What to Know Before Investing in Historic Properties

Posted by Michael Miller on April 26, 2018

That two-unit converted 1886 farmhouse is a lovely find that’s been updated beautifully. Each side of the duplex is sure to draw top-dollar rents. But there’s more to historic properties than the intricate moldings, fine details, and solid construction.

Real estate investors know that any property comes with some degree of risk. But when a house has been standing for more than 100 years, some of that risk can be disguised behind a renovated facade.

Start With an Inspection

Inspections are a must for any building purchase, but an especially thorough one is necessary for older homes. Inspections typically cover the home’s exterior, chimneys, roof, heat, plumbing, electrical, kitchen, fireplaces, bath, attic, and other interior items. We know that inspections aren’t foolproof, however. Some parts of a home like the septic, drainage, and underground pipes can’t be readily seen. A good inspection will help you weed through the recommended repairs and updates to determine what’s a necessity and what’s a deal-breaker.

Find Out What’s Inside the Walls

Don’t be fooled by a renovated interior. Older homes may have some walls that are near original, while others have been updated. If you happen upon plaster walls that have seen better days, don’t fear—the layers of wood lath and coats of plaster are sturdy and can often be repaired. If you’d rather not go the repair route, keep in mind that some older walls can be removed to reveal even better things, like beautiful brick.

Worry About the “A” Word

Asbestos was once considered an economical, efficient building material. It was used in roofing, insulation, siding, floor tiles, and more until the 1980s. That’s when we learned that tiny asbestos fibers released into the air by disintegrating materials can cause serious health problems, including cancer. Older buildings that have asbestos building materials will need professional remediation, which can be pricey. And in cases where the asbestos is degrading, it can be unsafe to be in the home without a mask until the material is fully removed. In terms of old house issues, this is a big one.

Avoid Old Wiring

When we know better, we do better—and that’s especially true of electrical systems in homes. Depending on the age of a home, the wiring may not have been part of the original design. And it might not have been updated since its installation decades prior.

Be wary of very old wiring, which was subject to different standards. For instance, knob-and-tube wiring, which was the standardized method of electrical wiring from the 1880s until the 1930s, lacked a safety grounding conductor. This wiring is still found in some old houses today, even though it might not hold up to modern electrical use. And even if it is still functioning, do you want to be responsible for an electrical system that’s not up to modern codes and standards?

Check Out Those Pipes

Homes today are built with plumbing in place. But older homes were sometimes retrofitted for plumbing, which looks a lot different from modern plumbing. In the earliest days, wooden pipes transported water (and, in fact, some cities and towns are still digging up those pipes). In some cases, the old pipes are still fully functional.

The problem arises when old pipes begin to corrode, which is what happened in Flint, Michigan—lead pipes tainted the water supply. Cast-iron pipes, which were used in new construction until about the 1980s, face similar problems. The corrosion of those pipes can lead to leaks and system failures. That can also mean lead poisoning for those who consume or use the contaminated water—a serious concern.

Be Prepared for the Unexpected

Investing in an old home means you will likely be faced with a few surprises. Be prepared to deal with issues as they arise, and keep a running list of what to look for in the future. For instance, if your massive three-story building has only one heating zone, it might be worth converting to two or three zones in the future to better manage energy use. Likewise, those original windows might look pristine, but replacement windows on an investment property can be a boon for management costs.

As with all things in history, you live and you learn. Make your next historic home-flip one to remember—for all the right reasons.

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