Evaluating a multifamily property. How old is too old?

Question

Hey all, I'm looking to purchase a small multifamily property as my first rental. I found a triplex that i like and when running the numbers it seem like a good deal. The only downside is that the property was built in 1850! It looks like it has been maintained and updated from what i can tell from the outside, vinyl siding, newish roof, etc. What are some things that I'm not considering that could potentially eat up my cashflow? What are some things specific to older homes to look out for when renting out a property? It also looks like the septic system may need to be replaced since it no longer complies with local laws, which may play a role in the lower asking price. Thanks!

Purchase: 126,900

Repairs/Septic Tank: 20,000?

Rents: 2,500

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Prop. Tax: 346

Ins.: 100

Mortgage(@100%): 642

Vacancy(10%): 250

Repairs(5%): 125

Cap Ex.(10%): 250

Total Expenses: 1,713

Cash Flow: 787

Purchase: 126,900

Repairs/Septic Tank: 20,000?

Rents: 2,500

-------------

Prop. Tax: 346

Ins.: 100

Mortgage(@100%): 642

Vacancy(10%): 250

Repairs(5%): 125

Cap Ex.(10%): 250

Total Expenses: 1,713

Cash Flow: 787

JT Spangler · Answer

With a house that old, you could easily uncover issues that cost 100k to repair, like failing structure, foundation, electrical (knob and tube was the standard when the house was originally wired -- this place is so old it predates electricity), heating/cooling (old boiler, furnace, coal chute even?), and you already mentioned the septic.

That's not to say you should avoid it. Just do extra due diligence before you buy. Double your expected repair expenses (5% is too low to begin with), and find a home inspector who's highly recommended and knows what to look for in old houses. Also, go check and see what permits have been pulled on the property over the years. If the electrical/hvac/plumbing was upgraded, that work should've been permitted, which means you can see when it was done and who did the work.

If the numbers you posted are accurate and a home inspector finds no major issues, it looks like a pretty good deal.

James Wise · Answer

Agent

Michael Seeker

Michael Seeker · Answer

How'd you sell a house that's older than anything you bought?  Did you inherit it or were you acting as an agent?

Most of my rentals were built around 1900 and all are pretty great.  They have lasted 100+ years afterall, and I'd much rather have something built around 1900 than around 1950-1960.  You can't find the quality of work today that existed back around the turn of the century.

As others mentioned, the trouble is in identifying any work that has been done AFTER the original structure was built and determining if it was done right and up to today's standards.  If you don't know what you're looking at, I'd highly recommend paying somebody to inspect the building for you with a fine-toothed comb!

Don't run away because it's old...old buildings can very well make for great investments.

JT Spangler · Answer

The disclosure just tells you what the sellers know to the best of their knowledge. The permits will tell you if the electrical was truly upgraded, and done by a licensed professional with an inspector signing off. There're lots of horror stories of listings with 'updated electrical!' that's really just a few feet of romex spliced illegally to old knob and tube hidden back in the walls, so until you open up the walls it looks updated.

Rick Jones · Answer

Thanks everyone! Definitely looks like I'm gonna need to get a good home inspector through the place to see if there are any underlying issues in addition to the septic tank. Also looks like the wiring was redone at some point, disclosure shows no knob and tube wiring through house.

Marcia Maynard · Answer

The oldest house I ever lived in was built in 1887. It was a single family home, with seven bedrooms and six fireplaces. Now it is a four-plex owned by the city. I'm thinking yours could have been single family and modified into a triplex. If so, there are lots of short cuts people could have taken over the years. Look for non-standard work. Check the condition of the fireplaces and chimneys... those of that era were usually well built and put out real heat... make sure they have been maintained. Windows were single paned and had storm windows. Lath and plaster walls. Not much insulation. Radiators. Pocket doors between parlors. All sorts of cool stuff. And some scary stuff too, like old fashion electrical and old fashion plumbing and old fashion heating. Would be cool to restore to the original looks while upgrading to current safety standards. Contact the local historical society and find out what you can about the place and the era when it was built. And also, find out if the ghosts are friendly!

James Wise · Answer

The oldest house I ever bought was built in 1905 or 1915.

The oldest house I ever sold was built in the 1880's

Evaluating a multifamily property. How old is too old?

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