MFR Historic Buildings: Pro/Cons?

Question

I'm looking at an MFR for rehab and rent.  It is a historic building so I assume I have to get extra approvals.  Anyone have experiences to share?  Pros/Cons/things to watch out for?

Rich Hupper · Answer

I am working on one of these right now. Your building might be eligible for state and federal tax credits. If you apply for tax credits you will have to own the property for at least 5 years and it must be income producing. You cannot live there.  Also your city might have grant money they can give you to help preserve the building. The grant money will most likely come with a deed restriction.  I think most people use historic consultants to facilitate getting their hands on the tax credits but you don't necessarily need to.

You will need to get many of your renovations approved by your local city historic board especially if they will change the exterior look.

Between monetizing the tax credits and getting grant money you might have much more wiggle room with the project than a similar project that is non historic.

One thing to watch out for with historic credits is the preservation of interior components. This can get costly depending on how much the historic commission wants preserved or replicated.

Greg Scott · Answer

That could be a nightmare, depending on how diligently the neighborhood monitors what you do to the building.

I live near a historic area and have had some friends own houses there.  They fight with their neighbors over silly things, like subtle variations in paint color.  In that same area, a company wanted to buy and old building that was literally falling apart.  The plan was to knock it down and construct a new building, one fitting for the style and architecture of the neighborhood.  As soon as the town found out, they rallied to "save" the old building.  The new building plans were denied and the old building sat crumpling for another year.  Instead, they went through a painstaking process of removing everything falling apart on the old building and replacing only what was rotted.  I suppose there may be a portion of the old building that was re-used so they could say the building was "preserved" but it was a fraction of the original materials.  In my mind, it was all a massive waste of time and money for the owner of the property, but it made a handful of stuffy neighbors happy.