I don't get a referral fee or anything, I just know he's fair and works to help owners.

Let me know if you need any help or have any questions.

Good luck on your investing!

Peter Tverdov · Answer

We do property management in New Jersey and most of the houses we manage are over 100 years old. On average we like to tell the owners to budget about 8% for maintenance each year.

The best way to do it, is to gut these places and put in new plumbing, electric and heat/cooling. The wood they used back then is better than today, so the bones are often good in these homes.

Forrest Williams · Answer

I have renovated a couple older properties, and the best advice I can give is: budget for more than you think. Are the pipes 100 years old too? Did they use lead solder? Is there lead paint? Is the electrical system a knob-and-tube death trap? Is there asbestos in the ceiling or floor? These are important questions to ask on a visit. Some of these items will require immediate attention, some you can wait on, all are expensive to fix or remove.

Another important thing to consider in an older city like Boston is historical districts. If the house is in a historical district, there may be covenants that stop you from making certain upgrades without a ton of red tape. Some you may not be able to make at all. I don't want to discourage you, there are plenty of deals in older properties, but be sure to do your research. Good luck!

Matthew Irish-Jones · Answer

@Palmira Angelova getting a local contractor is a good source.  We have all of this information internally from our property management division.

It took a lot of time to develop though

Matthew Irish-Jones · Answer

@Palmira Angelova. Lots of old houses In our market as well.

It’s far less about the agent if the house and more about the age of the major CapEx components.

If you have new plumbing, electrical, windows, HVAC, and a new roof you are in good shape.

If they Mechanical’s are extremely old you are better off creating line item costs and projecting their replacement date.  That way you are using actuals spread over time as opposed to a %.

Using a % is ok for quick and dirty analysis.  It’s better to get hard costs for accuracy.

Palmira Angelova · Answer

That's great advice, thank you @Matthew Irish-Jones! Do you normally use your local contract to get estimates on the major CapEx components, as you're conducting analyses?

Palmira Angelova · Answer

@Kathy Henley @Bob Ebaugh thank you both for the advice and specific numbers! Will definitely keep what you've both said in mind as I'm analyzing

Patrick McGrath · Answer

@Bob Ebaugh

I'm currently living in Good Ole Carroll county and investing in multifamily properties around the area.

Old house - how much to budget for major repairs + maintenance?

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