How old to go? (for a beginner that`s not a handyman)

[kornel]

Hello Everyone.
I think a good question that many rookie investors might have (myself included) is what is the oldest age of a building that a first-time investor that isn`t handy should consider? With enough experience, knowledge, and a trusted team with a track record, I can see it being more reasonable and potentially more profitable to do older properties with more deferred maintenance and mismanagement. However I think as a first-time investor, we are already going through a lot of new learnings (i.e. learning new systems, laws, skills, etc.) that by also having to deal with the many repairs that an old property requires could result in us biting off more than we can chew. Are there any good benchmarks that you would recommend when just starting out?

Thank you in advance for the help.

Best Regards,

Kornel Szrejber
[email protected]
Future KWC Investor

 

[RCrein]

If you are buying well-built single family homes, major repairs start in the 15-25 years old timeframe. Some would say this is becomming shorter all the time due to lower quality. Shingles tend to fail about this age. Best thing to give long life to a roof is proper ventilation, as hot attics age shingles prematurely. Furnaces and windows become suspect at about this age as well. Kitchens and baths tend to look pretty dated and worn in this timeframe as well. Depending on wear carpets may have already been replaced. If not they are probably overdue. Sometimes asphalt driveways can start to look pretty shabby around this age too. Good ones seem to last forever though if base was well prepped.

Older homes can be fine if they have been maintained. After 25 years most of these repairs might have already been done. Then you are likely good to go for another 10-15 years. If you watch out for these major repairs a lot of grief and expense can be avoided. Another strategy might be to stick to condos were the external repairs are managed for you. Hope these thoughts help. Good luck with your investments.

 

[Thomas Beyer]

QUOTE (kornel @ May 14 2010, 05:53 PM)
.. what is the oldest age of a building that a first-time investor that isn't handy should consider? ..


My wife just returned from Rome .. so I'd say 2500 to 3000 years is OK



Any property has issues .. some minor .. some major .. and the price should reflect that !



In BC or other rainy provinces mold, mildew and rot are an issue that you should assess more so than in AB or SK !



In PQ, MB, NB or ON some houses are 80+ years old .. but built out of brick and with new plumbing, windows or electric wires they can last another 80+ years whereas in BC a 25 year old home poorly insulated might be ready for the bulldozer in some cases !



As an investor you have 3 main tasks: find the asset, find the money partner/investor and manage the team (i.e. handymen, lawyers, property manager, accountant, mentor, appraiser, banker ...) .. so why is your lack of handy skills relevant ? It is just one of the many skills you will hire for a fee !



Do what you're good at .. and delegate/hire the rest !



Related posts:



5 ways to make money http://myreinspace.com/public_forums1/General_Discussion/61-3347-5_ways_to_make_money.html

Do what you love: http://myreinspace.com/public_forums/Real_Estate_Discussion/62-16722-Love_what_you_do_-_Do_what_you_love_.html

How to get started http://myreinspace.com/public_forums1/General_Discussion/61-4391-How_to_get_started_.html

 

[housingrental]

For me that age is 1950 and above
Certainly I`d look at houses built prior though
Consistent best quality construction is often found from apx. 1955-1965 in KW
Prior to that more significant issues in houses are more prevalent than after that 1950 that are costly and can be hard to assess - ie structure, water penetration, rot, wiring, plumbing, unusably low ceilings, trees invading plumbing lines and foundations, inadequate access to side and back yards when work is needed, etc...
Although potential keeps improving, as RCREIN noted due to lower quality some newer properties need a lot of love very fast..

 

[koop]

Hire a home inspector, age doesn`t mean much really.
A well maintained home from the `60`s could be better then a 5 year old multi-family that was built to sell before maintaince becomes an issue.

 

[kir]

Older houses do break down faster, but I think more importantly, that cheaper rents attracts certain types of tenants that , on average, are a bit more careless. Therefore, more headaches.

The proof...I use to live in a house that was built in 1962. I never have any problems with toilets and drainage.
The minute I move out and rent it out...I get a flood from toilets due to broken flaps or components not working. Why?
I don`t think it`s the age...it`s the people living in the house, but I can`t really proof it, otherwise there security deposit will be deducted.
So the common thinking is that the age of the equipment is at fault.

I also think people of the same like tend to stay together in clusters spatially. So NE Edmonton low socio-economic-status tenants are a bit different then downtown yuppies (Working professionals). So these types of renters treat property differently.

But, yeah..I agree older homes have more headaches in general...but other factors exists.

Kir.

 

[larysa002]

QUOTE (kir @ May 17 2010, 02:58 PM) But, yeah..I agree older homes have more headaches in general...but other factors exists.

Rooms layout is one of them as most like modern and convenient open concept. But older houses are often found in good locations and with larger rooms.

 

[Nir]

Hi Kornel, Good question!

I like Adam`s response as he specifically mentioned an age (1950 and up) as a rule of thumb he uses.

Just remember that interestingly regardless of the age of the building every 25 years or so you have to replace all of the following: furnace, water tank, fridge, stove, dishwasher, coin laundry, roof etc.

as you can see the above does not matter if the property is 25 yrs old, 50 yrs or 75 years old - in ALL places ALL of the above was replaced with new equipment (for simplicity lets assume) 25 years ago.

Only a few things like structure, and sometimes electricity and plumbing were not replaced. Yes, these are HUGE but just remember the age does not affect everything and a good home inspector will provide super important feedback on the condition of the above. I heard (but can`t prove or explain exactly why) that due to new cheaper material used today some of the new homes are actually weaker than some 100 years old homes!!!

GL & Regards,
N.

 

[housingrental]

Hi Neil
Poor workmanship is a big issue too... often the materials are incorrectly installed reducing life span...
The greater number, and more complicated components, greater likelihood of failing... ie new high end fridge lower life expectancy than fridge from 20 years back when first made.... same idea with furnaces, ovens, etc...

 

[RedlineBrett]

Don`t limit your search based on age. Many properties will have been renovated or upgraded over the years and you risk missing out on good candidates by setting an age filter.

As one poster above mentioned the old properties are always in the best locations - an item critical to management and top rents.

Do as Thomas suggests and find someone to help you with the stuff you are not good at - IE hire a handyman for small fixes or a good inspector when screening older properties. Talk with your realtor about what kinds of things always come up with older homes in your area so that you know what to expect as every single house will have at least a couple `issues`.

 

[2ndstory]

Age is of no concern to me. In fact, the workmanship from houses built in the 1950`s is at it`s pinnacle in some cases. My 4 plex is over 100 years old and I just somld one of my other houses that was a 1913. The only real issues are plumbing and electrical. Finding insurance for knob and tube buildings is getting tougher and you want plumbing that is at least a combo of copper and PVC. Foundation is also the most expensive part to repair, so get that looked at. Looks like you may be someone who will want to make any purchase subject to building inspection.

Nik

 

[Sherilynn]

Every point here has merit. I agree with Nik that age shouldn`t be the biggest concern. Deferred maintenance can age a home faster than years can (and will often cost more to fix). Well-maintained homes can last for a very long time.

I also agree with Nik in that the main issues with older homes arise from electrical and plumbing. Codes have changed drastically since the 50`s. Ungrounded wiring can be an issue, as can years of DIY electrical. Insulation can also be an issue with older homes (either insufficient insulation or asbestos).

Because of these issues, we tend to look for homes less than 50 years old. That being said, one of our most solid (and profitable) properties was built in 1955.

And as Thomas said, your handyman skills are irrelevant as you should factor contractor repairs and upgrades into your budget.

Regards,
Sherilynn

 

[kornel]

Thank you so much for your help everyone. I really appreciate you taking the time to help, and I think other rookie investors might benefit from this post as well.

After reading "Rich Dad`s Advisors: The ABC`s of Real Estate Investing" by Ken McElroy he mentioned that his criteria is to only buy properties built after 1988 with his logic being that the building codes were really lacking before that time (referring to US code). His other reason was that newer properties are designed in a way that satisfy contemporary preferences (ex. more open concept than older properties). It`s great to hear from your experience that age isn`t a critical filter to use as long as the proper due diligence is done on the property especially with respect to the more serious repairs mentioned above.

Many thanks once again.

Kornel Szrejber
[email protected]