Flipping Houses

Investing in Historic Districts: What You Should Know About Zoning & Regulations

Expertise: Landlording & Rental Properties, Real Estate Investing Basics, Flipping Houses, Business Management, Personal Development, Mortgages & Creative Financing, Real Estate News & Commentary
210 Articles Written

Take a ride on just about any Main Street, and you will see homes and buildings constructed perhaps 75, 100, or more years ago. Many people like the designs and charm of the buildings constructed in these bygone eras. These buildings are part of our history, and the phrase “they don’t build them like that anymore” is often overheard.

Want more articles like this?

Create an account today to get BiggerPocket's best blog articles delivered to your inbox

Sign up for free

And because “they don’t build them like that anymore,” many of these areas are covered by a specialized set of rules that aim to protect and preserve these special places. Many of these areas will be designated as historic districts. As investors, we need to be aware of these districts and the specialized regulations covering them because one can quickly run afoul of these historic regulations — and that can cost you a bunch of money and time.

What is a Historic District?

A historic district is just what it sounds like. It is a neighborhood or portion of a community that contains a significant number of buildings and structures built in a certain era and to a certain style. We have all seen them and perhaps visited some of them on a trip or vacation. Philadelphia’s Old City; Washington’s Georgetown; Bar Harbor, Maine; Savannah, Georgia and the French Quarter in New Orleans are some of the more famous historic districts.

Historic districts are, of course, located all over the country, and most are nowhere near as famous as the examples listed above. But they all will generally have one thing in common, and that is restrictions on what can be done to properties in those districts.

What is a Historic District’s Purpose?

The purpose of any historic district is a simple one: They exist to preserve the history and character of the district and to prevent the loss of the historical integrity of the area. Would the French Quarter be the same if the old buildings that compose it were demolished? Would it still be the tourist draw that it is if a suburban style housing pattern was allowed? The answer is likely no.

To protect these areas, many locales have enacted laws that seek to protect these areas by regulating what can be done to the structures contained in them. While these laws can be called many different things, they are all basically a form of historic zoning, and for ease, that is what I’ll call them here.

Related: 8 Expert Tips for Renovating the Exteriors of Your Buy & Holds

What is Historic Zoning?

Most of us are familiar with traditional zoning that restricts the use of land to residential or commercial. Generally, traditional zoning laws do not concern themselves with building design. Historic zoning, however, can and does regulate items such as building design and much, much more.

Historic zoning laws are, of course, going to vary from location to location. But like I said, historic zoning often regulates much, much more that folks are used to, and if you own or plan to own any properties in an historic district, you need to know what is covered. So what might these regulations govern?

  • Paint Color
  • Roof Color
  • Roofing Materials
  • Window Types, Size and Placement
  • Door Types, Size and Placement
  • Exterior Building Materials
  • Fence Type and Location
  • Additions
  • Demolitions
  • Driveway and Garage Location
  • Anything Else that Might Affect the Exterior of a Building

As you can see, a historic district’s regulations can get pretty detailed, and things that you would never dream of asking government approval for, such as painting your house, adding storm windows or replacing your front door, may require government approval.

What is the Approval Process?

The approval process will vary by jurisdiction. Usually there is some sort of commission in place that reviews proposals for the historic district. This may be a historical commission or a historical planning commission. Here in Memphis, it is called the Landmarks Commission. No matter what they are called, they are usually made up of appointed citizens, and in general, the approval process will often consist of the following:

  1. Discuss your plans with the local commission staff.
  2. File an application and pay a fee.
  3. Staff will review your plans and make a recommendation to the historic commission.
  4. The historic commission will vote “yes” or “no” on your plans.
  5. Move on with your project, redesign it or appeal the decision up to a higher level.

Depending on the scope of your project, this process can really add significant amounts of time and costs. You will likely have to wait a month or more for a decision, and you may need to hire specialized help, such as an architect, to meet code or historic requirements.

Does it Matter What I Do on the Inside?

Usually it will not matter what you do on the inside, as historic zoning is only concerned with keeping up the appearance on the outside. But check with your local jurisdiction just to be sure.

How Do I Know I’m in a Historic District?

Honestly, you may not know and it could be hard to tell, but there may be clues. First, are you working in an area of older (75 years or more) buildings with very few “modern” structures around them? That should be your first clue.

Secondly, many historic districts will have some sort of signage. If you notice signs saying “Historic Neighborhood” or “Historic District,” you should investigate further. Still, not all historic neighborhoods will have historic zoning in place. Some neighborhoods can even be on the National Register of Historic Places and have signage saying as much, but have no local historic zoning regulations. It can be confusing, so if in doubt, it is best to ask.

Related: Zoning: A Primer for Real Estate Investors

Will I Get Caught?

Yes. Getting caught violating historic zoning is highly likely. Owners in historic districts, at least in my experience, are fiercely protective of the character of their neighborhood. It is often why they moved there, and they will tattle on you. So be sure to get on your neighbors’ good side with any project in a historic neighborhood.

Finally, investors should understand that working in a historic district is very different from working in non-historic areas. The methods of building and rehabbing that are commonly used in non-historic areas may not be allowed or might not be proper in a historic district. Historic building and rehabbing methods may require specialized knowledge or hand crafted materials that can add significant costs and delays to any project. I have seen more than one rehabber make the mistake of not understanding historic zoning and what they were getting into. Don’t be that person. Fix up, save and work in historic areas; just know what you are getting into.

[Editor’s Note: We are republishing this article to benefit our newer members.]

Do you have any experience working in a historic district? How did your project come out?

Let us know with your comments.

Kevin Perk is co-founder of Kevron Properties, LLC with his wife Terron and has been involved in real estate investing for 10 years. Kevin invests in ...
Read more
    John C. Carlson Appraiser from Victorville, California
    Replied about 5 years ago
    I specialize in the valuation of historic & architectural homes. If a house in a Historic District is on the National Registry, be VERY CAREFUL with any changes to the house – interior and exterior. Be sure you pass the changes by the City and probably an Architectural Historian. Otherwise, if significant changes are made, the house could get de-listed from the Registry. As a case in point, I am currently appraising a house in the Los Rios Historic District in San Juan Capistrano. It was built in 1880 +/- and had significant upgrades made in 1995 +/-. The City was required to de-list the house from the National Registry because of the changes to the house. Also, work on historical houses has to conform to the Historic Building Code. If a house is listed and repairs have to be made, you have to be careful about matching repairs/upgrades to the historical character of the house. I appraised a 6-unit historic apartment in Pomona several years ago. A tenant had just kicked out a window. Instead of being able to go to Home Depot/Lowes & buying a new window frame, my client had to find a craftsman to built an EXACT REPLICA of the window frame. Cost: about $1200 as I recall. As pointed out by Mr. Perk, you need to be very knowledgeable about historic building codes and in addition, know what is required when you want to upgrade a historic house John C. Carlson
    Kevin Perk Rental Property Investor from Memphis, TN
    Replied about 5 years ago
    John, Thanks for chiming in with your experience. As you state it is very important to know what you are doing with historic properties, especially those on the National Register of Historic Places if you want to keep them on the register. With those properties you should be very concerned about what goes on inside. I also appreciate your point about the broken window. A Home Depot repair will often not do the trick as the replacement has to be exactly like the original. I have seen more than one Home Depot window replacement only later on get “replaced.” Thanks again for your comments, Kevin
    Robb Almy Investor from Fredericksburg, Virginia
    Replied about 5 years ago
    Great article Kevin. You really help to raise awareness about some critical issues when working on a historic structure. In addition to these local boards of review there is also the issue of easements that are usually administered by the state and/ or federal government that limit what can be done. For example, I had the opportunity to restore a Civil War era house in Virginia that was under a historic easement held by the Virginia Dept. of Historic Resources. This particular easement, put on by the former owner to receive tax benefits, covered the land (18 acres) and the inside and outside of the house. All plans had to be submitted and approved by the State Department of Historic Resources. In our case, we did not have major roadblocks or horror stories like some do in dealing with what can be “Hysterical” Preservation agencies. And, we too received a tax benefit (state tax credits) for the allowable work we did. We bough the property with the full knowledge of such easements as they must be disclosed. In my experience it takes a lot of patience and an adult beverage or two to handle such a project. Again, thanks for a great article.
    Kevin Perk Rental Property Investor from Memphis, TN
    Replied about 5 years ago
    Robb, Historic easements? I had no idea there was such a thing, but being from the DC area I understand where you are coming from. Just more layers to learn about and deal with though. But you can really make yourself stand out in the market if you get to know how to work with these types of things. I’ll bet it can get pretty heated up there over such things however. Thanks for the post and the kind words, Kevin
    John C. Carlson Appraiser from Victorville, California
    Replied about 5 years ago
    Kevin, When an owner makes a charitable contribution & obtains a Historic Façade Easement, they get all kinds of tax benefits. A façade easement preserves an historical structure by restricting changes to the structure. This assures the owner of the historic structure that its façade will be maintained, protected and preserved forever. You are dealing with the IRS here and there are all kinds of pitfalls that you can get into. If you dot an i or cross a t incorrectly the IRS can deny the deduction. This is a bad thing! I used to do Historic Façade Easement valuations, but stopped because most owners wanted a value of a billion dollars for an easement worth a couple of thousand dollars. YOU DO NOT want to get on the wrong side of the IRS. Anyone who wants to legitimately take an Easement deduction will need legal help to do it right. John C. Carlson http://www.jccrea.com
    Kevin Perk Rental Property Investor from Memphis, TN
    Replied about 5 years ago
    John, Thanks for taking the time to add your insight. I never want to get on the bad side of the IRS 🙂 Kevin
    Tristan Cortez Rental Property Investor from San Antonio, TX
    Replied about 5 years ago
    This is a great article!! Especially for me because one of the Area that I like for investment property’s is in and around the historic area. Thanks!
    Kevin Perk Rental Property Investor from Memphis, TN
    Replied about 5 years ago
    Tristan, Learn how the historic zoning works and you can really become a specialist in your market. Thanks for the post and the kind words too, Kevin
    Tim Johnson Real Estate Investor from New Castle, Delaware
    Replied about 5 years ago
    Good article! The point above on Tax credits is an important one. your state may have special tax incentives for restoring historic homes. Where I am in Delaware for example, there are state income tax credits of up to 30% of rehab costs available for owner occupied projects; On the federal level, the NPS can issue a tax credit for up to 20% of your rehab costs (if it meets standards as discussed above) if the project will become a commercial property. (I’ve been told a rental property would qualify as a commercial property but haven’t tried this myself). Historic standards aren’t awful to comply with, (can be more expensive as noted above) but their presence might discourage other investors (driving down your cost), and when combined with the tax credits might make project really appealing. Happy Hunting!
    Kevin Perk Rental Property Investor from Memphis, TN
    Replied about 5 years ago
    Tim, Yes, thanks for mentioning these credits. Although i am aware they exist I am not the person to write about them. But I am all about a tax credit, not just a deduction, but a credit. Looks like I need to educate myself a bit as I work in historic districts as well. Thanks again for the post! Kevin
    Billy Guyette Property Manager from Montgomery, Alabama
    Replied about 5 years ago
    Great article Kevin. The beauty of historic homes are there are a finite number of them. And in my experience, they almost always appreciate faster than the greater market. My primary residence was built in 1835, and while adhering to the different codes and regulations may seem burdensome, they do protect the value of the property.
    Kevin Perk Rental Property Investor from Memphis, TN
    Replied about 5 years ago
    Billy, 1835! Cool! Thanks for reading and commenting, Kevin
    Steven Silva Investor from Aurora, CO
    Replied about 5 years ago
    It’s not a bad idea to join local historic preservation groups (year membership is generally under $40). They have the inside scope on all the topics listed above and can even help find properties that need to be restored. My local group also connected me with the right people to help me fix and flip Victorian homes. They provided the “short list” of contractors that have all the know how and experience to handle Victorian homes as well as awareness on how to get project approved by all parties quickly. They also provided me with a list of real estate agents in the city that are known to work with distressed historic/victorian homes. I hope to be known as someone that specializes in restoring these properties in Colorado. I have a few apartments and rentals, but I really appreciate the character of these homes and hope to preserve them around the city.
    Kevin Perk Rental Property Investor from Memphis, TN
    Replied about 5 years ago
    Steven, I appreciate them as well. Thanks for reading and for the great advice. I appreciate it, Kevin
    Matthew Kreitzer Attorney from Winchester, Virginia
    Replied almost 5 years ago
    As someone who lives in a town that is 90% historical, I found the article insightful and educational.
    Michelle G. Investor from Phoenix, Arizona
    Replied almost 5 years ago
    Hello all! I have a question, when rehabbing a property in a historic district and also on the national registry, how do you determine the value? Recent comps are not homes on the national register. Or does being on the national register add much value? Thanks!
    Al Bigonia
    Replied over 3 years ago
    Hi Kevin, A few years ago I bought a 5 family in a Historic District in Somersworth NH. I just thought it was kind of cool that my building was in the Historic District. The Realtor never said what that meant to me as a landlord, but I soon found out from the tenants. Guess our Historic Commision isn\’t as strict as some of the other people commenting on this, but I was surprised that I have to go before that commision for anything I want to do to the exterior of the building . Funny thing is that they specifically allow you to paint it whatever color you want. But right now there are some Exterior doors that are hollow-core and obviously replaced by a previous landlord. Even though todays Fiberglass doors can be stained or painted to look like originals, one guy told me he would vote against it. I plan to present a compelling case for using Fiberglass doors when I go before them this summer, and hopefully , I can win that guy over, or he\’ll be outvoted. It hasn\’t been too bad so far but if they get into keeping the original molding patterns if they ever need replacing, that could be very expensive.