renovating rental in historical district

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Loon11
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Joined: Wed Feb 29, 2012 5:07 pm

renovating rental in historical district

Post by Loon11 »

Wondering if anyone has ever applied for and successfully received tax credits for renovating a rental property for historical preservation. Our duplex turns out to be in a "historical district" and it seems to meet the criteria by virtue of its address. I have learned of an huge incentive to apply for these tax credits offered by our State and the Fed govt. the amount of tax credit is 25% of the total amount of costs for State tax credit and 20% for fed. there are guidelines to follow, ie, can't put in replacement vinyl windows, they must be restored to its original look, etc.
I really want to try but it looks like a lot of red tape and its scary thinking of submitting for the credit on my taxes but we are talking about a total of up to $45K tax credit that can be carried forward for up to 20 yrs!
My contractor wants to hurry up but I am insisting to try this. Would love to hear from anyone who has been able to do this!
btenny
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Re: renovating rental in historical district

Post by btenny »

Call the town hall in Telluride Colorado. Back in 1961 the entire town was declared a Historic District by Colorado and the Feds. Then in the 1980s sometime the Feds introduced the tax breaks you are referring to. Anyone that renovates a building in town (and there are literally 100s of grand Victorian homes and other small houses from the 1890s to pick from) gets these tax credits. In the 1980s there was run on all kinds of builders and investors doing this kind of thing. I suspect if the rules still apply there are still people doing it today. Call and ask. The town clerks and building department people will know the rules. Maybe many of those rules will be applicable in your town and give you a starting point.

Good Luck
Bill
Saving$
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Re: renovating rental in historical district

Post by Saving$ »

The problem with seeking historic tax credits is that you do things which cost more money than you were planning on spending in order to qualify for the credits, but the review process is subjective, and you don't really find out if you really qualify until after the renovation.
Topic Author
Loon11
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Re: renovating rental in historical district

Post by Loon11 »

Thanks - yes, it's going to cost me more upfront - fees just for submitting. I need a consultant who knows the paperwork too. Plus can't ditch some of the old windows (must be restored) which is more expensive. But its worth a try I think - at least that's what the consultant thinks.
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tarnation
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Re: renovating rental in historical district

Post by tarnation »

Loon11 wrote:Plus can't ditch some of the old windows (must be restored) which is more expensive.
This reminds me of
http://www.xtranormal.com/watch/1151558 ... w-salesman
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Topic Author
Loon11
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Re: renovating rental in historical district

Post by Loon11 »

tarnation - that is really funny
forestlake
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Re: renovating rental in historical district

Post by forestlake »

We have been through this process with a historical building in a historical district. And my cousin does this type of thing for a living. The tax credits are very tempting, but, remember, you are then taking on the government as your partner. And with that comes all of the frustrations you might expect when working with your state and federal government hand-in-hand. It is expensive as you might have to work with the Davis-Bacon wage scale in addition to using specific types of materials (which of course are more expensive) that meet their guidelines for "preservation." Then you'll have to wait - and wait - and wait. Take your timeline and multiply by at least four to be realistic. Regarding the tax credits (btw, there are other programs available - grant programs - but they are actually more complicated due to the qualifications), if you really need them then that's great. We don't need them because we keep our earned income very, very low and basically pay no or little tax. So what you do then is sell the tax credits off through syndication on the open market (which is taxable I'm pretty sure). There are a lot of people who will pay probably $0.70 on the dollar for them - just FYI. So if you really want to go through with this, first know that just getting to the point where you'd want to make a decision (of whether it's a viable option for your project) will probably take at least two months. To get started, you'll first have to get in touch with your area's representative. This will be found through your state's website - somewhere in the economic development arena or your state's historic preservation office. They'll meet with you and do a preliminary analysis (on-site) to see if you'd qualify. Careful - they are building-huggers. Just nod your head and pretend every single one of their ideas is great. They will more than likely be judging your application if you do go down this road. From there, your rep(s) will work with you directly. One last note: These programs from a developer's standpoint scale up very nicely, but unless you're doing something of at least $400k-$500k, scaling them down to smaller projects aren't really that great. The best projects for these are big and expensive projects. You must have a lot of time, be in no hurry, and have all the money to front this on your own (nothing is granted/awarded until you're done and have your CofO). Oh, and btw - we passed on these for our small commercial building (about a $200k renovation) after losing 2-3 months working through all these programs. Didn't make any sense and now we'll be up and running by late winter early spring rather than late summer or next winter.
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Loon11
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Re: renovating rental in historical district

Post by Loon11 »

forestlake: Found out the hard way you are right on. After hiring a local "architectural historian" who supposedly knew the local Department of Historic Resources personnel and had projects approved, we ended up pitching it. She went thru the whole process, with CAD drawings, pictures ofthe property, etc, did Part 1 and Part 2 submission - did all that before getting a meeting with them to find out that they were entirely inflexible on changing anything in our plans. I would have ended up spending a bunch of money to put "lipstick on a pig" So, we pulled the plug on the project - lost a couple of weeks but not too bad. She cost me $840 which I consider thrown away - she claimed to be experienced and should have known that they would not allow us to remove any walls. But probably for the best - have heard nightmare problems with the tax credits - would have been nice but would have meant I needed an accountant and not even sure I could have used the credits.
So far, its been a PIA - had to have the utilities changed back to us after getting rid of the tenants - hook up fees, heat and electric bills, wish we had sold the place! Put the appliances on Craiglist, the workers put the stove out back and it was gone a few hours later> Heard that scrap metal people troll the alleys picking up anything not tied down.I had already sold the stove!
Ah the fun of being a landlord.
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Re: renovating rental in historical district

Post by LadyGeek »

This thread is now in the Personal Finance (Not Investing) forum (tax question).
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