Thoughts on Hundred Year Older Multi Units?

Question

Hello, I am a new investor in the Minneapolis area, and I am starting to look at properties-- I'm finding most if not all of the multi unit properties I'm going to see are 100+ years old... wow! While they have undergone various remodeling, I'm curious to hear from seasoned investors- what are your experiences with older properties like this? What are the most important questions you're asking when buying and what extra costs/frequency of repairs have you found with your older properties? The one I am going to see today is aesthetically nice, they clearly have done some updates, but my concern is with plumbing/structural things, have others had issues with this?

I am currently renting a unit in 100 yr old multi unit and since I have lived here (September) they have had to do nearly $20,000 in repairs between the heating system pooping out and the plumbing, is this typical?

I love this community and really appreciate the wisdom :)

Happy investing!

Todd Dexheimer · Answer

Too old: Galvanized piping and cast iron waste piping are too old and need to be budgeted for replacement. You many not need to do it the first 5 years, but once it starts to go bad, it continues. Knob and tube or Aluminum wiring - Same here, fire hazards and poor connectivity. A good way to lengthen the life span is to use 40 or 60 watt LED bulbsOld radiators will leak, especially with steam. The old furnaces can actually be ok if you don't pay the heat. I have a few furnaces from the 1950's and they require no maintenance, besides re-lighting the pilot light every 3-5 years. As for the building components, look out for undersized floor joists and beams, along with no footings. You also need to look at the attic rafters for undersizing. The other issue is insulation and venting. Often the houses are under insulated, especially in the attic and along the rim joists, as well as not properly vented in the attic. In MN, many people like to finish the attic, which is often done improperly. Look for evidence of moisture on the ceiling, especially along corners and look for ice dams or evidence of ice dams (shingles will be torn/dented)

Bruce Runn · Answer

@Hannah DimentI currently own 14 properties (primarily in/near Uptown) and 13 are over 100 years old. Love them! They are in the best locations for rentals and when I buy something, I renovate to bring everything up to modern standard. Rental properties that are close to Downtown Minneapolis were all mainly built in a large scale way starting in 1900. Where possible, when I buy, I update electrical boards if they have fuses, new wiring for extra outlets when they need more power, plumbing to insure there is good water flow, heating if the systems need replacing or are gravity based, and roofs when needed. For me, it's all part of the acquisition price since I hold long term. In my profit formula, I set aside $300/month per building for repair and capex. Over 8 years it has worked out to $125/month for repairs and $175/month for capital investment and I have every building on a schedule when items get updated or replaced so I have a good feel for what needs attention ahead of issues. Not everything needs to replaced right away so it goes on a schedule for replacement and the repair contingency takes care of it. This year, I am replacing 1 roof, 2 boilers, and 3 water heaters. I end up is really nice properties with tons of character/old world charm in prime "A" locations. I have over 1500 months of rentals and have had 1 vacancy in 8 years so essentially, the repairs pay for themselves since I literaly have a 0 vacancy rate. Rather than putting a vacancy rate into my profit formula, I continually update and make my places nicer.

Amber Gonion · Answer

Beware of pretty appearances, non standard building techniques, aluminum wiring, newspaper used as insulation, lath/plaster walls, piece-meal additions, real 2”x4” (not 2x4s) and square nails. Even if the unit looks nice these are all possible underneath. Not that you should not buy these, but you should be aware of the risks.

Todd Dexheimer · Answer

I have owned many hundred plus-year-old properties and currently on several. If they have old plumbing, heating, and electrical then you will have a lot of repairs. The biggest issue with those age of properties as they are not built very well and often times have structural issues. I would still buy hundred plus-year-old houses, especially in some of our good/trendy neighborhoods, but just going knowing that you either need to replace all of the old mechanical items or budget for them to go bad

Pavel U. · Answer

Welcome to Minneapolis @Hannah Diment! Be sure to join local biggerpockets meet up! What @Bruce Runn said. I too have a dozen or so duplexes and nearly all of them are 1925+. Only one is 1913. All have solid bones. In fact the 1913 duplex was inspected by a foundation company, and they were shocked how good it was, only settled less than quarter of an inch on one side. The only things I've had to repair so far - update few boilers; water heaters; windows in 1 or two; some plumbing; some electrical. Just be sure to hire a good inspector, and pay attention to major items (roof, windows, boilers/furnaces, foundation, electrical panels, galvanized pipes). Then again, you don't have to replace them all at once either.

Amy A. · Answer

I have 7 buildings over 100 years old. This is over half my portfolio and I make a living from it - it's not a hobby. Yes, you will need to learn a lot about plumbing. Fixture parts aren't readily available and you might want to replace them anyway to save on the water bill. Shut-off valves will fall apart in your hand and drains will crumble and leak, sending water into the unit below! The old plumbers are retiring and the few young plumbers out there don't know how to work with old plumbing. You have to keep up with the lead paint disclosure paperwork. Basements are often moist. The water flows in during the spring and flows out in the summer. Your insurance might be expensive due to asbestos siding or pipe insulation.The key is to not be too picky and don't expect it to be like a new building. If it's been around over 100 years and hasn't fallen down yet, and the grading around the building is good, it's probably OK. If you buy it right, it will at least hold its value and cash flow well. The tenants don't care how old it is as long as it's cosmetically pleasing. Historic utility expense data is easy to get, so don't stress about it. You have to start somewhere. My first 5 unit building that I purchased 10 years ago has a terrible layout, parking, wiring, foundation... yet my cash on cash return is over 100% almost every single year! Some cities have low-interest loans or grants to improve energy efficiency or abate lead paint. I wouldn't own a painted building - put foam board insulation and vinyl siding over it and forget it.However, for flips I don't usually buy old buildings. Single family home buyers are much pickier than tenants and expect perfection. I usually sell to first time home buyers and they are afraid of every little issue. Good luck!

Tim Swierczek · Answer

@Hannah Diment I have 9 rentals all over 100 years old and my primary residence is only a few years away from 100. You have gotten some great tips, so I will only add that you can make money on 100-year-old homes, just be sure you have reserves so that if you do have some issues early on you are not caught without the funds to fix them. Good luck.

Slocomb Reed · Answer

@Hannah Diment I currently own three properties over 100 years old, all in the Cincinnati area. Just recently bought a 1900 single family in Norwood that I don't actually know all that well (partner does) but the stone foundation is solid and everything else was already updated. I have an 1825 3-family and an 1870 four-family in a little historic district near downtown Cincy that I love. Solid stone foundations, solid brick construction, the floor joists are original and a little warped but that comes with the territory. I use luxury vinyl flooring because it's durable, affordable, and it'll contour to the weirdness of my old joists. I also bought them with plumbing and electrical already up to code.One thing to look out for is that flat rubber rooves are much more expensive to repair or replace than pitched rooves that can take shingles. I ended up having to completely replace a rubber roof that, because of the oddities of the 191 year-old house, cost me just over $12,000 for just under 1,200 sq ft of roof.Also, check to see if the properties fall into a historic district in your area. if they do, local government will have regulations about remodeling and updating, especially on the exterior and on the facade.Hope this helps Hannah!

Hannah Diment · Answer

Thank you everyone for all of your amazing advice! I really appreciate it--it has given me a lot to think about as I go forward making offers on properties. So far I have offered on two duplexes in the last two weeks, both around 100 years old, but for both, multiple offers were made the first day at or above asking price so I haven't gotten my feet wet yet with the inspection process. My RE Agent says that inventory is unusually low and that I'll have to make higher offers to secure a multi unit, however he is not an investor and raising my offers would take me away from the metrics I'm trying to hit- $100 cash flow/unit, 12% Cash on cash return. I'd love to hear from other investors in this area though- do these metrics seem absurd given the current market, or are you just being more creative?I have a super team that's been assembling, and I am looking to ramp up my networking and connections with investors in the area so please don't be a stranger! I love love love learning from people with more experience than myself (everyone on here :'D ) and would love to buy you coffee if you're in the twin cities area and are open to sharing your experiences. Cheers and thank you!Hannah

Amy A. · Answer

The shut-off valve situation just happened again on Friday! We had a leak going from the 3rd floor all the way to the 1st floor and had a heck of a time turning the water off! Once we ripped out the damaged 2nd floor ceiling, we found the joists had been hacked up by the "plumber" years ago (explains the sloping floor above). Always use a dropped ceiling below pipes so you just have to replace a ceiling tile, not the whole thing. My husband had just been complaining that he didn't have anything to do that day. I guess he won't do that again! There's never a dull moment with 100+ year old buildings!