Can we cash flow rental properties in Historic Districts?

Good morning everybody. I hope everything is going well with you.

We were driving around a neighborhood that we are planning to invest looking for houses. We want to get a feel for the area - actually we want to become experts on the area. First comment: most houses had the lockbox outside - if I had my real estate license active I would have been able to enter them and take a look. I guess I have to wait only a few more days to be able to do it… But I wanted to share this as one benefit of being a realtor… :O)

Anyway - some of the houses were in a historic district. It seems that those houses are sold at a premium. For example - a 2 bed/1 bath/1 car detached garage - asking price $259,500… :shocked

My question - what is your experience with historic districts? I am looking for rentals - do you feel we can find a good deal in those areas?

I saw several depressed properties in the area. It seems there is a lot of potential to buy one and fix it up. However not sure about being able to cash flow in a rental… What are your thoughts?

Additionally what are the implications of owning a property in a historical district? I believe there are some architectural limitations on what you can do with the house (am I right)? What is the impact on taxes, insurance, ability to renovate, etc.?

Not sure if this matters, but I live in Phoenix.

Thank you for your insight…

Have a nice Sunday!

I can only tell you about the historic houses in my own town. Your location will vary.

The historic houses bring super premium prices. Partly because they are so beautifully maintained and partially because the first settlers got the very best locations in town.

There are fines for not keeping the properties up to standard, and I would be a bit worried about tenants doing that. It involves a lot of gardening and constant cleaning.

The houses can only be repauired, updated with historic materials and colors-- which is fine with me, because the historic district is what is protecting the hgh value of those houses.

In some towns there are tax advantages in the historic district.

I’ve invested successfully in historic neighborhoods. The key is to not buy the restored beautiful house but look for the ugly houses or houses adjacent to the historic district. Historic districts typically contain older housing stock and some of the owners may have lived there for many decades. This creates opportunities for owner financing or finding properties with high equity but in need of repairs. Check your local authority on these neighborhoods as restrictions will vary. Generally paint colors may be limited, additions or changes to the exterior may require special permitting etc. The beauty of these areas is that people want to live there, both renters and owners. If you get in at the right price the properties generally cash flow and when you are ready to sell there is a high demand for these homes.

Cash flow will depend on just the numbers.

I agree with the previous posts. Historic Districts attract high quality tenants/buyers. I once had a National Historic rated rental (brick rowhouse) and the recorded covenants on the property required that any exterior repairs be done in the same materials, etc. In other words don’t replace old wood-sash windows with metal.

Those districts often have lots of fixer-uppers if you get in before the whole area gentrifies.

Hey - thank you so much for the answers. I called some of the agents today asking for price and condition of the houses. I was able to talk with three agents and they all told me that their houses have already been remodeled (and this is the reason for the high prices). I will keep looking. There were several houses in the area that need repairs. I will not rule the area out.

Thank you. Have a nice evening!