Should I buy something from the 1940s?

Question

I live in the Greater Detroit area of Michigan and from my quick analysis so far just using the 50% rule I have found out that only the properties (single family homes) which are from the 1940s and 50s located in B, B+ neighbourhoods which have the blue collar population are priced such that I can get a positive cashflow and if I look at something even as much as 30 years old, it's either a negative cashflow or very CoC return of just 4-5%. So, my concern is properties built until 1970s 80s used asbestos for insulation and siding and it's very likely that most of the properties I am looking at would have it. Now, I searched through the forums and people are saying is asbestos removal is very expensive and if you don't touch it, it won't bother you but what I think is, if something was built 80-90 years ago and if not today then 5-7 years from now it could have problems with all this asbestos stuff, what then? I wanted to hear everybody's thoughts about this.

Drew Sygit · Answer

You are over thinking this.

BTW - lead-based paint is a bigger issue than asbestos.

They don't have to be removed, just encapsulated so they are no longer a threat.

Mold is also a bigger issue than either of the above.

Sheena Drake · Answer

We have purchased 2 homes built 1880-they don't build homes as solid as they did years ago. So structurally I have found some of these homes have great bones but need TLC. Same Cap Ex as expected for newer homes, once you have confirmed electrical up to date. Don't be afraid of the year of build. If it's structurally sound and the numbers make sense, go for it. Bought one for 27K. Rehabbed 20K. Appraised for 90. Cash flow around $300 per month and I would live there if needed.

Joe Hammel · Answer

Not something I personally would really worry about. My favorite rental was built in 1925 and I absolutely love it. Bought $103k, Rehab $11k, Rent $1600. Southfield, Michigan.

I find it helpful to think of Investment properties as such...

1. It is a location I'm comfortable with?

2. Will the purchase price, rehab, and rent = cash flow/rent I want?

3. If I budget for maint and cap ex and maintain the house is a good standard of living - will it last and produce the income I desire for the next 30+ years?

If the answer is "Yes" to all of these - buy it. It's a business. No emotion. Each house is a product/business you're buying and if it can be kept in good condition and achieve the income you need, it's good enough. Buy it and stop thinking about it so you can focus on buying the next one.

Example - "I don't like the floor plan" ..... I would ask "Will it still rent out for the desired $?" Yes. Then who cares about the floor plan.

In a nut shell - Investors who only want a rental built after 1950, or after 1980, ect - are operating under the assumption that the Maint and Cap ex expenses will be so high that they will outpace or negate the income/profits. However, I think there are thousands of investors with rentals built pre-1950, that would report otherwise. Conclusion, don't limit what you're buying based on "age" alone. Do an inspection, budget for rehab/maint/capex, run the numbers - trust the numbers. Lots of 1920s houses in better shape than 1970s houses.

Eli Konig · Answer

I personally don't think you will ever have A problem,

Btw there is an idea that instead of removing old siding you can rather just make new siding on top of it, in that way there is no need to touch the old siding.

Lynnette E. · Answer

I would be concerned if a property is actually a 3 unit property and the tax records have it as a single family house. In many areas the owner would only be allowed to rent one unit as that is what the records show. To get the other units occupied then there would be regulatory approval after inspections and it would have to be incompliance with all current rules...zoning, egress, parking, everything. The OP should be very cautious and know how that location deals with this situation before jumping. Some places that would be a great jump, others it could be really bad!

Eli Konig · Answer

I don't think this formula is practical when you are big and are looking on bunch of deals, your township clerk or inspector wont be happy if you bother them every 15 minutes with questions on properties, they are not an MLS listing.

But in some places there are some information avail online on tax assessor's site or state parcels where you can search every property, but be aware the information might sometimes be totally wrong and that's when you can make A killing when most investors rely on this information.

For example we had A 3 family that was for some reason listed as A single family on the tax records and therefore most investors didn't bother to even go down see the property, nothing in the world can substitute going down to see the property by yourself and an experienced investor will see a lot

Lynnette E. · Answer

Before you make a final decision, see what records the building inspector has. Where I invest the building department can say when the last time the electrical, roof, plumbing, bath, kitchen, etc. had a major remodel. They can say if the walls are plaster and lath or drywall or 1970's paneling. If you have access to that type of information and limit your 'buy' search to houses that the major systems were updated in the last 20 years you could come out pretty good.

Cody Neumann · Answer

@Rajpuneet Singh Sandhu

Normally as long as you don’t touch it you are fine. I have a lot of properties around me that were built in the early 1900s and haven’t had any major issues.

Stephen Brown · Answer

No need to hear it again but age isn't as big of a factor as long as the property is in good condition. I'd like to hear what other investors put down for cap ex and repairs based on each decade, for example: a 1970's home has 8% and a 1910's home has 12% .. it'd be interesting to hear the different responses out there.

Should I buy something from the 1940s?

Should I buy something from the 1940s?

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