Shrewsbury, MA · Member since 2021 · 45 posts · 5 votes
Hello BP community! My name is Tinah, a brand new real estate investor in Worcester County, MA and I ran into a few problems on my first transaction (details on a previous post). And, as if it that were not enough, a day before closing, I found out that the property in question is in the National Registry of Historic Places. This information was NOT provided by my realtor, this is news to me! I learned that there are restrictions in any updates to the front exterior of historic properties and this information would have been disclosed during the process.
I called the historic department and this is what I got. She said property owners do not have to disclose that their property is historic and they can perform any updates they want on the property unless they received a grant that would invoke the "preservation restriction."
I am a little confused - sellers do not have to disclose this information? Wouldn't this be relevant for buyers to know? It's kind of a big deal since these properties generally involve more work, planning and expense, it seems. For newbies like me especially, we can not ask what we do not know.
Additional questions would be:
How does a savvy investor catch this piece of information early on?
Would you rely on your realtor to pick this up for you during due diligence?
What would you do if your realtor misses it?
And last but not least - How would you re/negotiate such properties so in the end it will cashflow despite the foreseen expenses?
There are Federal and State rules which may be different. There are rankings as to the historic nature. You may be able to get reduced property taxes. Sellers USUALLY make a big deal of this to attract a discerning buyer and they get higher price. Research the address history, go to the local library, ask some more questions. If it's old it has lead paint, maybe asbestos, clay pipes or pipes of cardboard like material orangeburg, the electric is going to be funky at best... All these things are part of the upgrades you need to plan for. Saving the facade is pretty easy, and you will want to save all wood staircases/ bookcases/ mantles as they are worth lots of money.
Thank you @Caroline Gerardo. It has 87% chance of having lead paint, positive for asbestos. It is strange then that seller chose not to disclose instead of making a big deal out of it and get higher price. Maybe, that goes for properties that have been renovated to some extent? Stranger still is that I am not the first buyer to back out.
It's not really something your realtor should have known unless it was in a historic district where they should have at least suspected it was possible and asked. I disagree with the town in that most agents and brokerages would want to disclose this as it can materially alter what you can do with the property. You should have an out if you want it. It is much harder to renovate a historic home and they require MUCH more in the way of plans and meetings.
I like old historic houses and have a few from 1900 to 1920.
That said, if you do buy it and keep the historic features, the property is worth much more, and is typically desirable to renters and buyers. I never have a problem getting renters for my historic houses. And I have not had anyone move out of them yet either! The 1970's house / apartment has turnovers, but not the historic houses yet. And they also are not 'open concept' but have small parlors and formal dining rooms, etc. People love them!
Thank you @Jonathan Greene, this property is in a historic district, I have found. That would be challenging for beginners to catch on if realtors can miss it too. Buyers would be at a great disadvantage.
Appreciate it @Lynnette E.. I agree, renovated historic properties have a certain charm to them and definitely has it's own niche to be profitable. And that being said, it also has different set of rules compared to non-historic properties, it seems. How do you make it work, with all the extra planning and expenses?
Appreciate it @Lynnette E.. I agree, renovated historic properties have a certain charm to them and definitely has it's own niche to be profitable. And that being said, it also has different set of rules compared to non-historic properties, it seems. How do you make it work, with all the extra planning and expenses?
In the area I invest in the City has to demo several properties a year because the owners can not keep them up and they become dangerous. I buy houses with serious issue and fix them. The building inspector and I have developed a relationship of respect for each other. He never gives me anything but support.
The community likes the historic houses and not very many of them are available for rentals, so they get prime rent, compared to newer houses.
Since I am buying houses that are distressed, I generally get them pretty cheap, and pay more for the reno that the house cost initially. To keep the house historic really does not cost that much more.
@Lynnette E. those projects take talent and a lot of creativity. You must have done a great job! Would be great to see before and after pictures of your work.
@Lynnette E. those projects take talent and a lot of creativity. You must have done a great job! Would be great to see before and after pictures of your work.
Look on the regular realty websites like to one that startes with Z and R for the address 402 W Wheeler St., Rockwood, TN, 417 E Rockwood ST, Rockwood, TN and 324 N Kingston Ave, Rockwood, TN. Some should have photos from when they were listed for rent. I do not bring the houses up to flip standard, but to rental standard. So some bathrooms that are functional were not changed out or updated or returned to their old state.
Wheeler was bought for $44k, worth maybe $150k now. Put in new roof, HVAC system, fixed, replaced parts, and refinished all of the hardwood floors, new kitchen. all of it, down to the non-existent 2 x 4s (historic fire in the kitchen, walls were cardboard and rolled paper in lots of places, new hickory cabinets, fixed falling in ceiling/roof for breakfast room, fixed foundation issues, new subfloor in living room, dining room, new stairs. The photos will show both bathrooms were not changed except for floors and plumbing leaks. That is because both are handicapped accessible and I fix what I need to get the return of $ for renting. If I was flipping I would have done the baths too, and painted the wall paneling. Some of the paneling is real paneling though and coming back into style.
Kingston was bought for $58k, worth about $175-200k now. Put in a new support wall outside, new roof, fixed walk around porch, new HVAC system, 2 new bathrooms done in the historic style in one and not in the other, new water line, new floors, fixed wall that was fallen 6 inches from second story to foundation, replaced termite damaged foundation beams, paint and cosmetic stuff, all new plumbing, lots more. Most of the inside is historic. But you can see from the price I paid, there was room for the work!
Rockwood St is my brick historic house. Bought it for $58k, worth $175k. New roof and car port, all new water pipes, dry basement work, clean out of junk left, painting, new appliances, siding replaced in eves and rain gutters added, new lights in some rooms, new floors in 1/2 the house, new HVAC. Bathrooms left in their 1970's decor, all worked, fine for renting! Other than the woodwork and some flooring this house's interior left the 1900's in the 1970's. I did not return it.
Thank you @Lynnette E. for sharing those projects. Love! You must have a good grasp of the styles and architecture of historical periods. Do you have a target percentage of ARV when evaluating properties to take on?
I see that you get them with very good discounts. What type of financing do you use to fund your projects? How did you find the essential members of your team? And do you do some of the work yourself?
Thank you @Lynnette E. for sharing those projects. Love! You must have a good grasp of the styles and architecture of historical periods. Do you have a target percentage of ARV when evaluating properties to take on?
I see that you get them with very good discounts. What type of financing do you use to fund your projects? How did you find the essential members of your team? And do you do some of the work yourself?
I do not get to really find out what the properties need until after I purchase them. All of these were bought at auctions where you can not go into the house, only look from the street. So I do not really have a cost estimate for fixing them until after I own them. I just try to get the properties cheap enough that I can do several high cost projects, because they almost always need HVAC, roof, foundation issues, flooring, and plumbing. I try to pay less that half of what it would be if it had no issues, so 50% of ARV or less.
These houses are sold with cash only for the sale, and often it is cash either immediately or within 24 hours of purchase acceptance. That is why I can get the prices I do, because there are not a lot of people with the cash to buy them and then having the ability to pay for the cost to fix them too. I put a portion of my retirement money into houses to rent, so that is where I get my funding. I am 62 so can take money out of the retirement funds when I want.
Team, well, I am not really a long term team person. I have a realtor that I found by chance who does a lot of resells for real estate owned by banks. So I do use her when it is the type of purchase that allows realtors.
For other work, its really word of mouth, recommendations from others like the realtor and the building inspector and the local hardware store. I have been burned a few times with contractors. That is why I don't do the long term team with contractors. When they get too comfortable they can stop working. Not show up, bill excess because they think you can afford it and they have a new girl friend or whatever... If a contractor does good, I ask them if they are available for the next job. But there is no marriage or commitment either way. I pay when they ask, do not squabble over the price, treat the contractors as the professionals I want them to be, so most like working with me.
My two teens and I do a lot of the more unskilled or lower skilled work. We can demo anything. We can do decks, paint, trim, floors, subfloors, put in vanities, caulk anything (tubs, windows, etc.), patch walls, etc.
We generally hire someone to install kitchen cabinets and counters, redo the plumbing and to do the electrical. We use a few folks for foundation issues, rebuilding walls and ceilings depending on the situation. We have 2 roofers we use, one HVAC guy.
WE have to be careful because where I invest if we do more than $25k in work with unlicensed people (me and my kids or handyman) then the property can not be sold or rented, it most be lived in by the unlicensed people doing the work. That is why plumbing, electrical, HVAC, major construction which requires building permits, and roofing gets contracted out. Plus we are busy enough how it is.
Sometimes we hire a friend to do painting when we are really busy. Sometimes the houses just sit which is an advantage to owning them free and clear, no monthly payment to worry about or push to get them rented. Plus their value is going up as they sit in this market. Nothing is set in stone with me. (I adopted a special needs baby in 2020 and he has 3 to 5 medical appointments a week, so that can keep us busy.)
@Lynnette E. thank you for sharing your knowledge and experience. I will keep note of them. And God bless you for adopting a special needs baby, you help make the world a better place.
