Have you ever wanted to own a piece of history?
Historic properties are properties that are specifically identified as hosting historically significant events. These properties may be listed on the National Register of Historic Places or your state-specific equivalent. Wherever you might find them, they provide unique real estate investment opportunities.
Each one is so unique, in fact, that it’s difficult to make blanket statements about purchasing a historic property. But here are some possible pros and cons to look out for when investing in historic properties.
Possible Pros of Investing in Historic Properties
1. The Property May Be Priced Low
Historic properties for sale are typically in poor condition and require a complete rehab. And not just any rehab; the renovation must restore and preserve the property. The upside to this is that the properties are typically priced low. To find deals like this, savvy investors use PropStream’s property finder tool.
2. You Get to Own (Or Even Rescue) a Piece of History
One key reason many investors choose historic properties has nothing to with ROI. Many investors simply respect real estate and want to help preserve land and structures that hold historic significance.
Other investors want the challenge of restoring a piece of history to its original glory. Rehabbing a historic property requires diligent planning of labor and materials. PropStream’s rehab estimator tool allows investors to project renovation costs, using local labor and material amounts to create a more accurate estimate.
3. Possible Tax Breaks
At the federal level, you could get a 20% tax credit for rehabbing and preserving a historic property through The Federal Historic Preservation Tax Incentives program. But even if your property doesn’t meet the requirements for the federal program, you may qualify for state, or even local, tax breaks for historic properties.
Possible Cons of Investing in Historic Properties
1. You May Have Restrictions on the Property Use
In most cases, a historic property is expected to be used for its historic purpose. To put the property to a new use may require local, state or even federal approval. So before you buy that old steel mill to use as a sports park, check each applicable level of government to make sure your new use is permitted.
2. You May Have Specific Rehab Requirements
Rehabbing a historic property could be the most fulfilling renovation project you ever tackle. But the potential downside is that you may have to comply with specific rehab requirements. The Secretary of the Interior’s Standards for Rehabilitation don’t apply to all historic renovations, but they are a requirement for anyone looking to benefit from federal tax credits for historic properties. Examples of common requirements include:
- Preserving distinctive features and finishes
- Avoiding chemical or physical treatments that could damage historic materials
- Avoiding changes that create a false sense of history (like using architectural features from other buildings)
3. You May Have Higher Maintenance and Insurance Costs
Maintenance costs are naturally higher for older buildings with older features and systems. And with historic properties, there are often greater maintenance and repair expenses because the structure must be protected and preserved through all maintenance and repair work. Furthermore, insurance costs are likely to be higher because of the slightly elevated risk due to age, as well as the exposure to the general public if the property is used for tours and events.
Before you invest in a historic property, make sure you’re using the right tools to ensure the success of your project. Take advantage of PropStream’s real estate tools to find and analyze investment deals, and use your local, state and federal resources for preserving historic properties.
