Steer clear of older MFH??

Question

Comparing a duplex from 1940 and 2003:

Neither requires immediate rehab.

The older duplex cash flows $550/month (30% ROI all things considered) and the newer one $350/month (14% ROI).

The older one has window a/c units. The newer one has central air. Both in the same town.

What would you prefer and why?

Jill F. · Answer

I guess it kind of really depends on your investment goals. If you are trying to come up with as much cash flow as soon as possible and your investment funds are pretty limited then you may need to go with the older one to meet your goals. You look pretty young in your picture so if you have a w-2 job and a long horizon, then perhaps the lower maintenance and the (likely) higher appreciation of the newer units might be the better call.

Bridgette Delva · Answer

@Keegan Darby awesome question!  One of the things I would take into consideration would be maintenance costs so a 1940s property makes me question the age of the plumbing and electrical, two of the most expensive problems to have. If the 1940s unit has been full renovated and updated and those upgrades have been made then take that off the table.

What’s the estimated re-sale value of each? I know cash flow is the goal so this wouldn’t be too strong of a deciding factor but it may tell me about the neighborhoods. Which one one has the best location? You can charge a premium for prime locations and tend to have more stable renters.

Window units are unattractive and typically define the type of neighborhood but, as your figures indicate, it’s not indicative of cash flow.

Are there any updates needed on either property? Who pays utilities on the properties?

Last thing that comes to mind is the tenant histories and terms of their leases.

I can’t say I have an answer for you but those are the things that come to mind for me to do a comparison.