Old Multi-Family Investing

[Hao Liu]

I am about to purchase a few 4-plexes which are really old. They were built in the 1920s. They are in OK conditions. Previous owner did some repairs, but not inside-out remodels.

These 4-plexes are in good location and the rent has been rising at least 4% per year for the past 4 years. I am planning to hold these for long term, probably 20+ years. Any concerns that I might have missed for these old houses?

The properties are in Oklahoma City area, if that helps.

[Joel Owens]

The ongoing repairs and the capex will be the killer to the cash flow.

I think you should research heavily the vintage of the 20's for all know issues. Then create a checklist from most expensive items to repair to the least.

Then have average life expectancy totals and grade each item based on how many years it has left, it's current condition, and is it working 100% correctly. Do not be swayed by sellers with some from paint and cheap carpet on the units.

It's like an older car. I don't care if it looks ugly on the outside. I can get it painted, put new tires on it etc. and make it look great for cheap. What I am concerned about is what is under the hood. That is what makes or breaks the investment. If the bones are good you could have a winner. Sellers often say look at this great property and it's crap they are selling with cheap repairs to try and make it presentable. Don't believe the hype... : )

You have immediate capex which is items needed to be corrected right away for the proper operation of the property and then you have ongoing capex items over time where they might be okay today but at some point will need to be addressed. Sounds like rents are strong in that area so it's mainly the condition of the building and units. Might want to underwrite a 2 to 3% gain per year in your analysis for projections as the 4% clip might not last forever.