Multifamily buildings built in the 60s and 70s are beginning to wear out
Let’s do the math…
it’s been almost 65 years since 1960 and 55 years since 1970.
Buildings of that era were built to a simpler building code. More importantly they are aging, and all major components are affected. Let’s review some of the components and their challenges.
Electrical
Electrical systems need to be updated with GFCI’s (a minor expense), and breaker box replacements to upgrade the number of amps available to tenants. Many apartments in the 60’s and 70’s were built with 50 – 60 Amp panels. Today the average apartment and or home needs a panel with room for 100-150 Amps and often in larger living spaces (over 2000 feet) there is a need for 200 amps. This is due to the demand for electricity we have developed. Not just only do we use larger ranges, refrigerators, washers and dryers, but also, dishwashers’ disposals, fans, mini split units, TV’s and other electric driven devices use more power. Fifty (50) amp breaker boxes do not cut it anymore.
Plumbing
One of our clients has recently had many plumbing problems. He has had wall leaks at three of his properties, and he asked me for a simple solution to identify and plan plumbing renovations, so he could be better prepared.
I responded to his email with the following:
“Water pipes end up with scale (think mineral build up) and pin hole leaks as they age. Bear in mind, most plumbing is installed when a property is constructed. To establish the age and condition of the plumbing in your properties I would have a plumber sample three units in each property to establish the material used during construction and the current condition of the plumbing. Then using the following concepts as a guideline, you will know how to plan.”
Types of material used in multifamily housing
PVC: The lifespan of PVC (polyvinyl chloride) pipes can vary depending on the source but is generally between 25–40 years. However, some say that recent technological advancements could allow PVC pipes to last 70 years or more.
Copper: Copper: Copper piping remains extremely common in plumbing systems across America. Copper pipes last roughly 70-80 years.
Brass: An alloy of copper and zinc, brass piping is slightly less common than copper piping but has a slightly longer lifespan. Generally, brass pipes can survive between 80-100 years.
Galvanized Steel: Galvanized steel piping also lasts between 80-100 years (except for Korean pipe that was available on the market in the 1970’s and 80’s that did not last).
Cast Iron: Cast iron pipes last between 80-100 years but have been susceptible to rust over time.
Polybutylene: Between the late ‘70s and the mid-90s, polybutylene pipes were popular, because the materials used in them were cheap and they cost less to install. However, these pipes were flimsy, and started to break apart after about 10-15 years.
Pex: Pex is a newer more flexible product, but it too has faced significant problems. There have been multiple lawsuits involving PEX plumbing, including a class action lawsuit against NIBCO and a class action lawsuit investigation involving Rehau PEX. Other pex products from Zurn and Uponor have also been facing class action lawsuits.
It stands to reason that Brass, Steel or PVC plumbing might be the materials to select if you re-pipe.
Fire suppression sprinkler systems
Fire sprinkler pipes can fail for a few reasons, including:
Corrosion
Exposure to environmental factors over time can cause corrosion in the internal and external piping, which can lead to leaks or stuck valves.
Calcium carbonate obstructions
These are common in systems that use hard water from non-potable wells or surface water. They can’t be fixed by flushing, so sprinklers should be inspected annually and replaced if they have deposits.
Exposure to chemicals
Incompatible chemicals on the inside or outside of the pipes can cause failures.
Freezing
When water freezes in the pipes, it expands and puts pressure on them, which can lead to cracks and bursts.
Due to the number of failures fire suppression systems are typically inspected every year to find any failure. Federal guidelines put forth by the National Fire Protection Association (NFPA), require every sprinkler system installed must be inspected once per year.
A 5-year internal inspection is an NFPA-mandated inspection examining the insides of your fire sprinklers’ piping. The examination must be carried out a minimum of every 5 years. The requirements do not differ by state—however, every jurisdiction is a little different.
Appliances and water heaters
Appliances can last 15 years before they are repaired or replaced. Hot water heaters tend to need replacement every 8 – 10 years but can last longer if well maintained and flushed regularly. I would inspect all water heaters to get a baseline and (age) a date of installation. You can budget for that ahead of time. Disposals can last five years or longer if well maintained and a solid product is used. The least expensive, lowest horsepower units tend to fail more frequently.
Carpeting and linoleum
Depending on the tenants, carpeting can typically last from 5 – 10 years, the same goes for linoleum. Units with high turnover tend to need these items replaced more frequently. The longer your tenants stay, the more likely you are to be able to extent these time frames. On the other hand, if the Motorcycle aficionado changes his oil or completes repairs in the living room, you are more likely to have to replace the carpeting sooner.
Asphalt
Parking lot asphalt is affected by heat and cold and rain and sun and it expands and contracts. It is also affected by improper drainage. Garbage trucks are so heavy, usually over 40,000 pounds, that they destroy asphalt driveways as well, so do roofing material trucks and other heavy equipment. The older asphalt the more brittle it gets. Every three years you should plan on seal coating and crack sealing your asphalt.
Roofing
Peaked Composition roofing has a typical 20-to-40-year lifespan depending on the quality of roofing installed. It should be inspected every year, and the gutters and downspouts as well.
Summary
Every year you write off depreciation shelter on your taxes, this gives you the opportunity to establish reserve accounts and plan the repairs you need to consider as your property ages and wears out.
Critical to your success in investing is your reserve fund. Set 5-7% of your annual income aside to build your maintenance reserve fund. Then you will have a leg up on the competition. Establish these reserves as soon as you have purchased your real estate investment.
Finally, there is something to be said for “value added “investing, if you have a solid contractor or group of contractors that can help you establish a budget early on and you repair or replace aging building components you can deliver an improved property to tenants at a significantly lower cost than building new. This enables you to compete with a better product at somewhat lower rents as compared to new construction rents. This could keep your property full and reduce your turnover.
Keep in mind, as you upgrade you also have the ability to control property insurance rates. Newer properties tend to have lower insurance costs as compared to older properties. Insurance companies want to reduce their risk, older properties with older components are a riskier bet for the insurance companies, and you will pay for that risk in increased premiums.
References:
https://www.google.com/search?q=lifespan+of+pvc+vs+other+water+pipes
https://www.sauderschelkopf.com/investigations/products/uponor-pex-plumbing-product-class-action-lawsuit-investigation
https://www.smithsplumbingservice.com/blog/2019/november/how-long-will-my-pipes-last-/
https://www.metrosafetyandfire.com/fire-sprinkler-system-inspection-and-testing
https://www.psintegrated.com/blog/5-year-fire-sprinkler-inspection
Clifford A. Hockley, CPM, CCIM, MBA
Cliff is a Certified Property Manager® (CPM) and a Certified Commercial Investment Member (CCIM). Cliff joined Bluestone and Hockley Real Estate Services 1986 and successfully merged that company with Criteria Properties in 2021.
He has extensive experience representing property owners in the sale and purchase of warehouse, office, and retail properties, as well as mobile home parks and residential properties. Cliff’s clients include financial institutions, government agencies, private investors and nonprofit organizations. He is a Senior Advisor for SVN | Bluestone.
Cliff holds an MBA from Willamette University and a BS in Political Science from Claremont McKenna College. He is a frequent contributor to industry newsletters and served as adjunct professor at Portland State University, where he taught real estate-related topics. Cliff is the author of two books, 21 Fables and Successful Real Estate Investing; Invest Wisely Avoid Costly Mistakes and Make Money, books that helps investors navigate the rough shoals of real estate ownership. He is the managing member of a real estate consulting practice, Cliff Hockley Consulting, LLC., designed to help investors and commercial brokerage owners successfully navigate their businesses. He can be reached at 503-267-1909 , Cliffhockley@gmail.com or Cliff.Hockley@SVN.com.
