Ask this Old (Multi-Family) House

[David Coughlin]

Right now, I am in the beginning stages of real estate investment spending a lot of my time educating myself. "House Hacking" is probably my best strategy while searching for my first property. I'm single, financially stable, and I spend half the year working half way across the world. I need a place to live when I'm home, and I also want my money to work for me.

With that said, I live the New England area and I am looking at multi-family homes (Manchester, 'Woo'-ster, Boston, Providence). At least 3 units is preferrable and I have no issues with living in a smaller unit. My big concern is that it seems that all these homes are built anywhere from the late 1800's to early 1900's. Every single on of them is over 100 years old! Some might as well be 200 years old at the end of a 30-year mortgage loan.

With basic research, I know that these houses were built to last, construction was better, maintenance costs are greater, lead paint is bad, etc. But are these houses still appreciating despite their age? How much longer will these houses economically last under good management? How would a 'real' real estate investor appraise this kind of home? How do I look at one of these houses and say "now that's a great deal!" instead of "man, that house is older than my late grandparents!"?

Direction and guidance to help my educational and real estate journey is greatly appreciated for this wannabe gonnabe investor :)

[Leo R.]

@David Coughlin age of the building--in and of itself--is one of my LAST concerns. I buy properties based on factors like the local tenant pool, the grade of the property, the grade of the neighborhood, the possibility of value add techniques, etc., etc., etc., but I've never bought (or not bought) a property simply because of its age. I own properties from the early 1900s, 1940s, 1960s, and early 2000s--and frankly, the older properties are often my favorites, and are often my best performers.

One of the biggest misconceptions by inexperienced RE investors is that new houses are inherently "better" and less costly/less headache to maintain than older houses. This is true some times, but in some scenarios, brand new properties end up producing significantly MORE maintenance/repair headaches than older properties.

The reasons are:

1) Some building techniques/materials are far superior to those used in the past, but some are not, and some are unproven. For instance, I'm very doubtful that pex will have a longer service life than copper plumbing. The trend toward flat roofs is just silly in most areas (bc it causes water diversion problems, which then cause a myriad of other problems). Lumber quality today is mostly trash. Etc., etc.

2) A new house hasn't gone through its "growing pains" phase. All sorts of problems can emerge in the first few years. For instance, inadequate/improperly designed water diversion systems can cause major problems (e.g.; rot, masonry degradation, foundation settling) that won't emerge for several years. I personally know people who bought brand new, multi-million dollar, beautiful luxury homes, only to have serious foundation settling over the first 5-10 years of ownership (and the repair bill was in the hundreds of thousands!).

On the other hand, an older house has been around so long that these types of problems have either occurred and been addressed by previous owners, or they're often plainly visible. For instance, if there's an unresolved settling issue, you can probably see cracks in the foundation, buckling, un-level floors, un-plumb doors, etc. ...but, if everything is solid now on an old house, it'll probably remain pretty solid for the foreseeable future. As my GC says: "if it's stood straight and true for the last 100 years, it'll probably make it at least another 25".

Don't get me wrong; there are plenty of issues/problems/quirks that old houses have that new houses don't, and an old house can obviously have hidden problems and big repair/maintenance bills too--which is why thorough due diligence is fundamental to REI...but, the point is: a new house is not a foolproof solution to repairs/maintenance headaches (and in some cases, a brand new house can be a much bigger gamble than an older house).

Good luck out there!