170 Year Old Rental

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170 Year Old Rental

David Wolf
Warner Robins, GA · Member since 2009 · 8 posts · 0 votes

Hello Everyone,

I am contemplating putting in an offer for a 170 year old home which has been split into 4 apartments. The main benefit of this house is its location: 1 minute walk to the areas prominent university. In addition it is in the historic district of the town and overall a very nice area. Obviously the main tenant base of this property would be the law students that attend the university.

The main drawback is the properties age. With a property this old it is really difficult to attempt and estimate the number of repairs. While my wife and the Realtor seem to think it would rent as is, I cant help but think it needs updates.

1. 100% hard wood but really needs to be sanded and refinished.

2. OLD Windows. None of them open. I counted 36 windows.

3. Paint over paint over paint add 100.

4. Bathtubs should be torn out and replaced. While they function I am not certain they could be cleaned to my standards.

5. Worst part: The floor in one of the units has a pretty good tilt in one room. The foundation has been renovated in the past but who knows how current the tilt is. Obviously would get a structural eng to take a look during inspection period.

6. The roof looks fairly new but I saw signs of leaks.

Some numbers:

Asking: 95,000 (forclosure, last person paid 250k in 2006)

Rent: $500 - $600 Depending on how nice we make the units we could probably charge more due to the location.

Utilities: Separate except for water.

Estimated Repair: Personally I think it would cost approximately 25K to completely fix the property. Windows would be a huge part of that..

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Nicole A.Pro Member
Rental Property Investor · Baltimore County Maryland and Tampa Florida · Member since 2013 · 2k+ posts · 2k+ votes
13y

Are you sure you posted the correct pictures because that property is beautiful and doesn't look to need work on the floors or the tub....

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  • Andy Robison
    Investor · Kansas City, MO · Member since 2013 · 465 posts · 170 votes
    13y

    @Roy N what is the CFBT? I've not read that acronym around before.

    0Reply
  • Brian Chastain
    Commercial Real Estate Agent · Dayton, OH · Member since 2013 · 6 posts · 2 votes
    13y

    @Roy N.

    True on the cash outlay. I also added in his repair cost of 25k. There also should be consideration of vacancy rate even if it is only a month in between renters. IMHO

    ...which now I see you added :)

    0Reply
  • Tom A.
    Investor · West Bloomfield, MI · Member since 2009 · 358 posts · 306 votes
    13y

    @David Wolf, I'm getting the impression that your repair scenario involves some over-improvement. I'm not one to "cheap out" on things but in this case I might side with your wife and agent. Student housing, particularly in old homes, doens't have to be all new and perfect. It certainly won't be a few years after your rehab. Would you redo it all then again? No.

    The windows probably don't all need to be replaced. If they're basically sound you can free them up by cutting through the paint. They might need some reglazing (the putty that holds/seals the panes).

    The floors may or may not need refinishing based on the pics. I'd compare to other rental housing in the area. Same for the bathtubs. Try to keep any old clawfoot type tubs.

    The floor tilt isn't a defect, it's a character mark in a house that old. I have one that's doing the same thing because some dufus cut a huge chunk out of one of the 10" x 10" main beams. The fix in my case was to add footings and stanchions on either side of the weak point. Not very expensive, materials were well under $500. That merely stopped the sagging. To fix the sagging would have been very involved. The second floor had been completely remodeled and if we took the tilt out of the first floor, the second floor would have been out of whack. The tenants don't mind, they understand it's an old house.

    @Nancy H., those HW floor refinishing prices seem high, at least compared to my area. You were quoted $2.20 to $4.80 per sqft. I can find $1.75 all day long, and $1.50 with a little effort. Just a few data points FYI.

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  • Chris Masons
    Investor · Union, NJ · Member since 2011 · 838 posts · 295 votes
    13y

    Roy,

    If the primary goal was monthly cashflow I would change 2 things: self managing, and going for a 30 year fixed mtg which would substancially increase his monthly cash flow by reducing his monthly debt service as well as management fee/costs. He can always pay it down on months that he feels he has extra cashflow to throw at the mtg. Why strap yourself with a 15 year?

    I Think this think would cash flow beautifully with a 30 year. Rates over here here he would be looking at ~5% with no points.

    regards,
    Chris

    1Reply
  • Roy N.Pro Member
    Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
    13y

    @Chris Masons

    That is a consequence of my unfamiliarity with mortgages in the U.S.A.

    Here in Canada mortgage terms are typically 1, 3, 5 or {occasionally} 8 or 10 years with 5 being the most common. Amortization on the other hand is typically 20, 25 or {more rarely now} 30 years.

    Of course ... the flip-side of having shorter terms is that a 5-yr capped variable rate on a 25 or 30 year amortization is just 2.6% :)

    I agree that a 30-year amortization will lower individual payments and improve cash-flow, but does that necessarily mean you need to lock-in to a 30-year term?

    I too would self manage, but I always model a property as if I would have to hire out the management.

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  • Roy N.Pro Member
    Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
    13y
    Originally posted by Andy Robison:
    @Roy N what is the CFBT? I've not read that acronym around before.

    Andy:

    CFBT - Cash Flow Before Taxes

    CFAT - Cash Flow After Taxes

    0Reply
  • Andy Robison
    Investor · Kansas City, MO · Member since 2013 · 465 posts · 170 votes
    13y

    Thanks!
    Learning is continuing to occur!

    1Reply
  • Nancy H.
    Investor · Concord, NH · Member since 2013 · 13 posts · 2 votes
    13y
    Originally posted by Tom A.:

    @Nancy H., those HW floor refinishing prices seem high, at least compared to my area. You were quoted $2.20 to $4.80 per sqft. I can find $1.75 all day long, and $1.50 with a little effort. Just a few data points FYI.

    Oh, Tom, that stings. To get that price per sf! But not here in the Northeast. You'd also never find a property like the one the OP is considering for $250k, let alone $95k. Regional market differences.

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  • Roy N.Pro Member
    Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
    13y

    @David Wolf

    So did we encourage or scare you off of this property ... or neither?

    1Reply
  • Roy N.Pro Member
    Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
    12y

    I still have a burning curiosity on this property as its out MO for student/young professional rental ... a character home very close to a university.

    I looked this morning and seen it is still listed.

    1045 Bond Street, Macon, GA

    @David Wolf - Did you walk away from this one, or is the bank just taking their time to receive offers?

    @Chris Masons, @Brian Chastain - If David passes this one by (after all, it was his find), would there be any interest in pulling four investors together and putting in an offer around $75-80K? Ideally, there would be one "local" party {David?} who knows the area and would be the eyes and ears ... maybe even the PM.

    0Reply
  • David Krulac
    Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes
    12y

    @David Wolf

    I've owned a 120 year old house converted to apt.

    1. Replaced the original 120 year old windows with all new windows, 37 in all

    2. Replaced several gas heating boilers and several gas hot water heaters.

    3. Added 4 additional bedrooms

    4. Original 120 year old slate roof was still on property when i sold it.

    5. Separated the heat so the tenants paid their own heat, hot water and range fuel. The electric was already separated.

    6. Heavy insulated the property, originally built with no insulation.

    7. New siding, soffit, facia, gutters and downspouts.

    8. Raised rents after improvements.

    9. Sold property for 3 times purchase price

    I've also owned a rental building that was 140+ years old

    Separated the heat, added central air, raised the rent, then sold.

    I've also owned a 170+ year old house

    Convert to new gas heat, refinished hardwood floors, added new kitchen, added another bath, raised the rent, then sold.

    I currently have a 100+ year old rental, which have practically redone:

    All new electric, plumbing, 5 new furnaces, 5 new hot water heaters, new roof, new insulation, new siding, 27 new windows, 5 new kitchens, raised rent.

    There is a definite pattern, improve the property, raise the rent and then often sell.

    1Reply
  • Roy N.Pro Member
    Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
    12y

    This 4-plex in Georgia is still on the market and the bank has dropped their position from $95K to $87.5K.

    0Reply
  • Shane Johnson
    Hudson, WI · Member since 2012 · 189 posts · 30 votes
    12y

    @David Wolf has dissappeared... lol.

    buy this one buddy! :) Your standards of refinishing may be too high, at only $500-600 a month for college students, they honestly wont care that much.

    If you want to save money, do the floors yourself. Study how to's online for a week or two rent all the equipment and go to work (if your handy). I did my own floors for less than $1.00 a foot. They are not perfect, but after staining them walnut, and bringing in furniture, noone ever notices.

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