Tips for Investing in Older Homes
There is definitely potential to make money when investing in older homes. The key is knowing how to identify potential problems that can end up costing a lot of money.
Whether you should look at older homes as an investment depends on your location. Some cities have mostly older homes, and it is a given that they will be on your list of potential investments. Other areas have newer homes, and the older homes might be less desirable because residents are buying more recently built homes.
Usually, I tell students to look at homes built within the last 10-15 years, but this is definitely not a hard fast rule. In some locations there are hot investments that are much older. Is it better to find a newer property to invest in? Sure. But if you know what to look for, older homes can make a good investment too.
Considerations for Investing in Older Homes
Do a Thorough Home Inspection
It is always wise to do an inspection when you are investing in older homes, but even more important for an older house. Some issues are just fine, and won’t impact a profitable exit strategy. But some problems, like a damaged roof or foundation, are expensive fixes and are more likely in older homes.
Aside from doing a professional inspection, there are things you can look at visually to detect problems:
- Signs of water damage, like water stains or buckling floors
- Cracks in the ceiling or walls.
- Uneven floors
- Doors and windows that don’t close properly
- Plumbing issues like dripping faucets or slow flushing toilets
An inspector will also look at everything from the HVAC system, plumbing and electrical, roof, and the integrity of the foundation.
While the methods I teach don’t require a home to be in perfect condition to make a profit, the outdated aesthetic of an older home might be a turnoff to potential buyers. This includes paint colors, wallpaper, outdated cabinets and fixtures, and old appliances.
I don’t advocate putting a lot of money into staging properties, but a fresh coat of paint, a good clean, and updating some of the older fixtures can go a long way when selling or renting an older home.
Again, while these definitely aren’t deal breakers I would choose a better looking home over a dated one, if possible.
Positives of Older Investment Properties
While there are drawbacks to old properties, there are also some positives for real estate investing purposes.
For example, you might be able to buy older properties for less than a newer home in the same area. Older houses also have lower property taxes in many cities when compared with newer properties.
Other pros of older homes might include:
- Higher quality materials and construction than newer properties
- Built on larger lots
- More character and charm than newer homes
So, if you come across an older property, it can definitely make a good investment, but make sure complete due diligence to make sure you won’t face any expensive problems.
To learn how to invest in all kinds of homes without using your own money or credit, I invite you to come to one of my live events or check out my free Investor kit.