How risky to buy very old house for duplex?

Question

I'm looking at a duplex that was built in 1870, so it's about 150 years old!  However, if I assume monthly repairs of 1% of the value, plus capital expenditure reserve of 1% for a total of 2% of value, the Cash on Cash and Net Operating Income actually looks quite good.

I still need to learn specifics about what in the house has been replaced and what hasn't, but assuming that after inspection there are no major repairs needed, how risky is it to buy houses that old to rent out as a duplex?

Jason V. · Answer

I have a triplex that was built in 1900. Old houses definitely cause more work for the investor, but can be an appealing and rewarding investment IF you are careful.

I would ensure that you replace any knob and tube wiring in the house, or at least have it inspected. These old homes also have rock wall foundations that need to be kept in good repair.

Old homes also have some strange quirks that can be a major irritation. For example, door and window sizes are all over the board and generally not uniform. I found myself cutting new doors down to fit into the existing frame.

One appealing characteristic of an old home is lathe and plaster. It seems to rarely get damaged because it is stronger than drywall. There is also some great characteristics in an old house that are not replicated in today's designs.

If you are new to investment properties, an old house may be a way to break into the market. That being said, I don't plan on buying any more old homes for rentals unless there have been sufficient upgrades. The extra money I make from the investment usually goes out the door with repairs and upgrades to the house to maintain it for tenants, eating up a chunk of my cash flow.

John Hanson · Answer

Thanks for the quick response....

Forrest Williams · Answer

I would say a lot hinges on the inspection. A few things to look out for: Lathe and plaster walls? Knob and tube wiring? What are the pipes made from? Is there lead in them? What about in the paint? Are there enough lights in each room? Is the foundation structural? Is the building in a historic area that may tie you up with red tape when you try to improve it? How old are the appliances? Furnace and AC? How's the insulation? How's the condition of the roof? Are the windows original?

There are a lot of variables with old houses. If I had the option to buy a duplex built in 1870 or one slightly more expensive built in 1970, I'm going to take the 1970 house every time. If this is your first house, I would probably pass. If it's your 10th, you'll probably be better equipped. I would go through it with a very critical eye.