Are older homes with known issues still worth the investment?

Question

Finally found an off market duplex in NJ that the numbers look good on for a BRRRR however it is a much older home built in the early 1900s with some problems. I already know knob and tube is all throughout the property which should run about 30k to replace. There’s also a steam boiler with radiators as the heating source that I have a feeling I will need to replace to just save myself the hassle of repairs in the long run. This could run another 10-40k depending on the solution used (mini splits or HVAC). The good thing is that the roof is only 10 years old, hot water heaters 2 years old, and all subfloors have been replaced in the last 5 years along with asbestos removal throughout.

I know this renovation could be a lot for a first property but I have the appropriate contacts that I believe can get this all done (fixes above and cosmetic updates - 2 gut job kitchens and bathrooms) for around 150-175k max which would worst case lead to break even at appraisal and pull out that Reno cost put in. My biggest concern is once the walls are ripped apart to make the replacements that more issues will be found. For anyone thats had any types of deals like this with older homes and big ticket issues known right off the bat has it still been worth it or is this something to just run from?

Caleb Brown · Answer

I think this project can get expensive fast. Older homes are bought/sold everywhere but it will always cost you more than you thought it scenarios like this. There will also be an issue or a repair that you will uncover as you go. Many people avoid older properties to avoid rehabs going over budget and not deal with the hassle. Old homes can be awkward on how they are set up. There are many things that were rigged up to get the owner by but not a long term fix, if it's 100+ years old you can imagine how many DIY/patch jobs have been done. If you are going to go down the rabbit hole of this project make sure you get multiple bids and add a cushion.

Shawn Mcenteer · Answer

Hi Matt this is tough to comment on without seeing the property. I have seen knob and tube project get estimated at $10k cost as much as $100K. Having the proper team in place along with not getting over charged is huge part of this process. Steam boiler aren't to crazy depend on the loop and how each unit is heated. My first house hack had 1 steam heater that heated the entire property, I replaced it and put in 2 zone system. This project can be relatively inexpensive surprisingly but it really comes down to how you run he heating lines.

Mini splits work but you need to make sure to include heat pump with them if you want them a primary heat source because our winters will get cold. Running basebaord with new heating system tends to be best bet. Regarding cooling it is not that important, I have luxury rentals getting as much in rent with window as my neighbors with the $40k hvac system.

Kitchen gut jobs is huge. Will be what makes you the most money, opening walls tends to be highest ROI. Open concept is huge. In regards to the kitchen itself would need to see layout to best recommend how to maximize ROI

Eric Gerakos · Answer

Run.

Are older homes with known issues still worth the investment?

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