Do you buy older homes for long term rentals?
Bryce JamisonPro Member
Rental Property Investor · Mebane, NC · Member since 2015 · 493 posts · 439 votesDo you buy older homes for long term rentals?
Most Popular Reply
Member since 2022 · 1k+ posts · 1k+ votes
3yI have a bunch over 100 years old. I'll work on a old house any day over a new one, much easier to access everything, at least in my cases. I remodel making sure that future changes are easy. They easily double(or more) in value every ten years. (but that may be changing now). From this landlord's perspective, new houses suck. New construction requirements are for the sole purpose of keeping the trades working, elec, plumbing, mech, siding. Crappy products made not to last. Real crap! Some younger renters may seek out a newer plastic place with lots of MDF. I have my (low maintenance)demographic that I prefer to cater to. Not saying there isn't money in new properties, there obviously is, but I love tearing into an old place and upgrading it. You should too! $$$$
32 Replies
- Real Estate Agent/Investor · Peoria, AZ · Member since 2016 · 2k+ posts · 2k+ votes3y
I think it all depends on where you live. In Phoenix, a 1996 build is practically brand new when compared to a WWI-era home in Cleveland or Pittsburgh or some other Midwest or East coast city.
While I agree that older homes come with more problems, buying something newer may not work as the price will be higher and won't cash flow as well.
I'm of the mindset to buy what fits your budget and investment goals. Many newer investors have to start somewhere and older more-beat-up homes are cheaper and can help someone get their foot in the door.
As for appreciation, this too is location dependent. I've seen 100-year old 1300sf houses in Phoenix in the historical district sell for more than new builds twice their size in the suburbs.
- Real Estate Agent · Pittsburgh, PA · Member since 2015 · 1k+ posts · 846 votes3y
Quote from @Bryce Jamison:
I tend to shy away from homes over ~20 years old to buy and hold for long term renting. This is because I'm concerned that even though the things in the house I can see look great things like the electrical, plumbing, or the foundation may need major repair if not immediately relatively soon. I'm also concerned older homes have already seen their biggest jump in capital appreciation and don't have as much potential for price growth compared to newer homes.
What are your thoughts on older homes? Is there something I'm not taking into consideration? Would a low enough sales price make all of my concerns go away?
Thank you for your time!
In Pittsburgh it’s the only way to buy rentals haha!
I have a few over 100 years old.
they come with their own unique problems, but to be honest I think they have some advantages too. - 3yTheresa HarrisPro MemberMember since 2019 · 15k+ posts · 11k+ votes
Age is relative. My rentals vary in age with the newest one built in 2006. It is the condition of the home (and location) that is important. I've had friends buy new homes and have more problems due to poor construction than I've had in 'older' homes.
- Rental Property Investor · Oak Harbor, WA · Member since 2022 · 29 posts · 18 votes3y
I'm not convinced that sales price and the age of the home go hand-in-hand. You can have a lower sales price home built in 2005 that could give you more problems than a more expensive home built in the late 1800's. So to answer your question, I don't think that a low enough sales price will make any of your concerns go away for any age house.
- Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes3y
I like the cash flow on them, if you rehab them right the first time it won't be a money pit.
- Member since 2022 · 1k+ posts · 1k+ votes3y
I have a bunch over 100 years old. I'll work on a old house any day over a new one, much easier to access everything, at least in my cases. I remodel making sure that future changes are easy. They easily double(or more) in value every ten years. (but that may be changing now). From this landlord's perspective, new houses suck. New construction requirements are for the sole purpose of keeping the trades working, elec, plumbing, mech, siding. Crappy products made not to last. Real crap! Some younger renters may seek out a newer plastic place with lots of MDF. I have my (low maintenance)demographic that I prefer to cater to. Not saying there isn't money in new properties, there obviously is, but I love tearing into an old place and upgrading it. You should too! $$$$
- 3yJohn MorganPro MemberRental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
Most of mine are built in the 50’s and 60’s. I have a few built 90-100 years ago that seem solid with no issues. I figure the ones over 50 or 60 years old have already had all the big ticket items replaced. Lol
- 3yCorby GoadeBusiness MemberInvestor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
A deal is a deal. If the numbers and neighborhood work for me, the age and condition of the property are totally irrelevant.
- Investor · Member since 2022 · 8 posts · 3 votes3y
I agree older homes are more 'risky' but yes I agree with everyone else here that it really depends on location. Something that would also be a factor for me is how close I am to the investment. If I was local to the property I would be more okay with it rather than if I was investing in older in a different state. Yes, there are property management companies, but not sure if I would 100% trust them.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes3y
Quote from @Anthony Angotti:
Quote from @Bryce Jamison:
I tend to shy away from homes over ~20 years old to buy and hold for long term renting. This is because I'm concerned that even though the things in the house I can see look great things like the electrical, plumbing, or the foundation may need major repair if not immediately relatively soon. I'm also concerned older homes have already seen their biggest jump in capital appreciation and don't have as much potential for price growth compared to newer homes.
What are your thoughts on older homes? Is there something I'm not taking into consideration? Would a low enough sales price make all of my concerns go away?
Thank you for your time!
In Pittsburgh it’s the only way to buy rentals haha!
I have a few over 100 years old.
they come with their own unique problems, but to be honest I think they have some advantages too.Same with Cleveland a pretty much all of the Midwest.
- Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes3y
Quote from @Bryce Jamison:
I tend to shy away from homes over ~20 years old to buy and hold for long term renting. This is because I'm concerned that even though the things in the house I can see look great things like the electrical, plumbing, or the foundation may need major repair if not immediately relatively soon. I'm also concerned older homes have already seen their biggest jump in capital appreciation and don't have as much potential for price growth compared to newer homes.
What are your thoughts on older homes? Is there something I'm not taking into consideration? Would a low enough sales price make all of my concerns go away?
Thank you for your time!
You are overthinking it . I have bought and sold about 500 properties built from 1910, - 1940 all for long term holds. Just update those that need updating , its ALL about pricing,
Good Luck
- Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes3y
I personally don't mind an older home - several of mine were built in the late 70s, early 80s. In fact I don't have any built in the last 30 years.
As far as appreciation - I think this is 100% location dependent. I own a couple of homes in a neighborhood built in the mid 80s and late 70s. New construction (strip centers, grocery stores, roads etc) started booming the last year. Lots of new ground breaking. New home developments are 330k+. This neighborhood sold for 150-200k. I would bet the older homes will see a lot more appreciation than the newer homes, percentage wise.
As far as purchase price - I find older homes you can get a much better price on and rehab and still be slightly under market value - and the rent will support the mortgage and expenses. Not the case with newer homes (in my area)- newer homes you could flip if the price was right, but the rental rates wouldn't support the purchase price + any rehab.
I do shy away from small cheap houses - 3/1 or 2/1 in bad areas or that are on a pier and beam type foundation. That just seems like problems to me. I'd have to pick these up for incredibly cheap to make it worth it.
I'm excluding new multifamily style buildings - I think this is actually a great idea. New construction, townhome style or even small simple house style - coupled with nice neighborhood amenities, and in a good school zone
- Investor · Brooklyn, NY · Member since 2022 · 158 posts · 118 votes3y
I second '@Bob Okenwas statement regarding market.
Personally, I only buy old homes (circa 1900) and would not consider a newer build unless it was being practically given away.
The benefit of old homes imo is that I go in and redo all of the systems and have basically a brand new house that I know was done right bc I oversaw everything.
Most new homes are built with cheaper materials than the homes built in 1900. The beams are thinner. The wood is pine or mdf, as opposed to oak. The floors are some vinyl crap, as opposed to oak. Etc. I'll never understand the people who buy old homes, rip out all the oak and replace it with cheap stuff. Yeah, it's new now but in ten years....
But, again, it's all about market. In my market there is a premium placed on old homes that are restored.
- Rental Property Investor · Raleigh · Member since 2022 · 18 posts · 18 votes3yAge isn't everything. It also matters where the home is located, and what the weather, type of tenants it attracts/has been attracting, etc. other factors are. The stresses a house goes under are different depending on the location, weather, type of construction, and tons of other factors.
Quote from @Bryce Jamison:
I tend to shy away from homes over ~20 years old to buy and hold for long term renting. This is because I'm concerned that even though the things in the house I can see look great things like the electrical, plumbing, or the foundation may need major repair if not immediately relatively soon. I'm also concerned older homes have already seen their biggest jump in capital appreciation and don't have as much potential for price growth compared to newer homes.
What are your thoughts on older homes? Is there something I'm not taking into consideration? Would a low enough sales price make all of my concerns go away?
Thank you for your time!
Rent-to-price ratios also matter. I've owned homes built in the 1990s, and ones built in the 1960s. They both cash flowed and I never had major issues while owning them. I also have a friend that bought brand new construction, but had to shell out tens of thousands in repairs because the home wasn't built properly, the inspection didn't catch the issues, the builder didn't have a warranty on the property, and insurance didn't cover all the problems. So "new" doesn't immediately mean "low maintenance/low headaches" necessarily.
It also depends on what in the older homes was replaced/updated/renovated. If you have a older home that has never shown signs of foundational issues, and it has a new(er) roof, electric, plumbing, HVAC, hot water heater, etc. Then you can pretty easily calculate what the holding costs of that home will be and when you'll have to replace those systems. The due diligence period and having a good home inspection are your friends in a situation like that.
Regarding foundations in particular: Homes that are in some parts of the south east are built on gumbo clay. When it rains, the clay shifts, and so does your foundation. This happens to any home built on that. TRUST me, I know that very well because I've lived in locations like that for a long time before. If your house is not build on soil like that, but instead is built on more stable soil types, you probably will have fewer issues as long as the foundation was built properly to begin with. An older home you'll definitely know if there's a foundational issue or not. You might not uncover that with a newer home until much, much later. But that's just my two cents.
Also I agree with one of the above comments: "A deal is a deal". Either the numbers work or they don't. Age isn't the main factor here. - 3yCorby GoadeBusiness MemberInvestor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
"Low enough sales price" is all relative. You are neglecting to account for gentrification, which is the biggest REI gain or all. It's risky, but you need to consider the possibiity for sure. Old properties aren't a bad thing as long as you account for the big four- HVAC, foundation, roof and sewer. If those are relatively modern you have very little to worry about. Just don't combine old and class D unless you have a very good reason.
Best of luck!
- Investor · Pueblo West, CO · Member since 2014 · 310 posts · 213 votes3y
In my personal opinion, it's the land that is appreciating, not the house. I personally like to buy in towns/neighborhoods in which no new builds are possible within 10 miles because all the land is developed. You tend to get more appreciation. Location, location, location.
- Rental Property Investor · Mebane, NC · Member since 2015 · 493 posts · 439 votes3y
Thanks for the responses everyone!
There have been a few comments along the lines of "new homes aren't built with the same quality as old homes". Does anyone know why this is? I've heard this same sentiment outside of these forums. I don't know if it's true, or a few anecdotal incidences of people having issues with newer homes. If anyone knows of any articles that can support this claim one way of the other even better!
- 3yJaron WallingPro MemberRental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
If I was truly concerned with property age I wouldn't be an investor or a current landlord.
- Real Estate Agent · Austin, TX · Member since 2020 · 1k+ posts · 941 votes3yIn my market I won't go before 1970's. I know some midwest markets where people won't go before 1875, it all depends.
Quote from @Bryce Jamison:
I tend to shy away from homes over ~20 years old to buy and hold for long term renting. This is because I'm concerned that even though the things in the house I can see look great things like the electrical, plumbing, or the foundation may need major repair if not immediately relatively soon. I'm also concerned older homes have already seen their biggest jump in capital appreciation and don't have as much potential for price growth compared to newer homes.
What are your thoughts on older homes? Is there something I'm not taking into consideration? Would a low enough sales price make all of my concerns go away?
Thank you for your time!
- San Antonio, TX · Member since 2009 · 3k+ posts · 1k+ votes3y
@Bryce Jamison As long as the previous owner keeps up with the maintenance of the home and keeps it in good condition, I tend to favor older homes in established neighborhoods. Usually, this is a sign of stability and a preview of the types of people who live in the area.
Personally, I've bought older homes since I invest in mobile homes myself. In the manufactured home industry, I've heard more complaints about new homes being bought and installed straight from the factory than consumers buying older homes direct from homeowners.
Just my experience. Hope that helps!
- 3yElise Bickel TauberBusiness MemberReal Estate Agent · Cranberry Twp · Member since 2017 · 384 posts · 198 votes
Really it comes down to the numbers right? When in Due Diligence have a thorough inspection and get estimates for any work that is needed now and potentially in the next 3-5 years. don't forget about the tax benefits to doing the work upfront. If you are worried about out of pocket costs, see if maybe a rehab loan is an option to get everything needed done now and refinance in 3 months when everything is complete. Plus you can upgrade inside if needed to get higher rents. Hopefully that helps a bit!
- 3yDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
@Bryce Jamison So, explain to us how your logic applies to 200 year old homes in New England area that continue to appreciate?
Logical Property Management4.9458 Reviews - Investor & Agent · Tulsa, OK · Member since 2016 · 1k+ posts · 1k+ votes3y
Yes I own two that are near 100 years old and I will tell you they are a pain in the you know what compared to all of my post WW2 properties especially post 1980… layouts are better in the last 50 years and energy efficiency is better and I can keep going… HOWEVER to reply to the other aspect of your question, I've found appreciation is better with older properties in areas of the path of progress. Odds are your newer builds are on the outskirts of a city into the suburbs where people fight to get a property if it's affordable. So while that's a great asset you pay more for it typically. Older properties can be picked up for < 50% of ARV and go up in value in rapid ways with urban renewal efforts … I've seen this happen time and time again and so it's worth saying, diversification is ideal. I want some older stuff to gain tons of appreciation and I want to see where that takes me but I also want some newer builds to have less headaches from a maintenance standpoint.
- Member since 2021 · 31 posts · 23 votes3y
Quote from @Anthony Angotti:
Quote from @Bryce Jamison:
I tend to shy away from homes over ~20 years old to buy and hold for long term renting. This is because I'm concerned that even though the things in the house I can see look great things like the electrical, plumbing, or the foundation may need major repair if not immediately relatively soon. I'm also concerned older homes have already seen their biggest jump in capital appreciation and don't have as much potential for price growth compared to newer homes.
What are your thoughts on older homes? Is there something I'm not taking into consideration? Would a low enough sales price make all of my concerns go away?
Thank you for your time!
In Pittsburgh it’s the only way to buy rentals haha!
I have a few over 100 years old.
they come with their own unique problems, but to be honest I think they have some advantages too.Same and agreed, as long as the majorly expensive stuff is in working order, I think its fine to buy older homes. But if I had a lot more liquid capital and had the choice, I would buy newer ones.
- Rental Property Investor · Mebane, NC · Member since 2015 · 493 posts · 439 votes3y
Quote from @Drew Sygit:
@Bryce Jamison So, explain to us how your logic applies to 200 year old homes in New England area that continue to appreciate?
Excellent point Drew! I asked the question so I could make sure there weren't scenarios like this I wasn't considering.
For context, I'm not talking about historical homes in places like Martha's Vineyard. In my world the older homes I'm looking at are in moderately rural North Carolina.
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