If you're reading this, you're likely considering buying a property that's seen its fair share of years. You want to expand your rental portfolio, and you've set your sights on an older townhouse or apartment complex. Purchasing it might feel like a risky move, but it can come with various benefits. You have plenty of ways to turn an aging structure into an ideal home for modern tenants.
Research your options thoroughly. Many advantages come with older properties, but so do disadvantages. Knowing the ups and downs of the process enables you to make the best investment for maximum gains. Keep reading to learn more about each perspective.
The Pros
Buying a rental is exciting — especially when it's a property type you haven't dabbled in before. Here are the pros of repairing an old place:
1. Increased Occupancy
Older rentals have become favorable with many tenants due to their affordability. Numerous properties in the Midwest have seen gains in millennial tenants due to the area's steady economic growth and low home prices. Urban areas are also rich in old townhouses and apartments, and they allow tenants to live near the city's attractions. People can access their workplaces, catch public transportation and go shopping without traveling far from home.
Birmingham, Alabama, is a lucrative area for landlords due to quick sales and affordable prices. The business district in this city makes it manageable for renters to relocate and start working close to home. Similarly, Memphis, Tennessee, is a well-known city for old and low-priced homes, and it's a hot spot for millennials.
These aren’t the only cities with great deals on real estate. There are lots of growing markets located in the South and Midwest, creating tons of opportunity for investment. Buy a cheap townhouse and kick off the renovations — the sooner you start, the sooner you'll gain tenants.
2. Property Value
Buying a rental in a historic neighborhood raises your property value and make it more attractive to potential residents. You know comfort and proximity to the city center are deciding factors for many renters. However, some also weigh additional components like sustainability and local history when planning a move. Young tenants indulge in a blast from the past, while older renters enjoy the nostalgia.
Amenities and appliances are also valuable things to acknowledge when considering tenants' values. People won't be as receptive to a place they need to buy stuff for — the move itself will already affect their budget. Not all old properties come with a fridge or oven, but you can stock yours with these must-haves for increased appeal. Consider adding garbage disposal and recycling services, too.
3. Community Contribution
Fixing an old home does more than satisfy your renters — it also upgrades the entire community. Potential tenants gravitate to areas where homes look appealing and well cared for. Can you play a part in breathing new life into a neighborhood?
If landlords take time to renovate older properties, they'll see more local and out-of-state renters. The influx of inhabitants will bring more revenue to the entire region and boost its reputation. Some of the hottest markets in cities stem from neighborhoods they may have previously seen neglect.
Many individuals uphold specific duties to maintain their town, whether it's volunteering, cleaning the roads or participating in conferences. Improving old homes can be your contribution to a better quality of life.
The Cons
Old properties aren't without their challenges, but you can manage them with the proper skill and knowledge. Here are some things to reflect on before purchasing:
1. Maintenance Costs
Like any property, your rental will need maintenance to stay in prime shape — but old houses call for extensive upkeep. Perform regular inspections and follow building codes as carefully as possible while doing repairs. Falling out of accordance with the regulations can pose legal issues or affect the home's value. Building guidelines change frequently, and what worked decades ago might not fly in modern times.
Adding a balcony or interior barn doors can look stylish, but it can cause additional maintenance and repairs if the building isn't suited for it. If you discover issues with the plumbing or electrical work, you might have to replace the entire system. These components add up quickly when repairing a home, and an improper renovation means extra maintenance.
2. Limited Renovation Options
Older homes are often structured in ways that don't allow for elaborate redesigns. Knocking out the walls and removing flooring requires complex work, which will cost you more money. If you don't like the way a home looks, you might have to leave it as is if it's not renovation compatible.
It's possible to encounter other obstacles if you do decide to renovate. The building materials might not be available anymore, meaning you'll have to substitute or hunt for the originals. The house could have decades of prior renovations built into it, and there's no guarantee that those redesigns are quality or even safe.
3. Harmful Materials
Lead, asbestos and other toxic materials often lurk in old home interiors. Placing tenants in a townhouse containing these substances can entangle you in legal issues if they experience health problems. Even the building design — such as balloon framing — can harm occupants in case of fire or other events. You can eliminate some of these problems during renovation, but all of them might not be removable.
The Pros and Cons of Fixing Up Older Rental Properties
Now that you know what comes with revamping an old rental, you can dive into it or pass on the opportunity. If you do take the chance, your old townhouse can serve as a charming and lucrative addition to your portfolio.
About the Author: Holly Welles covers real estate topics for the up-and-coming renter or homeowner. She runs her own blog, The Estate Update, and can also be found dishing up advice over on Twitter @HollyAWelles.