Do you buy older homes for long term rentals?

Rental Property Investor · Mebane, NC · Member since 2015 · 494 posts · 439 votes

I tend to shy away from homes over ~20 years old to buy and hold for long term renting. This is because I'm concerned that even though the things in the house I can see look great things like the electrical, plumbing, or the foundation may need major repair if not immediately relatively soon. I'm also concerned older homes have already seen their biggest jump in capital appreciation and don't have as much potential for price growth compared to newer homes.

What are your thoughts on older homes? Is there something I'm not taking into consideration? Would a low enough sales price make all of my concerns go away?

Thank you for your time!

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Henry T.

Member since 2022 · 1k+ posts · 1k+ votes

I have a bunch over 100 years old. I'll work on a old house any day over a new one, much easier to access everything, at least in my cases. I remodel making sure that future changes are easy. They easily double(or more) in value every ten years. (but that may be changing now). From this landlord's perspective, new houses suck. New construction requirements are for the sole purpose of keeping the trades working, elec, plumbing, mech, siding. Crappy products made not to last. Real crap! Some younger renters may seek out a newer plastic place with lots of MDF. I have my (low maintenance)demographic that I prefer to cater to. Not saying there isn't money in new properties, there obviously is, but I love tearing into an old place and upgrading it. You should too! $$$$

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Bryce JamisonPro Member
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Rental Property Investor · Mebane, NC · Member since 2015 · 494 posts · 439 votes
3y
Quote from @Nate Sanow:

Yes I own two that are near 100 years old and I will tell you they are a pain in the you know what compared to all of my post WW2 properties especially post 1980… layouts are better in the last 50 years and energy efficiency is better and I can keep going… HOWEVER to reply to the other aspect of your question, I've found appreciation is better with older properties in areas of the path of progress. Odds are your newer builds are on the outskirts of a city into the suburbs where people fight to get a property if it's affordable. So while that's a great asset you pay more for it typically. Older properties can be picked up for < 50% of ARV and go up in value in rapid ways with urban renewal efforts … I've seen this happen time and time again and so it's worth saying, diversification is ideal. I want some older stuff to gain tons of appreciation and I want to see where that takes me but I also want some newer builds to have less headaches from a maintenance standpoint.
Thank you for the very thorough and clear thought process. This is exactly the type of answer I was hoping for.
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Liz Crews
Member since 2023 · 1 post · 0 votes
3y
I know most investors would say it's crazy to invest in older condos for rentals but in Raleigh it seems to be an overlooked opportunity. If you can find a place where the HOA or COA is flexible and you are able to convince the membership to go into development and perhaps convert the property into a co-op you could build a new apartment complex with commercial rental spaces on the ground floor and residential spaces on the top. I just haven't figured out the $$$ part and how to do a tear down and rebuild yet. But in my imagination it seems like a good way to create some prime real estate in the city limits. Many are zoned as mixed use communities. I would love to talk to some open minded experts that have the bandwidth to think outside their bottom line. Many condos are falling apart but they sit on millions in urban acreage.
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Mitch Miller
Investor · Raleigh, NC · Member since 2014 · 104 posts · 112 votes
3y
I also have a few older homes I think I have a couple built in the 1910's. They have all be renovated and would not look that way. Some Pros are they were built better back then in my option. I have newer properties that spec builders just through up and have issues with. The only big issue I ran into is on of the basement walls needed extra support, I don't think a newer build would have that issue. I just maybe have been lucky but the age does not scare me if the price is right and the inspection comes back clean. But I see a valid concern here as an investor and if that is a risk you don't want to take I think that is valid.

Your second point of most of the price appreciation is gone, I think is just off base. Properties are not like stocks where After IPO the market cap is so large that that most of the life changing appreciation is gone. In housing the house goes up with the market, think comps. Example if you buy a new build at 300k or a renovated 100 year old home at 300k right next door, both should see the same appreciation. Now that is a very high level example but the appreciation is not gone if that makes sense you will capture the ballpark same appreciation if the properties are comparable.
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Bruce WoodruffPro Member
Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
3y
The age of a house has absolutely zero to do with it's possibilities as an investment. Zero. It's all about numbers.....does it need work? How much? What does that work cost? DO the numbers (ROI) still work?
Actually, the older homes have much more potential...to shy away from them is just silly.
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Nathan G.
Investor · Prosper, TX · Member since 2018 · 15 posts · 3 votes
1y
I like new constructions. Much easier than old homes.
Get high returns in stocks. Then cash some out periodically and buy turnkey new rentals. Sometimes they come with new appliances. No need to repair or update anything for a long time. Can skip inspections.
At the moment I am turnkey all the way. Again get the high returns in stocks.
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Bryan Stengel
Real Estate Agent · Long Island · Member since 2018 · 88 posts · 38 votes
1y
Hi Bryce, I think the age of the home will never affect the cash flow or even how much it really appreciates. We live in Levittown and all of these homes were built in 1948. Surprisingly, these homes that once sold for $7,000 are now selling for close to $1,000,000 and it doesn't seem as though the rate of appreciations is decreasing anytime soon. If the the demand is there, the homes are likely to still appreciate over time. Adjusted for inflation, the prices of homes in a desirable location appreciate more than average wages. As mentioned before too, newer construction tends to sell at a premium too. Older homes may need updated style, but as long as your rough-ins are intact, everything should be fine.
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Patrick DruryBusiness Member
Real Estate Agent · Columbus, OH & Cleveland OH · Member since 2021 · 1k+ posts · 2k+ votes
1y
@Bryce Jamison
Everything I own is built in the 1900-1940 range. I think it really comes down to risk tolerance. At the end of the day for a new build your just paying for peace of mind. The older homes do quite well for me. I think a lot of investors are just scared of them because they don't understand them. As @Bruce Woodruff mentioned it just comes down to the numbers. What is the price, how much work does it need, what will the rents be, and what is the ARV
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