Investor · Aiken, SC · Member since 2014 · 398 posts · 120 votes
I am looking at a 100 year old duplex that is in pretty good shape with a good location.
The building has lots of updates, hardy plank siding, new roof, split utilities, updated kitchens & baths, all appliances included etc. It is listed for $110k very motivated seller and each unit is rented for $925 furnished with utilities. Each unit could rent for $600 unfurnished with no utilities. The history & numbers are solid.
My question is: What am I missing? I feel like I have missed something with the age of the property, but it doesn't seem that bad. Anyone with experience with older properties, advise?
If I am not missing anything it seems like a solid deal for my area, especially since I should be able to pick it up for a good bit less than its list.
Hey no worries it happens to everyone. The returns really aren't horrible, but there are better opportunities out there which is, in my mind, the major downfall of this investment. If I'm locking my money up in an illiquid asset, I want at a bare minimum 12%.
If expenses are 35% of gross income - Cash on Cash return = 12.1%
If expenses are 40% of gross income - Cash on Cash return = 9.6%
If expenses are 45% of gross income - Cash on Cash return = 7%
These are clearly just estimates but nothing I see would warrant further investigation from me. Unless I could bump rents up to $800/mo/side then I may dig into the numbers. The problem is that even if you don't pay for utilities, you are still buying a 100 year old property and as such will pay a higher insurance premium and also higher maintenance expenses. The 45% expense estimate, in my mind, would be aggressive. At 35% expenses, we see a decent return, but that will be unrealistic.
That does help. I think I got focused on the furnished numbers, but I think any advantage will be eaten up by utilities. I hadn't gotten an insurance quote yet, but I would imagine that would be much steeper. I have been having reservations about this property, but had gotten stuck between facts, figures & emotions.
Hey no worries it happens to everyone. The returns really aren't horrible, but there are better opportunities out there which is, in my mind, the major downfall of this investment. If I'm locking my money up in an illiquid asset, I want at a bare minimum 12%.
Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
11y
That old duplex could be fine IMO @Jesse Waters. Have a 1910 duplex and it is solid as a rock. When it hit a 100 I pulled off 3 layers of roofing (all original) and reroofed. I heard that the old original shingle roofs with old growth wood lasted 40 years. I figured 40 years 1st roof and 2nd and 3rd roofs at 30 years each for a 100 years of roofing. It even has original plumbing which I am considering changing out.
Thanks for the input guys. I have dug up some more solid numbers including both city & county taxes, better estimates on utilities etc. I have also looked at comps for the furnished rentals in the area. I am calling this one a comfortable 14% COC, even with over estimated expenses.
As far as the purchase price goes, $110k is just the list price. I know the selling agent and my broker has sold properties for the owner in the past. The owner is no longer in SC and has moved back to NY and is desperate to get out of all of her properties and is very willing to make a deal. I am thinking we should be able to nab it for closer to $85k. Or 18%, higher if I can get he seller to pay some closing cost.
Investor · Rochester, NY · Member since 2014 · 66 posts · 27 votes
11y
Don't let the age of the building scare you. We rehabbed a kitchen in one of our properties and found a newspaper from 1879!! The building is over 100 years old. So what. It cash flows! The only downside is that it is in the preservation district.
Investor · SE, MI · Member since 2013 · 1k+ posts · 461 votes
11y
Our first purchase was a 1913 triplex, then a 1901 triplex, and we're closing on an 1894 quad next month.
The first two need to be scraped and painted and could use new windows as well. You can pretty much figure on there being no insulation in the place. Look for old wiring (knob and tube)- not a deal breaker but something to be aware of. Chances are someone who thought they were handy owned it at some point and did repairs, so be forewarned about that as well. In our cases, plumbing jobs take longer due to the previous owner's uh... creativity.
I look for higher cash on cash returns, min 25%, but that may not be possible in your area. I find it a lot harder in my area to get numbers like that with a duplex.
Thanks for the info. This property underwent a lot of renovations in the past few years. All new Hardy Plank siding, new roof, new kitchens & baths & new windows. The electrical is all newer as well, no knob & tube.
I think I am happy enough with the numbers to make an offer. Just want to get it under $95k.