Help! Take the deal or no deal?

[Wee Pone Yang-Chang]

I just put in my first offer for a duplex and amazingly it got accepted on my first try! Once fully rented, my potential CoC return is about 20% or $520 cash return after all expenses paid. Location is great, down the block from the University. Accepted offer is $170,000. But after inspection report came out, I think I'm having cold feet. The home is built in 1920. Please let me know your thoughts: gutter repairs, front and back deck repairs/replacement, several holes/roof damage to unused garage, eventual replacement to galvanized plumbing, eventual all window replacements due to lead.....Biggest concern: Both furnaces are OLD and are nearing end of life expectancy. I can't stop thinking that I'm getting myself into a money pit. I would like to keep this as a rental for at least 5 years or more, some updates but don't want to totally renovate it. The seller is refusing to fix anything but is offering $5,000 credit at closing. Should I do it? Total renovation is not in budget right now.

[Carl Millsap]

@Wee Pone Yang-Chang Congrats on taking action. It's natural to have cold feet especially after seeing the inspection report. 

Some things to consider not just for this deal, but other deals as well....

1. You said "once fully rented"....is it ready to rent? how much is it going to take to get it ready to rent? Do you have the cash on hand to complete renovations?

2. Look into buying a home warranty from a credible company. This option would / could help when the HVAC units go out. You would pay a deductible and some expenses not covered by the warranty but not the full expense of replacing the units. You can ask the seller to cover this expense at closing.

3. In 20 years, I've only had one major water line break. Not saying the water lines on this 100 year old property won't break but it's not a common thing. Depending on area, some water companies offer insurance on water lines. Something to consider / look into.

4. Get a quote for window replacement. Can you do it in pairs over time or would they all need replacing soon to prevent tenants from having high utility bills? Given that the windows are old and HVAC systems are old I imagine the utility bills are high already. I could be wrong.

If I'm starting out I would pass on this and find something newer, more modern. I don't know your area, 100 year old properties may be common but I have to believe you can get a better bang for you $ without the hassles of a 100 year old property.

Good luck!