Historic Homes Advice

[Alex Zhu]

Hi everyone,

First post ever here. My wife and I are early on in our real estate investing journey and looking to grow our portfolio. We are based in Texas and recently saw an early 1900s historic property come onto the market. The exterior of the house looks to be in pretty good condition, but the interior definitely needs some work. We're are looking at this through the lens of turning this property into a short-term rental (provided we could stay within the city and state regulations). I'm looking to get some advice from folks who have either gone through this process or have done some research into this fairly niche area of investing. A couple of brief things that I have found based on my preliminary research (and please let me know if any of this is inaccurate): 

- Restoration/repairs can be quite costly simply given the age of the home and the changes in code & technology since the home was built. It seems like there are some trusts or other funding programs that consider contributing to restoration and repair projects, but we'd like to operate on the assumption that we will not be chosen for these types of grants, just in case. It sounds like an archaeologist/restoration specialist may need to be involved, or at least that is what is recommended.

- I've seen opinions on either side regarding appreciation/resale value over time on historic homes. For those who have followed this trend, what have you generally seen as compared to  the performance of newer builds?

- In needing more extensive restoration/repairs and having to navigate the various local and state government rules, project time and holding costs are expected to be higher. Is anyone able to share their experience with this? 

Thank you to the Bigger Pockets community for providing such amazing content and value. Looking forward to reading any insight y'all can share!

[Bruce Lynn]

@Alex Zhu   What city is the house in?

I have sold several historic homes...over 100 years old....and working on likely another one or two this month.... my thought is be prepared to spend money and time.   While in some ways they were probably built more of quality, typically they are very different standards than you get today...for example insulation....some of these used shredded newspaper in the walls and when for example you do infrared scan, you can see that that has settled to the bottom 2-3 feet of the wall and the next 8 ft to the ceiling might not have any insulation...things like that.   Of course look at things like electric and plumbing and sewer.....probably you will have wanted all that updated recently or you will need to budget for that, especially if using for a rental.  Look at the windows....often I see these painted shut if they are the original wood sash windows....that might be a liability if a rental....and then you get in that dilemma...do you spend a ton of money to restore them...strip all 5 coats of paint and 100 years of muck or do you take them out and replace them with something more efficient.   Sometimes I think these are more labors of love vs good investments.   What kind of roof does it have....I saw probably 100 year old house today in Greenville that was beautiful...looked at the roof and it was slate.....what do those cost to replace?  Who will do it?  Probably not 90% of the roofing companies.   So you may spend a lot more time looking for materials and spend more money on materials than many.

As far as STR rentals are concerned....make sure you know the market and the sentiment of the neighbors...I would go knock on doors...talk to them....are they going to be supportive or make your life miserable. Different places have different ideas...some think it improves....for example I'm guessing places like Fredricksburg.....but there are some people that are probably very much against it....maybe places like Fairmount in Ft. Worth...although I don't know that to be the case, just seems like mostly owner/occupied housing there. I would also be very very aware of what the restrictions of the area are. Read that document and go to the sessions of the commission that covers that if there is one. You are right, sometimes there are paint restrictions, windows, doors, material requirements. You want to make sure you are comfortable with those.

Good luck..have fun....watch some sessions of this old house.....for inspiration.