Multiple Family/Unit Rentals Issues

[Kristen Ray]

Hello BP!

We are new REIs in Maryland. We are looking at purchasing our first multiple family unit. However, we’ve noticed that most of the multiple family units in our area are very old. Most of them were built in the late 1800’s and early 1900’s. We lived in a fully updated Victorian home built in 1925. And although we took stellar care of the property the property required a lot of maintenance (we lived there for 5 years).

So what are your thoughts and experiences with purchasing older properties as investments?

In addition, we’ve noticed several multiple family units have few bathrooms. Thus, tenants from the various units would have to share bathrooms.

What have been your experience with such a set up?

[James Wise]

Originally posted by @Kristen Ray:

Hello BP!

We are new REIs in Maryland. We are looking at purchasing our first multiple family unit. However, we’ve noticed that most of the multiple family units in our area are very old. Most of them were built in the late 1800’s and early 1900’s. We lived in a fully updated Victorian home built in 1925. And although we took stellar care of the property the property required a lot of maintenance (we lived there for 5 years).

So what are your thoughts and experiences with purchasing older properties as investments?

In addition, we’ve noticed several multiple family units have few bathrooms. Thus, tenants from the various units would have to share bathrooms.

What have been your experience with such a set up?

 We have a very old housing stock here in my market (Cleveland, Ohio) as well. We run a massive portfolio with 1,000's of tenants, many of which live in duplex units built between 1900-1930. Here are some thoughts / tips / best practices on what to do with really old multifamily housing stock.

• The basements often get damp & or wet in rougher cases. The basements are not & should not ever be considered living space. The only thing they should be used for is a place to house the mechanicals of the property & provide the tenants a space to do their laundry. They should not be allowed to use them as storage nor should you ever install carpet or drywall down there or attempt to finish them as living space in anyway. Painting the block with dry-lock & running a dehumidifier while not using it as living space is the way to go. If you do all of that you don't have any issues.
• The exterior should be vinyl sided immediately. The old wood siding has likely been painted with lead based paint at some point. Spending the money to encapsulate it with vinyl siding is the way to go. Otherwise you'll be doing constant maintenance to it over the years. If a lead issue is ever found handling it after receiving that information will be beyond costly. 
• If the windows are original it's a good idea to replace them with vinyl windows. Just like the exterior of the home the windows can lead to possible lead paint issues. The wood issues are constantly rubbing against the frame when they are being opened & closed so this is the other major part of the home that leads to lead paint issues. Just eliminate the problem & get the vinyl windows. On top of that the older windows are very drafty, break easily & require constant maintenance. 
• Watch out for the main waste line. Often times the original main waste line may have tree roots growing into at as the trees around it are very mature. This can lead to sewage backups inside of the home. (Good thing your basement isn't finished with carpet or drywall!)
• Installing central air will go a long way in keeping your tenants in the properties longer. These homes aren't typically insulated very well. So they are HOT in the summer.
• Refinish those hardwoods. They simply don't make newer properties with beautiful woodwork like they did when they we building all of these old homes. The hardwoods will stand up well to constant tenant abuse so don't cover them up with carpet which will need to be replaced after every few tenants. Refinish your hard woods & put a protective clear coat over the top. They will least forever.
• Lock the attic. No reason to have the tenants use this unfinished space (unless they are renting it from you) If you leave it open they will just store a bunch of junk up there that you'll end up having to pay to be removed. Or worse you'll have to deal with the tenants accusing each other of stealing their items & then blaming you for it.
• If ever possible pick a side by side duplex over an up down duplex. The up down duplexes are more common, but if you ever run across a side by side you should scoup it up. Even if you have to pay a premium for the side by side duplex it's well worth it. The amount of fighting over noise tenants in an up down duplex do will blow your mind. The side by side duplexes will make everyone's life easier & thus have longer stays than the up down duplexes.