Best age of home for rental properties? What is too old?

Question

How old of a house is good to buy as a rental property?  From your experiences how old is too old to not have excessive repairs or other problems?  What property ages have worked well for you?

I am asking as someone interested in purchasing my first rental property.

Jim S. · Answer

You can have a 20 year old building that needs major work or a 120 yo building that needs nothing. A 120 yo neighborhood might not bring in as much rent as a 20 yo neighborhood. You have to look at everything as what needs or will need repair/replace. It all depends on what & when things were updated. And of course how good of job was done at that time. I have 2 duplexes 120 yo. Great rentals/income. Very little repairs/maintainace.

Bob Okenwa · Answer

Old is somewhat subjective. For you, old may be 1899. For me, old would be 1955. Secondly, it depends on your financial situation. Older tends to equal more expensive. If you can stomach the renovation of an older property to make it modern and still be able to cash flow, than the age doesn't matter as much.

Not sure about the housing stock in your area, but in AZ, homes built in the last 30 years tend to have the least amount of work needed because they are built with stucco walls and concrete tile roofs that last a really long time. But a 30 year old house in the desert is going to look a lot different than one in Illinois I presume.

Nathan Gesner · Answer

It depends on many factors. I've managed some old homes that were never fully updated, so they had a lot of issues with ancient boilers, old wiring, drafty old windows, etc. I've also managed some old homes that were completely updated and just as reliable as a new home. I've also managed some new homes that had issues due to poor construction or because modern equipment is not built as well as the old stuff.

Tracy Streich · Answer

Older homes have more maintenance issues newer homes cost more.  It is all a trade off.   Everything will rent.

George Skidis · Answer

Starting in 1993, every one of my properties has been a gut rehab before the first tenant moved in. The first 27 were built between 1955 and 1963. They are a type of prefab ranch style 3/1 home on a concrete slab. These were sold by "National Home" and that may have been located in Tennessee.

We always ripped out the 60 amp fuse box / electrical service and upgraded to a 40 space 200 Amp circuit breaker system. Yes that was a little bit of overkill when I did it. However, municipalities change their electrical codes on a regular basis. So yes a 100 Amp 20 space box would have worked from 1993 to 1997. But in 1998 Cahokia required a 30 space electrical service. Landlords who told me I was being excessive got to replace their electrical service more than once.

When the kitchen wall way open we would replace all the old lead and cast iron drain lines with PVC. We left the copper alone. However some faucet bibs were galvanized and that we always replaced.

All the floor coverings were removed down to the slab and new "COMMERCIAL" grade floor tile was installed.

If the roof was in good shape we left it alone.

We also replaced the asbestos shingle siding and windows. We did the siding before it was illegal to remove it. The windows were either wood or aluminum triple track and we went with vinyl.

So yes my upfront cost before refi was high. My annual maintenance costs were almost nothing for the first ten years.

That was my "Template" for the first decade. Now I prefer mobile homes since the annual taxes are so much less. A 3/1 on a slab is now over $2,000 a year in Real Estate Taxes. A mobile home is not subject to real estate tax but instead has a "Personal Property"  tax. Of the homes we own that tax ranges from $47.00 to $89.00 a year. Plus the land tax which is considered unimproved. For mobile homes we look for units built AFTER 1980. Then we gut them as well. So we will never get appreciation but saving $2,000 a year is not a bad trade off for a long term landlord. We gut them as well. If they are on their own lot we sell them owner finance using the Deal  on Wheels strategy of the late great Lonnie Scruggs.

Now I told you all of that to tell you this. You make your money when you BUY the property. Flips are fine but long term wealth comes from OWNERSHIP.  Build a team of experts that can help you evaluate every deal. My original mentors have all passed on but there are always new teachers out there. I now teach others at my REIA. So go join your local REIA. Try an find one that is a member of National REIA. The membership is usually under $200 a year but there are exceptions. Don't spend all your capital or go in debt at some get rich quick seminar. Learn everything you can in 6 months and then start making offers. Don't be afraid to offend the seller. There will always be another deal around the corner.

Good luck and Good Investing.

Russell Brazil · Answer

I prefer homes built from 1940 to 1980.

Louis Jeffries · Answer

When a property is appraised they are given 2 ages. One of course is the actual age which reflects the year it was built. The second, more important age is the effective age. A property can be older but have a younger effective age Because its major systems have been upgraded. Upgraded electrical, plumbing and hvac systems as well as the structural integrity of a property are more important the the actual age of a property. There are also many newer homes with better structural integrity than newer homes. Older homes were generally built better.

My advice is once you have viewed a property and determine this is something you are interested in purchasing, always have a home inspection, regardless of the physical age.

Filipe Pereira · Answer

I try to keep it newer than 1900. Almost all MFRs in Connecticut and western MA (the markets I am in) are at least 80 years old at this point, with most of them closing in on 120 years old. That's old! But it also means that what has been there has worked for a very long time, so you probably know what you're getting at this point.

I find that stuff built pre 1900 or so is tougher to work on - stairs are too narrow or don't have the right tread/riser ratio, ceilings are short, floors are pitched, massive fireplaces (again, think New England here - cold winters), etc.

Old in your market may only be 20 years though!

Best age of home for rental properties? What is too old?

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