Bad idea to buy a historic multifamily?

Question

Hi everyone!  Any advice would be appreciated.   I currently have a 4 unit under contract in Worcester County, MA, that was built in the 1760s.  The units are laid out quite well and the house seems quite structurally sound on inspection.  They just don't build them like this anymore...the post and beam attic is quite impressive.  The wiring needs a little work, but is relatively up to date (no knob and tube) and the plumbing, heating and windows are in good shape.  The area is great for rentals and the numbers work.   My biggest concern is resale value/appreciation.  It seems the owners struggled to sell this place the last two times it was sold...finally cutting the price quite significantly to get it done.  This past time I assumed was due to covid, but they struggled to sell the place in 2015, as well.  Am I making a huge mistake buying a property of this age?  Any thoughts on if the age of the house will be a huge impediment when it comes time to sell?

Zachary Ray · Answer

Just older pipes, plumbing, lots of hidden things. Electrical might not be up to date. Example could be a home I have is 1954 and all the electrical outlets were not grounded properly to today's standards. Things like that. If you have a good reserve it is nothing to worry about.

Lisa Kattenhorn · Answer

@Zachary Ray I did add some extra for cap ex and maintenance, but can you give me some specifics as to what I might not be considering in a house of this age?

Colleen F. · Answer

@Lisa Kattenhorn we had a separate septic and well inspection. For regular plumbing the inspector was able to identify a crack in an exposed basement pipe. He recommended that we eventually replace the cast iron.   For the electric, we had an electrician come in to give an estimate on replacing the panels. In your case you might estimate the house wire replacement.  Recently I had some updates to grounded 3 prong outlets and the plus was the ground wires were present. If not you have to run new wire which can be harder with plaster walls. Because you have so many appliances today grounded outlets are important.

Zachary Ray · Answer

Just keep in mind the maintenance on older homes can be significant.

Colleen F. · Answer

Sound like your price should take into account the upgrading the wiring from the street. Painting will cost too and lead compliance.  However older homes are  more common in the northeast and don't turn off everyone. They were likely overpriced in the previous sale attempts.  We didn't see a depression in price for our primary in shrewsbury,MA due to Covid, not sure if it is different with rental

We have a historic MF in RI , not sure how hard it will be to sell but we bought it for income and I know it will hold its value if we maintain it, it will probably appreciate but I didn't bank on it.

Nadia O. · Answer

hi lisa. i don't know your area. i'm in southern california. But im going to chime in the same interest i had for a historic duplex in B class area. The home needs major repairs & being a historic home, the repairs will cost so much more. I'm not sure if you're aware, but you can't do a typical renovation for these homes. You need do restoration repairs & that will cost a lot more. The home that i was about to inquire is way overvalue due to its condition. I would say a little over $100k. Hence, it is still in market till this day.

So to answer your questions, i don't think it's a bad buy if you can renegotiate the price even lower. It sounded like the seller is desperate to sell. Now this may be their own personal financial burdens with addition to lower rent prices due to pandemic. If you are thinking of buy & hold, you might be ok. I, personally, love historic homes. They have so much charm & characters. They are simply beautiful. I would buy if the price is really good. It sounds like you may have the chance to owning one if you can lower the price more.

But do consider the location & a thorough inspection to make sure your purchase can turn into a solid one

Brian J Allen · Answer

I am also a fan of the older houses.  the locations are typically better since they got to choose the locations first.  It is important in Worcester, and in the surrounding towns to really know your location.  Remember. YOU CANT MOVE THE HOUSE, YOU CANT MAKE IT BIGGER, BUT YOU CAN MAKE IT BETTER.  Make sure the lot and the location justify your purchase.  I would be glad to help you on specifics if you like.

Tracy Streich · Answer

Just factor in a larger % for repairs and maintenance.   Don't be scared of the age just factor it in to your purchase and cash flow.

Paul Ireland · Answer

I have quite a few 100+ year old properties in Worcester myself. I figure if they have made it this long, what is really going to happen now? Why worry about resale if you're thinking about this for rentals? Worcester is a fantastic market for rentals.

Greg Scott · Answer

Prices and demand for rent property have increased with COVID so that is not a reason it was slow to sell.

If you are concerned about being able to sell it, only buy it if the cash flow from holding it is a good investment for you and you want to hold it long term.  Assume you will have zero appreciation.  Does it still work?

Bad idea to buy a historic multifamily?

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