Is a 1935 4 plex too old for my first deal using FHA loan?

Question

Hello good afternoon, I was wondering if someone with experience could let me know if this would be a good deal or not being a first-time homebuyer using an FHA loan with 3.5% downpayment on a 1935 4 plex. I don't ever plan on selling it. So the property has tenants already and central AC. Not sure about the plumbing or wiring but i assume the wiring has been replaces due to the tenants being there for several years. Would this property be considered too old for me in my situation and my current goals? as i do not plan on selling it later, and its already 91 years old. Please let me know what you think before i make a decision. Thanks

Caleb Brown · Answer

It really depends on the property. In general there are more upkeep and surprises that a early 1900s building can have compared to a 1980s building for example. A few things I'd look at.... 1) Wiring, electrical panel. Have these bene touched? Grounded? Panel age? 2) Plumbing. Is the main ewer original? Are the pipes original, mix or updated? 3) Plaster. This can make remodeling a pain and greatly increase the cost. Is there plaster, drywall or a mix? 4) Are the windows original wood or vinyl? 5) HVAC, duct work. Is the duct work going to every room? Adequate insulation?

Those are the main expenses that can derail your property.

Marc Winter · Answer

@Aaron Douglas,

With FHA property qualifications, the age of the property isn't very important, but the current condition and its code-compliance is.

I've owned/managed many 'old' properties.  Often, upgrades to systems are needed.  Price that into your offering price.

Hire a local GC to walk the property with you to discuss and estimate costs for any health/safety issues and necessary system upgrades.

NOTE Just to keep folks safe: FHA requires an affidavit from the borrower/owner stating they intend to live in one of the units for a year.  That's in writing, signed off by the borrower.  (No, ya cain't change your mind after closing without some major compelling evidence. Get caught = mortgage fraud = a federal offence.)

Jesus Roman · Answer

I wouldn't worry about the year as much as the Big 5 Electrical, Roof, Foundation, HVAC, and Plumbing. If those are updated, a 1935 build is often more solid than something from the 2000s.

It also really depends on the neighborhood. Take Houston Heights for example. It’s full of 1930s homes in excellent shape that hold their value incredibly well.

One heads-up: Since you’re going FHA, the appraiser will be strict. You mentioned it has central AC, which is good because FHA typically won’t approve a home if window units are the primary cooling source. Make sure the central system is actually functional in all four units.

Get a solid inspector to verify those major 5's and if those are good then don't let the age scare you off.

Chris Kersey · Answer

Echoing what has been said above, this will really depend on the condition of the property and it's systems (foundation, electrical, plumbling, hvac, roof, WDI, ect..) . Great idea with the house hacking and finding a place already leased up. You will want to dive into these tenants and their history (timely payments) with the property as well.

I'm a central Houston builder/developer/investor/realtor and can answer specific questions in messages.

Drew Sygit · Answer

There are 200+ year old houses in New England area that people are living in and renting out...

Ryan Spath · Answer

@Aaron Douglas

Hey congrats on “house hacking” with an FHA loan. One of the best ways to get into the market in my opinion. Regarding the property being to “old” there is nothing in the FHA rules that is age dependent. They want the property to be safe, sound, secure, and habitable. So, all the major systems must be in working order. Windows and doors must function and lock, solid foundation, roof has more than 2 years of life remaining, no major structural defects. No peeling paint (we have run into this In Idaho lately on older buildings) Running hot water, safe drinking water, there may be a couple more things, but these have come to mind based on recent transactions. One thing to consider is older buildings will require more maintenance, if you plan to keep this forever and it’s already 91 years old, what is the ongoing maintenance vs buying a newer possibly more expensive building? We have a few properties that are 20+ years old and the past year has been maintenance heavy. I’m not saying the building isn’t a good deal, just be prepared to fix things.

Aaron Douglas · Answer

ok thank you. I will be sure to ask about those.

Is a 1935 4 plex too old for my first deal using FHA loan?

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