Ask this Old (Multi-Family) House

Worcester, Massachusetts
House Hacking
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Ask this Old (Multi-Family) House

David Coughlin
Member since 2022 · 3 posts · 2 votes

Right now, I am in the beginning stages of real estate investment spending a lot of my time educating myself. "House Hacking" is probably my best strategy while searching for my first property. I'm single, financially stable, and I spend half the year working half way across the world. I need a place to live when I'm home, and I also want my money to work for me.

With that said, I live the New England area and I am looking at multi-family homes (Manchester, 'Woo'-ster, Boston, Providence). At least 3 units is preferrable and I have no issues with living in a smaller unit. My big concern is that it seems that all these homes are built anywhere from the late 1800's to early 1900's. Every single on of them is over 100 years old! Some might as well be 200 years old at the end of a 30-year mortgage loan.

With basic research, I know that these houses were built to last, construction was better, maintenance costs are greater, lead paint is bad, etc. But are these houses still appreciating despite their age? How much longer will these houses economically last under good management? How would a 'real' real estate investor appraise this kind of home? How do I look at one of these houses and say "now that's a great deal!" instead of "man, that house is older than my late grandparents!"?

Direction and guidance to help my educational and real estate journey is greatly appreciated for this wannabe gonnabe investor :)

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Leo R.
Investor · Member since 2021 · 591 posts · 695 votes
3y

@David Coughlin age of the building--in and of itself--is one of my LAST concerns. I buy properties based on factors like the local tenant pool, the grade of the property, the grade of the neighborhood, the possibility of value add techniques, etc., etc., etc., but I've never bought (or not bought) a property simply because of its age. I own properties from the early 1900s, 1940s, 1960s, and early 2000s--and frankly, the older properties are often my favorites, and are often my best performers.

One of the biggest misconceptions by inexperienced RE investors is that new houses are inherently "better" and less costly/less headache to maintain than older houses. This is true some times, but in some scenarios, brand new properties end up producing significantly MORE maintenance/repair headaches than older properties.

The reasons are:

1) Some building techniques/materials are far superior to those used in the past, but some are not, and some are unproven. For instance, I'm very doubtful that pex will have a longer service life than copper plumbing. The trend toward flat roofs is just silly in most areas (bc it causes water diversion problems, which then cause a myriad of other problems). Lumber quality today is mostly trash. Etc., etc.

2) A new house hasn't gone through its "growing pains" phase. All sorts of problems can emerge in the first few years. For instance, inadequate/improperly designed water diversion systems can cause major problems (e.g.; rot, masonry degradation, foundation settling) that won't emerge for several years. I personally know people who bought brand new, multi-million dollar, beautiful luxury homes, only to have serious foundation settling over the first 5-10 years of ownership (and the repair bill was in the hundreds of thousands!).

On the other hand, an older house has been around so long that these types of problems have either occurred and been addressed by previous owners, or they're often plainly visible. For instance, if there's an unresolved settling issue, you can probably see cracks in the foundation, buckling, un-level floors, un-plumb doors, etc. ...but, if everything is solid now on an old house, it'll probably remain pretty solid for the foreseeable future. As my GC says: "if it's stood straight and true for the last 100 years, it'll probably make it at least another 25".

Don't get me wrong; there are plenty of issues/problems/quirks that old houses have that new houses don't, and an old house can obviously have hidden problems and big repair/maintenance bills too--which is why thorough due diligence is fundamental to REI...but, the point is: a new house is not a foolproof solution to repairs/maintenance headaches (and in some cases, a brand new house can be a much bigger gamble than an older house).

Good luck out there!

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  • Olivia Radziszewski
    Realtor · Chicago, IL · Member since 2019 · 274 posts · 191 votes
    3y

    Hi @David Coughlin- have you been running numbers on the properties? There are calculators under tools to run the numbers. When it comes to old properties like that I will usually take a few extra steps during the inspection period to check everything out. Such as having a plumber come out and camera the sewer to make sure that there are no current blockage issues. There are plenty of old buildings in Chicago, it is definitely possible that there will be more maintenance, however, it really depends on the current state of the property and when the last rehab occurred. Good luck!

    0Reply
  • Michael Vittorio
    Investor · Bucks County, PA · Member since 2017 · 46 posts · 16 votes
    3y

    Hi David,

    @Olivia Radziszewski had a really good point, scoping the sewer is a good way to prevent huge unforeseen costs (cost the owner before me $5k to replace the pipe to the house.) In terms of buying an old house I have some experience here: We closed on a 100 year old house not long ago. I am no expert but some issues you might want to look out for:

    - Mold in crawlspace/basement (as well as evidence of running water during storms, we've seen this)

    - Structural damage/settling (definitely hire an expert on this one)

    -Improved Electrical/Plumbing (These systems DO have a lifespan and the older systems aren't as reliable as newer ones)

    - Asbestos Flooring and Tile (Where I am from the removal of this stuff is mandated by law to be done by a licensed professional, no DIY. Not necessarily a deal-breaker, but needs to be accounted for in extra cost)

    - Lathe and Plaster has pros and cons (Make sure you know them)

    - Insulation in modified walls (Old houses tend to have wooden expansion walls built against stone exterior walls. This leads to increased utility costs)

    - 'Weird Smells'

    The list can keep going but I hope this helps you churn some ideas about buying an old property. In general if I were looking at an old property (80+ years) I will be increasing maintenance and vacancy costs. There's a lot to take into account so maybe chat with a landlord or GC from that area. It will help you estimate costs of repairs of different items.

    Appreciation on MFH investment properties will typically be based on their NOI. If rents increase you can expect the property to appreciate, so long as maintenance is manageable. They follow different rules from SFH where a family isn't looking at ROI. I am always conservative with my estimates and I usually use more stringent numbers than what the previous owner has recorded on the pro-forma. They are after all trying to get the highest price they can.

    Hope this helps.

    2Reply
  • David Coughlin
    OP
    Member since 2022 · 3 posts · 2 votes
    3y

    Thanks @Michael Vittorio and @Olivia Radziszewski for giving me ideas to think about when analyzing and inspecting older homes

    0Reply
  • Justin Hammerle
    Realtor · Providence, RI · Member since 2022 · 404 posts · 262 votes
    3y

    Hi @David Coughlin

    I think you are approaching this correctly with caution and focusing on education as a first time buyer.

    Generally at the walk through stage, it will be important to have a team that can help you identify costly repairs prior to writing an offer, I see this as being just as important with older properties as with any. If you are considering a government backed loan like FHA, post offer/acceptance there will be a mandatory inspection which will help identify any major issues as well.

    Taking into consideration what you find during a physical inspection, you can move repairs/capex down or up and see whether or not the property fits your metrics.  I wouldn't let the age of the home deter your from going through the DD process at minimum.

    Glad to connect and discuss more anytime.

    0Reply
  • David Coughlin
    OP
    Member since 2022 · 3 posts · 2 votes
    3y

    Thanks @Justin Hammerle for the feedback!

    0Reply
  • Crystal SmithPro Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes
    3y
    Quote from @David Coughlin:

    Right now, I am in the beginning stages of real estate investment spending a lot of my time educating myself. "House Hacking" is probably my best strategy while searching for my first property. I'm single, financially stable, and I spend half the year working half way across the world. I need a place to live when I'm home, and I also want my money to work for me.

    With that said, I live the New England area and I am looking at multi-family homes (Manchester, 'Woo'-ster, Boston, Providence). At least 3 units is preferrable and I have no issues with living in a smaller unit. My big concern is that it seems that all these homes are built anywhere from the late 1800's to early 1900's. Every single on of them is over 100 years old! Some might as well be 200 years old at the end of a 30-year mortgage loan.

    With basic research, I know that these houses were built to last, construction was better, maintenance costs are greater, lead paint is bad, etc. But are these houses still appreciating despite their age? How much longer will these houses economically last under good management? How would a 'real' real estate investor appraise this kind of home? How do I look at one of these houses and say "now that's a great deal!" instead of "man, that house is older than my late grandparents!"?

    Direction and guidance to help my educational and real estate journey is greatly appreciated for this wannabe gonnabe investor :)



    You have some great questions. Here's how to get some answers.  Interview some realtors in your area. One of the interview questions should be to provide you with some data showing the median price of properties in the areas you're interested in over the last 3 to 5 years. There are systems that provide such reports that most realtors have access to.  We use these systems all the time in my market. 

    Regarding the part of your question- "How much longer will these houses economically last".  The answer to that question can only be determined on a house-by-house basis;  i.e. how well has the current owner taken care of the property or what kind of investment are you willing to make to get a property up to modern-day codes?  You may find there's an opportunity in purchasing a property with good bones at a heavily discounted price, then renovating it driving up its value.  You could use an FHA 203K loan for this.
    312-681-7487
    0Reply
  • Jaron WallingPro Member
    Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
    3y

    Based on your post I assume you watch This Old House. The current project (on YouTube) is a fire burned 3-family home in Dorchester. Considering the original owner purchased the property for $20K back in 1980, similar properties sell for over $1,000,000 today, I'd say YES appreciation is a plenty. Those Dorchester tri's have always been a "house-hacking" dream. It just wasn't call house hacking. 

    Like others mention the condition of said property is a case-by-case situation. You need to understand and see pitfalls/ property damage when you walk properties. If you can't see them pay someone who can so you avoid money pits. I'd also assume you'll need $5-10K cash from day one for emergencies, rainy days, leaking flat roofs, and surprises. 

    1Reply
  • Mekkel BlanchardBusiness Member
    Realtor · Taunton MA · Member since 2018 · 39 posts · 20 votes
    3y

    Hi David, Awesome to hear you have taken the most important step - Education! As most have already said it will simply come down to the numbers. Every property new or old depending on the work it needs has a number - meaning there is always a correct amount to purchase the property at to make sure you are not over paying! I have purchase buildings from 1900-1960 in the New England area and it is important to do your due diligence and to have someone on your side while walking properties to point things out that you may not be familiar with. Good luck hunting! Take action and educated steps towards your goals and you will be successful!

    [email protected]
    1Reply
  • Leo R.
    Investor · Member since 2021 · 591 posts · 695 votes
    3y

    @David Coughlin age of the building--in and of itself--is one of my LAST concerns. I buy properties based on factors like the local tenant pool, the grade of the property, the grade of the neighborhood, the possibility of value add techniques, etc., etc., etc., but I've never bought (or not bought) a property simply because of its age. I own properties from the early 1900s, 1940s, 1960s, and early 2000s--and frankly, the older properties are often my favorites, and are often my best performers.

    One of the biggest misconceptions by inexperienced RE investors is that new houses are inherently "better" and less costly/less headache to maintain than older houses. This is true some times, but in some scenarios, brand new properties end up producing significantly MORE maintenance/repair headaches than older properties.

    The reasons are:

    1) Some building techniques/materials are far superior to those used in the past, but some are not, and some are unproven. For instance, I'm very doubtful that pex will have a longer service life than copper plumbing. The trend toward flat roofs is just silly in most areas (bc it causes water diversion problems, which then cause a myriad of other problems). Lumber quality today is mostly trash. Etc., etc.

    2) A new house hasn't gone through its "growing pains" phase. All sorts of problems can emerge in the first few years. For instance, inadequate/improperly designed water diversion systems can cause major problems (e.g.; rot, masonry degradation, foundation settling) that won't emerge for several years. I personally know people who bought brand new, multi-million dollar, beautiful luxury homes, only to have serious foundation settling over the first 5-10 years of ownership (and the repair bill was in the hundreds of thousands!).

    On the other hand, an older house has been around so long that these types of problems have either occurred and been addressed by previous owners, or they're often plainly visible. For instance, if there's an unresolved settling issue, you can probably see cracks in the foundation, buckling, un-level floors, un-plumb doors, etc. ...but, if everything is solid now on an old house, it'll probably remain pretty solid for the foreseeable future. As my GC says: "if it's stood straight and true for the last 100 years, it'll probably make it at least another 25".

    Don't get me wrong; there are plenty of issues/problems/quirks that old houses have that new houses don't, and an old house can obviously have hidden problems and big repair/maintenance bills too--which is why thorough due diligence is fundamental to REI...but, the point is: a new house is not a foolproof solution to repairs/maintenance headaches (and in some cases, a brand new house can be a much bigger gamble than an older house).

    Good luck out there!

    4Reply
  • William Coet
    Lititz, PA · Member since 2013 · 595 posts · 272 votes
    3y

    Old houses with plaster and lathe can be quitter than new ones with drywall.  Check that the plaster is tight on the ceiling.  If it's not it can come down on someone.

    0Reply
  • Ian Halter
    Investor · Member since 2022 · 36 posts · 17 votes
    3y

    @David Coughlin Old homes are great to cut your teeth on, given you have enough liquidity and go in knowing extra repairs can happen. Prior to purchase you need to set yourself up for success: a great 3rd party inspector that is no-nonsense, a local agent that knows your type of home and area _very_ well, feedback from other owner/investors with similar homes (i.e. what to look for) and contractors who specifically work on old homes and know their nuances. At the end of the day there's only so much you can do and I can't understate how valuable local knowledge is. Below are tasks I encountered, outside of renovations, that incurred extra costs and whether or not I could do them myself. YMMV (your mileage may vary)

    Fixable alone: boiler maintenance and steam system rebalancing, minor lead paint sealing, plaster patching (even very large ones), thermostat installation, insulate flooring and rim joists, painting, floor repair, skim coating walls, installing thresholds, weatherproofing, installing/refinishing door and cabinet hardware, adjuster gutter drainage

    Needed professionals: sewage main unclogging ($), knob and tube disconnection+removal ($$), flooring ($$), adding joists for structural support within walls ($$), replacement and removal of old brass/cast iron plumbing where necessary ($$$), new gas line for laundry and lines for appliances ($), wall demo + replacement ($$$), steam line moving and radiator repair ($$), gutters ($$)

    $ - hundreds, $$ - thousands, $$$ 5K-10K, $$$$ - tens of thousands

    Hope this helps, best of luck with the old home!

    1Reply
  • Mariel DeVito
    Member since 2022 · 115 posts · 49 votes
    3y

    Thank you for the question.  I am about two years into this RE journey and I'm eyeing my next project to be a historical home built in the 1880s.  I will certainly take the time to inspect the property properly.  Plumbing, electrical and the roof are my top concerns at the deal I'm looking at.  Every investor is different but my take on investing is that the property not only cashflows but it's one that I actually like.  My husband and I update our investment properties as if we would live in them.  This historic one may possibly be my favorite one should we land it for its character and location.  Newer homes won't ever have the same charm that the older ones have acquired over time.

    0Reply
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