Advice on buying / rehabing an older rental (1900)

[Dan Barman]

Looking at purchasing my 1st rental property and interested in advice from anyone with experience rehabbing older homes. It's a single family 3/4 BR, 2 BA in a hot area of NY's Hudson Valley, built in 1900. Looks good on the outside but inside it's a MAJOR fixer-upper; slanted floors, former tenants evicted and likely trashed the place before they left (it's disgusting). Kitchen/Dining room looks great though and house is located on an amazing, quiet, family friendly block near center of town. Bedrooms are small and no in-room closets (has large-ish hall closets and attic storage however), one of the bedrooms is a walk-through. Looks like damage is mostly cosmetic, house probably has good bones but won't know for sure until after inspection.

Asking price is about 2/3 of what houses like this in good condition go for in this area. I've run it through the BP rental calculator with conservative, medium and liberal scenarios and it looks like the property would cashflow between $450-$1,000 / mo. This house could also be a flip but I have not looked at that scenario in detail.

What are some things about older homes that I should keep in mind when deciding to make an offer? Are there questions I should be asking that I may not be thinking of? My main concern is the rehab, I know I need a good inspection before but don't want to get caught with any major surprises. Also, I'm concerned about the lack of closets in the bedrooms and the walkthrough (will it be hard to rent). I live about 1.5 hours drive south of the property, my schedule is flexible but I won't be able to run up there at the drop of a hat. We do have good friends nearby who are landlords/realtors who have offered to help. 

Any advice would be much appreciated.

Thanks!

[Elizabeth Zieman]

Hi Dan et al, I'm an architect in Ridgefield CT (just over NYS border) and have done 100s of renovations on older homes (love them!).  1900 is a good year!  Houses are solidly built, have great bones, if you can work around or update the design obsolesence.

The comment the person above made about bringing building up to code is not quite correct. You only have to bring aspects of the building that are being altered up to code, not the entire structure. That said, I recently almost had a closing fall through (and almost lost my EMD!) when my property insurance company suddenly outright rejected coverage because of knob-and-tube wiring and multiple layers of roofing and deteriorated chimney. I finally found an insurer, and was able to close, but I had to remedy those conditions immediately.

Note also that home inspectors will warn you left and right that they are not required to detect building code violations/deficiencies.  I almost at a point where I don't even bother with home inspectors.

Some other common issues with older houses, particularly if you will be renting:  lead paint, asbestos, mold (although I find older houses are leaky enough that, as long as the roof drains well, air movement through the building is good and prevents moisture buildup), steep staircases, narrow hallways.

But you MUST MUST MUST do a walk-through with an experienced contractor (one who specifically has experience renovating older houses/buildings) prior to placing an offer.  He/she will give you a good idea of what you're in for costwise.  Then take that # and multiply by 1.25 and you've probably got a good rehab cost #.  If he/she likes you, they might even be kind enough to talk you out of a bad purchase!

More specifically, it's hard to say without seeing the house.  I'm happy to help you....just PM me.