How old is too old for rental investments?

[Karl Huther]

I’m new to rental property investments. I see some in my area that look to be in decent shape but says the property was built in 1886. What would be reasons to shy away from a property like this? I’m up for the challenge but don’t want to flop on my first go around.

[Richard F.]

Aloha,

Old, and really old homes or multi-family properties have similar critical areas to either closely investigate, or plan on major, if not complete, removal and replacement. Plumbing and electrical systems are most obvious, however what is often NOT considered, is what "improvements" have the past 50, 100, or more years of handymen and owners made? Plumbing by-passes or abandoned lines; collapsing sewer lines; badly corroded supply and waste lines (both can be from inside or outside corrosion) fixtures with very hard to find components; hidden electrical junction boxes...or non-existent boxes at junctions; outdated and/or underrated distribution panels; knob and tube wiring improperly connected to, or extended with, romex; Switches wired incorrectly, breaking the neutral instead of the hot side; no, or poor grounds for improper outlets; overheated connections, outlets, switches, and light fixtures; improper wire sizes for circuits and overloaded circuits; and plenty of others...all very costly to troubleshoot, locate, and correct individually.

Roofs are another area...how many layers? I've seen as many as seven...surprising the structure could hold the weight with added load of snow in winter! Internal gutters are troublesome and can cause a lot of hidden damage when not maintained properly for years. Leaking valleys, dormers, lack of maintenance on flat roof surfaces, missing shingles/shakes all can create leaks that will run all the way down through the house, rotting framing, flooring, damaging ceilings and anything else the water comes in contact with from the very top to the very bottom of your structure. In multi-family properties, you might have electrical service run in conduit, but serious, long term leaks can corrode through the conduit from the outside, or find its way into junction boxes or other avenues enabling it to get inside the conduit and sit until it rusts through from the inside.

Foundations, certainly, but are often fairly accessible and visible. Post and beam construction often may not have "approved" footings in older properties, and/or sinking posts which need reworking to bring the structure to a reasonably "square" configuration. Joists which have been "notched" or completely cut to accommodate some "update" can create severe structural issues causing leaning floors and tight doors.

Others have already mentioned asbestos/lead based paint issues, however you rarely see remediation costs mentioned...they can be VERY high, and the fines for violating Fed/Local EPA laws can start at $11,000 for a first violation. Per Day.

Another issue that can be problematic and costly, are changes to floor plans that have been made to a home over decades, especially "conversions" where a large home is cut up into 3, 4 or more separate units, with kitchens and baths added for each, and often fireplaces blocked off or removed. Depending on how they are done, these alterations can ruin a property, or if you are lucky, thought went into the alterations and the old doors and trim were saved in the basement, making the restoration of the real charm somewhat easier.

To summarize, you really need to understand fundamental construction and either have plenty of experience to know what you are looking at, or Pros you can truly trust and rely on to adequately evaluate your opportunity and provide numbers that hold true to a high degree. Do not take on a project like this on a shoestring budget...you need to be prepared for anything and everything. Oh, and also, be sure you are not taking on a property that is on a Local or Federal "Historical" register (or "on the radar" of local historical activists), which will dramatically affect what you are able, or not able to do with the property.