The Risks Involved When Investing In Older Properties
Some property investors will love purchasing older properties. The theory is that the older the property, the more room there is to improve it. Certainly, homes that were built 30 years ago aren’t as expensive as those built today. This makes older properties seem like a very smart investment idea. In truth, they do have a lot of potential. You have more chance of getting an old home and flipping it for profit than doing the same with a new one.
However, there are risks associated with older homes as well. Thus, you shouldn’t assume they are the perfect investment. In fact, investing in the wrong old house could make you lose a lot of money. For more context, let’s look at some of the dangers that older houses pose:
The potential to be condemned
When a house has been condemned, it means it is no longer safe to live in. If this happens, you will have to sell the house and move out of it. There are many ways a house can end up in this situation, though a large majority of condemned houses are older buildings. Why? Because the structure weakens over time, making the property unstable. You could buy an old house, and within a year it becomes structurally unstable. Now, you’re left with an investment that’s too unsafe for anyone to live in. How on earth are you going to reclaim the money now?!
So, that’s one key thing to be worried about when buying an old house. Always conduct a thorough survey and get expert opinions on structural integrity. If the house seems like it’s on the way out, don’t invest your money in it.
They require heavy investments
Secondly, most old houses require substantial investments beyond what you paid for them. Refer back to the point above, and you’ll get many homes in poor conditions. Thus, you have to pump money in to make them more presentable. The trouble is, every penny that you invest into this home needs to be reflected in the asking price. Realistically, it’s almost impossible to ‘fix’ home and not see its value increase. That’s not really the issue at hand here.
The issue is that you may not get a return on your investment. You could invest money, but the house price won’t rise by as much as you invested. So, all that money was spent for no reason. Or, the value of the property goes up, making it less attractive to others. People may look at the home for sale and raise an eyebrow at the price. They could find a newer home for the same value, so why would they buy an older one?
Investments will be required when you get an old property, and that’s a fact. The key is ensuring that the property can be improved and still earn a profit when you sell it. If this is the case, go ahead and take the risk. If it looks like the home needs too much work, it’s not worth taking a chance.
Can often be outdated
Instantly, this sounds like a rather obvious point to make. Of course, older homes will be outdated! However, we’re talking about outdated in the sense of their design. Think about it, the world was a very different place 30 or 40 years ago. Even going back 20 years, you will see significant changes. The type of property people require these days is substantially different from what it used to be like. Older properties may be designed in ways that just don’t appeal to the modern homeowner. You have Victorian homes that are absurdly large and spacious, too much so for the average family these days!
Then, factor in the way they’ve been designed with regards to electricity and plumbing. It could all be a bit messy in there, requiring lots of work to bring it up to scratch. Again, you’re back at the second point where lots of investment is required.
The bottom line is that older homes should be approached with caution. There’s some bad advice out there suggesting that old homes are the best investments. The correct advice is that they CAN be the best investment. There are never any guarantees in the property world, or else everyone would be stinking rich! Older properties do have potential, particularly if you want to flip them for a profit. Still, you have to pay attention to how old the property is, and what state it’s in. If it’s not super old and in fairly good condition, it might be worth investing in.