Read about the benefits you can get and the challenges you will face when buying a 100 year old house before deciding on whether to invest in one.
Unlike newer homes that all look the same, older houses boast vintage charm, unique character, and excellent craftsmanship that you rarely see today. Some of them even hold historical significance in their respective towns. But with every golden opportunity comes a catch: because of their age, old houses may be riddled with problems concerning the structure, electrical system, and plumbing, among others.
So even though many homebuyers would love to live in a home that looks unique, only a few are willing to spend on the renovations that come with it. As a real estate investor, this is your opportunity to make these residents’ dreams come true and make money out of them. However, you cannot just buy the oldest house you find without inspecting it thoroughly. You need to be sure that you would not encounter any issues that are too big or expensive for you to handle.
Investing in an older home is not wrong at all, but you do have to be careful in your search. In this article, you will learn 10 pros and cons of buying a 100 year old house. Keep reading to find out what they are.
Benefits of Buying an Old Home
Buying a 100 year old house could be a smart real estate move for investors like you. Here are five main reasons why:
#1: Older Houses Have a Lower Purchase Price
Older homes usually cost less than newer ones because they are outdated and need renovations and upgrades. This makes them undesirable for the average homeowner who does not want to deal with these. A newer, modern house that is the same size as an older residence in the same area will cost more because they tend to be move-in ready.
As a property investor, the older homes’ outdated features are a boon for you. By paying a low price for it, you could have a bigger budget for making upgrades and transforming the property to attract tenants or buyers.
Thanks to real estate listing websites like Mashvisor, it is now easy to find cheap old houses that you can invest in. When searching for a property using our platform, you can narrow your search down to your preferences. Some of the filter options include the city or neighborhood, the number of bedrooms and bathrooms, and the years built.
Aside from the property’s features, we will also show you the data that you need in order to decide if a house is a great real estate investment depending on your preferred rental strategy. You will see the listing price, rental income, cash-on-cash return, cap rate, and occupancy rate.
#2: You Will Have to Pay Lower Property Taxes on Older Homes
Property taxes are determined based on the assessed value of your house, which is then multiplied by the tax rate in your area. Because of several factors including age and condition, older homes have lower assessed value than newer homes. So you may pay a much lower property tax at closing compared to someone who buys a brand new house.
If you want to either sell or rent out the house, you will need to renovate it, not just to increase its value, but also to make it attractive to buyers and tenants. However, if you do major renovations on an old house, your property tax would increase in proportion to the change of your home’s value. This is an expense that you need to plan for.
But if updating your old house means that you can charge high rent from decent tenants who are willing to pay for it, then the extra expense may be worth it.
#3: 100 Year Old Houses Tend to Have More Square Footage
Older homes were built at a time when there is a lot of ground to cover, which is why they usually have bigger yards. Meanwhile, newer homes nowadays are in smaller lots so that developers can cram in more properties.
#4: Builders of Older Homes Tend to Have Used More Solid Building Materials
These days, developers try to save on costs by building newer homes using inexpensive, builder-grade materials. Because of this, many new houses are not as high quality as you would think they are. While these homes are still structurally sound, the materials used may not last as long. Older homes, however, often have materials that are designed to last for a hundred years or so.
#5: Older Houses Have More Character
If you look at new developments, their houses all look alike and have the same features and feel. Meanwhile, older houses tend to have unique characteristics. You can use its character to charm prospective tenants into moving in.
What to Look Out for When Buying an Old House
While the benefits to buying a 100 year old house make this type of property a must-buy for investors, there is a catch–you are likely to make several significant renovations. Continuing the list of what you need to know before buying old properties, here are issues that you may encounter:
#6: Structural or Foundational Problems
How long do houses last? Without special care and regular maintenance, their lifespan can reach about 200 years. But even though the materials used in many old houses are designed to last this long, there is still a chance that you will find problems in the structure or foundation.
Some of these damages are easy to spot, but there are others that you have to intentionally look for in order to find them. Here are some issues with the structure and foundation that you should watch out for:
- Major cracks or unevenness in the slab or perimeter foundation wall
- Corrosion, dry rot, or moisture damage in pilings, concrete foundation supports, and above-ground studs
- Damaged piers or support footings
- Doors that jam or will not latch properly
- Windows that get stuck
Consider getting the expert opinion of a structural engineer or contractor before committing to your purchase.
#7: Hazardous Materials
Lead and asbestos are two hazardous components that builders before 1978 used in residences. In that year, the federal government banned consumer use of lead-based paint in homes, after studies showed it to be toxic, especially to children. However, this material can still be present in houses that were built before the government banning.
So if you are buying a 100 year old house, you may find lead in the interior or exterior paint and asbestos insulation in the crawl spaces, walls, and pipes. While sellers are legally required to inform you of any toxic materials that may be present in the home, they do not always do this. It is a good idea then, to get an inspection for either material. You may just need to cover the lead paint using safer alternatives as long as it is not chipped or peeling.
However, you will have to remove asbestos if you are making extensive renovations that require knocking down walls. This can cost you up to $30,000 depending on how much needs to be disposed of.
#8: Insects and Pests
If you are buying a 100 year old house that has been empty for a long time, you are likely to find pests inside. While some of them are inconvenient, there are pests that can be hazardous to your health and damaging to the property. Also, some pests are easy to find, while others are hiding inside the walls. The pests you could find in old houses are:
- Powderpost beetles
The home inspector should spot this issue and identify the pests in the home. Based on what they find, you can then decide on how to get rid of them. Different pests require different extermination methods, so calling a pest extermination company can help you get rid of them, especially if you are dealing with more than one kind.
After getting rid of the pests, you need to understand how they were getting into the property or where they were nesting. If you find termites or traces of powderpost beetles, you also need to double-check that the house remains structurally sound. Because pests are such a common problem, make sure to allocate pest removal costs in your budget and factor this expense into the overall price of the home if you are selling it.
#9: Outdated Electrical Systems
When buying a 100 year old house, you can expect that you need to update its electrical system. Electrical issues can range from inconveniences, such as not having enough outlets, to safety hazards, like old and exposed wiring.
Speaking of outlets, many older homes have ungrounded outlets. You can detect if the ones in the property you wish to buy are one of those by looking at the number of holes in them. Grounded outlets have three prongs that form a little triangle. If you do not see this, then you will have to spend a lot of money updating the entire electrical system.
You might also have to replace the electrical service panels and circuit breakers if they have deteriorated. Ignoring these issues would risk your tenants to electrical fires, shocks, short circuits, and power failures. They may not even be able to use modern equipment, as these often require grounded outlets and would not work at all if you plug these into an outdated electrical system.
Hiring a licensed electrician ensures that they will take the correct steps in updating the electrical system in your property.
#10: Inefficient Windows
Another expense involved when buying a 100 year old house is replacing its windows. The windows in old houses would most likely be inefficient, which would result in expensive electric bills and poor home insulation. You can determine if the windows in the property are inefficient by looking for the following signs:
- Air leaks: The easiest way to check for this is to light a match or incense stick and hold it close to the window frame. The smoke trail should show if there is a draft coming through the frame.
- Moisture and mold: If the seller said that they kept the windows closed and yet you see moisture or mold inside, then it is a sure sign that cold air is entering the house.
- Sealant damage or cracking: Builders use a sealant around the window frames to ensure a better fit. But if the sealant is cracking or showing visible signs of damage, then the affected window is sure to be inefficient.
Unfortunately, replacing windows is an expensive task and can set you back at least $15,000. To avoid this much cost, see if sealing the cracks around the windows and reinforcing the house’s insulation would help solve the problem. This method only costs about $1,000.
Is Buying a 100 Year Old House a Good Investment?
After reading the 10 pros and cons of buying a 100 year old house, you might still be wondering: is it bad to buy an old house? There is nothing wrong with doing that. In fact, you might be able to earn big in doing this project. What other types of property have the following advantages–
- Lower purchase price
- Lower property taxes, but only before you renovate the house
- More square footage
- Sturdy building materials
- Unique character
But while you search for an old house worth investing in, you need to watch out for issues that may eat up your budget and even incur losses. The five common ones are:
- Structural and foundational problems
- Hazardous materials like lead-based paint and asbestos insulation
- Insects and pests
- Outdated electrical systems
- Inefficient windows
Because of these major issues, how can you know what to look for when buying an old house? You do not have to look for an old home that is clear of any problem. In fact, it might be impossible to find one that is move-in ready. You just have to be smart about which renovations you can afford to do and which ones you will have to pass on.
If you have decided to buy a 100 year old house, then you need a tool that can help you with your search. Our real estate platform, Mashvisor, specializes in helping real estate investors like you find their next rental home. Instead of spending months of research going to different neighborhoods, you can use this to find properties in your chosen area that could earn you optimal rental income. Start out your 7-day free trial with Mashvisor now.