First deal - help with old home

[Amanda Brewer Davis]

Hello and thank you in advance for reading

I’m in escrow on my very first investment deal and desperately need guidance.

This is 2 homes built on one lot in Reno, NV. The first home is brick and built in 1932 with an unfinished basement. The second home was built in 2001 and needs nothing done. Looking to rent the first home for ~$1700 and the second home for ~1500. (Close to University and will be easy to rent). Appraisal competed today - don't have information yet.

Purchase price: 422K, estimated monthly payment with taxes and insurance ~2200.

Here are the problems with the old home…

-Knob and tube wiring with maybe 20% updated wiring: I have contacted several insurance companies and none of them will insure this house because of the large fire risk.

-Cast Iron plumbing with minimal ABS upgrades (Good water pressure /drainage and got hot fairly quickly)

-Chimney is tilting away: Structural contractor states maybe in 10 years would need ~8,000 repair.

-Oil burning furnace: Fire hazard with amount of buildup in furnace and in flue. Sellers will have to fix this for sure. ~1,300 to clean. OR $4,500 to change to gas furnace.

I feel like with this high purchase price, I would expect everything to be updated already. I also feel like I would be unreasonable to ask the sellers to complete all these upgrades. What do you guys think would be a reasonable negotiating?

(My initial thought – have them upgrade electrical prior to closing and ask ~$15,000 cash back credit for repairs.)

How do you ever feel safe buying an old home?

I would appreciate any and all advice. Thank you so much for your time!

Warmly, Amanda the Newbie

[Douglas Snook]

Not sure what escrow means in your area but did you do an inspection before going into escrow? It may be too late to change anything now, but ask to be sure.

I would definitely try to get them to change the knob and tube before closing otherwise how will you be able to get insurance? Won't the mortgage/finance company demand proof of insurance to close? If they will close without insurance on one building then definitely ask for some kind of credit or cash back and get the work done asap (The bank may close but require money be set aside for the work with it to be done in 30 or 60 days and proof provided)

Also try to get them to clean the chimney before closing and ask them to bring proof to the closing table for your records. The titling chimney is on you I would think unless it is about to collapse.

Are you buying at market price? These issues would be good points to offer less then market.