Nancy and Jacob had bought and renovated a handful of houses and they were doing fairly well. However, every house that they purchased to rehab gave them a giant headache because they inevitably found more needed repairs during the renovation process than they bargained for. It cut into their investment returns and they knew they could be doing better. In talking with them recently, it became clear that they faced the same problem over and over because they just didn’t know how to spot the common problems found in older homes. When buying, renovating, and selling a house that’s older and run-down, there are a few specific issues you want to always be on the lookout for.
Buying and Renovating an Older Home?
We have a significant volume of older homes across the U.S. Most of the homes that are over 50 years old tend to be found in the Northeast and Midwest, while newer homes tend to be more common in southern and western locales. While there’s no exact definition of an “old” house, generally speaking, we are talking about houses built before 1990. Historic buildings, or those built before 1920, also have especially unique issues to be considered.
Of course, there are exceptions, but the subjective “age” of the house correlates highly with the geographic locale. Houses age differently according to a variety of factors, including their construction style, material quality, renovations, and the effects of climate or geology. For instance, houses in the eastern part of the country can show damage resulting from storms or humidity while those in the west are vulnerable to geological shifting or sinkholes. The materials and construction used to build these homes play an important role in how well a house holds up (or how much it runs down) over the years.
Most Common Problems Found in Old, Run-Down Houses
Older homes can be charming, offering endless possibilities for customization to let their character and history shine. The unfortunate side of buying an old house, however, is that they are more likely to come with troublesome surprises. Renovating them to code and contemporary comfort can get expensive, but knowing what to expect can help you prepare your budget and ensure that you get the best return possible. It can also simply help you determine if you should buy an investment property or not, depending on its age, condition, and the work you’ll have to put in. Let’s take a look at the five most common big-ticket problems that we frequently find in older, run-down properties:
If the house was built before 1978, there’s a good chance that it has lead-based paint, which is the most common cause of lead poisoning. If the lead-based paint is covered up with multiple layers of new paint, it usually is not a problem. However, you should be on the lookout for paint that is chipping, chalking, cracking, or otherwise damaged, as this can cause lead exposure. Especially scrutinize window sills, doors and their framing, stairs, railings, and porches, as that’s where you are most likely to find paint worn from heavy use that can be hazardous. Although not required for homeowners, the Environmental Protection Agency (EPA) recommends that you consider hiring a lead abatement contractor when renovating, which can add hundreds or even thousands of dollars to your project, depending on the extent of the renovation.
Asbestos is a hidden health threat in millions of homes built before 1980. It can be found in everything from old floor and ceiling tiles to roofing materials, insulation, and joint compound between sheetrock. Despite all the media attention, asbestos is not going to jump out of the walls and kill anyone. Rather, it is generally only harmful when airborne. That said, you will want to take serious precautions when doing renovations in the investment property’s kitchen or any other room that may interfere with materials containing asbestos. In fact, some states, like California, will require you to hire licensed professionals with specialized equipment to contain the asbestos during a rehab project. This can add significantly to the costs of your renovations budget.
Pre-1960s plumbing pipes were most often made of galvanized steel that tend to corrode or plug up over time. These days, chances are that at least some of the system has been re-plumbed with copper or plastic, but it tends to be piecemeal because replacing everything is pricey. It’s difficult to evaluate the plumbing pipes because most of it is behind walls, but you should at least examine the piping under sinks and, if you can get into it, the crawl space. Additionally, you can check for interior corrosion of the pipes by testing the water pressure at different sinks and bathtubs. If there’s low water pressure, there’s probably bad galvanized piping that has the potential to spring a very expensive leak. You might choose to selectively replace the bad pipes, as many homeowners do, or re-plumb the whole house—that could cost between $4,000 to $10,000.
Homes of any age can show signs of foundation issues, or settling. It is possible for even newer homes to see significant settling if the soil underneath was improperly prepared or the construction took place during extreme weather conditions like a drought followed by a rainy season. Foundation problems tend to take place more frequently in regions that have a lot of soil moisture, unstable bedrock, or seismic activity. Some of the signs to look out for include wall cracks, sticky windows or doors, separated crown moulding, or even water in the basement. If you see any of these, you’ll want to get an expert opinion from a structural engineer to understand the extent of the repairs needed, as they can cost anywhere from $5,000 to upwards of $20,000.
Unsafe electrical systems.
Original wiring can be a safety problem in houses built before the 1940s, but most often the real issue in older homes is that the electrical system was not built to sustain today’s appliance- and device-heavy lifestyle. For instance, the average electric service in a 1950s house was only 100 amps, while most newer homes require double that—200 amps. In addition, you’ll want to ensure that the circuit breaker, which is designed to shut off service when the system is overloaded, is in good working order. Changing out the electrical panel or the circuit breaker will require an electrician, but you will get AFCI-breaker protection with the newer systems, providing some extra protection against any aging wires hidden in the walls. Costs can range widely according to geographic location, the new equipment you choose, and the electrical company you hire.
Keep in mind that many states require that you disclose any unmitigated safety issue, like lead-based paint or asbestos when it’s time to sell your investment property, but an inspector is likely to point out all the issues to the prospective buyer, too. It’s important to have a good understanding of the potential problems found in old houses so that you can accurately account for it in your rehab budget.
How to Effectively Cost Out Major Repairs on Run-Down Properties
There are many ways to estimate the cost of rehabbing an old house, from handwritten notes to online spreadsheets. But you are going to want a software program that can help you comprehensively account for all the needed repairs. HomeVestors® franchisees use the proprietary software solution, ValueChek®, to help them itemize each repair and automatically obtain a regionally-specific estimate of the cost. This helps evaluate the total cost of renovation against the after repaired value of the investment so that HomeVestors® franchisees can quickly and easily understand a property’s potential return on investment before making an offer. If you are ready to take some of the guesswork out of your investments while adding efficiency to your business, contact HomeVestors today.
Each franchise office is independently owned and operated.
HomeVestors of America® is the nation’s only real estate investing franchise, providing wonderful business opportunities to real estate and investment professionals across the nation.