Multiunit Bld - 100 years Old - Diligence Required

[Tushar Shah]

Hello BP Members, 

I am under a contract for a 8 unit building came on MLS few days back and was hoping to get your opinion on few technical/diligence things given the communities vast experience in investing in multifamily space.

1. 1) The building currently has one common boiler and furnace that supports 6 units. There is then another boiler and furnace that supports the other 2 other units. As such, Owner pays for electric and gas along with water/sewage. Is it common to have fewer boilers/furnace supporting entire building or one always prefers to have a separate boiler and furnace for each unit?
1. From maintenance/investor perspective – Isn’t it better to have fewer boilers and furnaces – less maintenance expense? Main question I have is what are the disadvantages of having common boiler and furnace. 
2. The two boilers and furnaces are old ( 8 years old) but functional – How does one go about inspecting the estimated useful lives for these? The normal inspection we do only takes serial number and tell us when it was manufactured. It does not go into any additional checks/inspection. Do investors recommend getting a boiler company and HVAC guy do a thorough/detailed inspection in addition to the normal inspection?

1. 2) How does one typically get comfortable with plumbing and electric for building which is 100 years old? The inspection again will just do a high level inspection and nothing too detailed. This building is 100 year old and don’t think any upgrades are done on plumbing and electric. However, at the same time everything is functional, very less maintenance expense and tenants are happy staying in the building.

1. 3) The listing says the building has 1) new roof, 2) new rear staircase, 3) new vinyl windows and 4) new glass block windows. Are there any other major capital expenditure items I should worry about for multi families? 
2. The main issues I see with this building is old boiler and furnace – but am curious to see if there are other items that may concern you.
   

Always looking forward to educate myself and learning from the community. 

Thanks in advance for the responses. 

[Kathy Henley]

@Tushar Shah Your general inspection report is that, 'general'. Additional inspectors dedicated to the boiler and HVAC will give you valuable information. Your inspection phase is to understand the health of the building and help you estimate the reserves that you will need in the near future. Ignore NOTHING in an old building, cash flow can be non-existent with constant repair requests from your tenants. Drains and water supply lines are costly to replace (and hard to replace when a unit is occupied.) Sewer lines, power drop, electric control panels ($$$). Any item that your general inspector says that more info is needed, hire a contractor with expertise in that topic (like a roofer or electrician). Remaining service life can be estimated by expert. Pay for their expertise. We ignored the warning of a failing window that ended up costing over $30K to repair because the entire wall was in danger of failing due to water intrusion. 

Then ask, is there anything that you can expect from your geographic area to expect in future expenses - like wet basements, recent building code upgrades, or upcoming community infrastructure repairs that will be paid for through property tax assessments?