Historic Home Investment Opportunities?
Historic home districts can be an exciting and great place to live, but the desire to reside in a charming antique home is not the only reason people start shopping for these types of properties. Another common reason to get interested in historic home listings is for the investment options. People who want to make a profit in real estate are often attracted to historic areas because of the exciting investment potential.
It is true that you can make an impressive profit off of older homes, but these sorts of properties occasionally come with their own set of unique challenges. Investors who are used to more traditional real estate opportunities are often surprised when they delve into to the historic market. Here are a few important things to consider when investing in historic areas.
Tax Implications
As most investors know, the right tax breaks can turn a tiny profit into a big one. Historic homes are a particularly good choice if you are willing to spend some time looking for all the best tax opportunities. You can get huge federal income tax deductions if the house qualifies for a conservation easement, and there might also be state and local level tax breaks that you get for renovating or maintaining a historic property. All of these helpful tax breaks can offset some of the costs of repairs. Be vigilant and do your homework, however; consult your local tax professional for more information on taxes.
Renovation Possibilities
Nothing is more exciting as an investor than buying a diamond in the rough that can be fixed up and sold for a higher price. However, renovations can be one of the biggest challenges of investing in historic homes. There are often tight regulations you have to follow, especially if a property has historic significance, so it takes a little extra effort to make your renovation plans.
Even simple things like changing the wiring or adding a new sink can be very challenging, so be sure to familiarize yourself with the local laws and rules governing historic properties, and work with experienced contractors. It can be tricky to renovate a home, but keep in mind that the results can be impressive. Turning a rundown old house into a luxurious historic home can satisfy your soul as well as to help make you a lot of money.
Appreciation Rates
An interesting trend seen in real estate markets across the country is that historical properties have a significantly higher appreciation rate. On average, a historic property’s value is about 26 percent higher than other homes in the surrounding market, and it is not heavily affected by market downturns. This means that you can end up with exciting profits if you hold onto the property for a little while. Higher appreciation rates can be realized even if you do not make any repairs yourself, but results tend to be particularly impressive if you do some renovations and repairs.
Maintenance Requirements
Of course, any older house will probably have some issues due to its age. The price for fixing all these issues can be a little higher than normal because homes were not built to specific standards in historic times. Be sure to factor in maintenance and repair costs when you are considering profits for renting or selling a property. You may want to avoid properties with roof or foundation issues since these are particularly difficult to deal with.
Do not forget that many historic homes also have additional rules when it comes to improvements, repairs, and/or construction of any kind. Consulting your Realtor for assistance in obtaining this information early on in the process can help things move quickly.
Renting Opportunities
Not all investors plan on renovating and selling right away. If you prefer to rent out your investment properties, knowing what to expect from renters can help you decide whether or not older homes are right for you. It turns out that tenants in historic districts tend to stay in a single property for longer periods of time.
This is great for you because you do not lose money while the house is sitting empty between tenants. Historic properties are also ideal for short-term vacation rentals. They also tend to get more views on Airbnb than newer homes in the same area.
Final Thoughts
Investing in a historic property is unlike investing in most other types of homes. If you are prepared to put a little time and effort into it, the end result can definitely be worth it. As more and more buyers and renters begin to appreciate the unique features and details of older properties, you have the chance to get a good return on historic home investments.
