I’m a fan of renovation. It’s a brilliant way to add value to property. So, why not combine the two and take on a historic home in need of an overhaul?
If you’re serious about doing this and making it a success, there are some things you should consider. The first is to take off the rose-tinted glasses and understand what you’re letting yourself in for.
Two restoration projects started at the same time close to where I live in Panama City’s historic district. One is now a gorgeous home with bougainvillea-draped balconies and a very happy owner. The other sits unfinished, mired in a saga of runaway budgets and a bungling project manager.
The first owner was very realistic and hands on. He hired a good project manager. But he still ruthlessly monitored outgoings and progress. He got stuck in when needed and shopped around to get better prices.
The second owner left a close family friend in charge. The friend’s not crooked. But he is inexperienced and not easy to get on with. Costs quickly got out of control. Good workers quit. And the project slipped more and more behind schedule.
To avoid falling into this trap, here are my top tips for restoring a historic home to its former glory.
First up is figuring out how you’ll pay for it. In some locations, you may find it more difficult to get a bank loan on a historic property. But some places encourage the purchase of historic homes by offering special lower-rate mortgages. These are sometimes tied to the buyer renovating the property within a certain timeframe. Make sure you’re clear on how much you can borrow, and understand the strings attached before you make an offer on a property.
And look at tax breaks. In a bid to jump-start restoration of a historic district, governments and local authorities sometimes offer tax breaks on building materials or architect services. You might even get an exemption on the income from renting all or part of the property. Chat with a local attorney about this so you’re clear on any potential breaks and how to claim them.
Set clear budgets and stick to them. Make sure you’re not over-paying for the property to begin with. And then pay attention to what you’re spending. If the home ends up costing you $500 per square foot, and fully restored homes sell for a maximum $300 per square foot in that area, you’re facing a big loss if you decide to sell. I’m amazed at how much some owners will pay for things that don’t add a dime to the value of the home.
Then, there are the practicalities that go with older homes.
You should always get a thorough inspection of the property before you buy. It’s not easy to find a qualified home inspector overseas, but an experienced architect, engineer or project manager can help. That saves you discovering, after you’ve moved in, that the roof has a major leak that will punch a $20,000 hole in your budget…or that the foundations are shot and you don’t have the funds to stop your home subsiding.
Some homes may only need minor restoration. Others might need a teardown, taking everything back to the bare walls and starting again.
That might sound scary. But at least you know what you’re getting in to and you should have an accurate idea of what the work will cost. Minor renovations, on the other hand, can start small but spiral out of control. You could find a whole bunch of stuff you hadn’t counted on that will quickly eat your budget or force you to compromise on design or layout.
Check if the property has any kind of special status or sits in a conservation zone. This is a good way of protecting the value of your home. But the flipside is it jacks up your costs and limits what you can (and can’t) do to the property.
The tightest restrictions I’ve seen came in a fat document filled with legal jargon that dictated all aspects of the home, even down to what color you could paint the front door. Some regulations require you to preserve all original features where possible. If finding a skilled contractor who can patch in tiny slivers of wood to repair an old window frame and paying him a shocking amount of money to do so isn’t your thing, understand what restrictions apply before you commit to buying.
A happy medium is where you need to keep the original façade of the building but can do whatever you like to the interior. That is a good combination allowing you to mix historic style with modern bathrooms, kitchens and more open floor plans.
Once you know the rules, comply with them. I can’t stress this enough. You normally need a final sign off and approval of the work by a government official. Without that piece of paperwork, you may find it tricky (or impossible) to sell your home on.
With a historic home, a good rule of thumb is to accept that a major restoration usually takes longer and costs more than expected. You should have a good handle on the costs when you start and keep track of it as work advances. Include a generous contingency budget to cover unforeseen expenses that crop up during the job. And factor in wiggle room on your finish date. I’ve met folks who sold their home thinking their historic renovation would only take six months and then had to shuttle between hotels and vacation condos for weeks when the work over-ran.
Ask around about contractors and project managers. Find ones that specialize in historic homes. They’ll charge more, but it’s usually worth paying the extra cost. A good architect or project manager will know the ropes, they’ll have dealt with the local planners or conservation committee before, and they know what will pass muster (and what won’t).
Bear in mind, you may not have a salvage yard across town filled with old floorboards, bricks and doors. The materials used in a colonial home in the tropics may differ wildly from what you’re used to back home, too. Skilled contractors can advise on what is worth repairing, what needs replacing—and where to source hard-to-get pieces that will make all the difference between a decent restoration and an epic restoration.
Find out if there are any additional hurdles that you face. In some historic neighborhoods, getting debris and garbage moved out may only be allowed at certain hours. Weekends might be off limits for any kind of construction noise or nuisance. Blocking streets to get materials delivered might land you with a big fine. This is where local knowledge and experience really helps.
Finally, you might decide to do this in a country where you don’t speak the language. If you want some bilingual help on site, get that organized before the hammers start to swing.
Get Your Free Roving Real Estate Investor Report Now
Sign up for the FREE Roving Real Estate Investor e-letter and get a valuable report (free for a limited time) on The 5 Best Places in the World to Own a Home From $150,000.