I've always believed in the power of opportunities waiting to be unearthed in the world of real estate investing. One such gem that many investors overlook? The historic rehabilitation tax credit.
This tax incentive gives investors a reason to look at old, historic properties with a fresh eye. It's all about rehabilitating them, bringing life back into the community, and reaping significant tax benefits along the way.
Check out the video below where seasoned real estate investor, JoAnna Anderson, shares the benefits of rehabbing historic properties and how to work with the state to reduce your repair costs on these specific deals.
In this quick video you’re also going to discover…
- How JoAnna got the state to pay for part of her rehab costs on her most memorable historic property to date
- How and why it is so important (and so easy!) to properly document repairs, especially when it comes to historic properties
- Why historic properties are more than just a profit check
- And much much more!
A Deeper Dive Into Historic Rehabilitation Tax Credits
So...ready to dive deeper into the historic rehab tax credits? Let's do it!
1. Bridging Past And Present: Decoding Historic Rehabilitation Tax Credits
Introduced back in 1976, the historic rehabilitation tax credit, or the Historic Tax Credit (HTC), is a secret weapon for savvy real estate investors.
This federal incentive allows you to shave off 20% of the eligible rehabilitation expenses from your tax bill.
However, to qualify, the property must be listed in the National Register of Historic Places or be within a registered historic district and certified by the National Park Service.
With that said, if you're an investor looking for opportunities around historic rehabilitation tax credits, getting to grips with HTC is a must.
2. Stacking The Deck: Federal and State Credits
The federal HTC is a boon, but don't overlook state historic rehabilitation tax credits.
These vary by state, both in terms of the credit percentage and the types of properties that qualify. For instance, Maryland offers a tax credit of up to 20% on qualified rehabilitation expenditures, while Virginia offers 25%.
As an investor, understanding both federal and state tax credits can substantially impact where you choose to invest.
3. The Double Whammy: Combining Federal and State Credits
What makes historic rehabilitation tax credits even more appealing is the ability to use both federal and state credits on the same property. This allows you to maximize your tax benefits, maximizing your ROI and snagging you bigger, better deals.
4. Navigating the Maze: Eligibility and Application Process
While the benefits of historic rehabilitation tax credits are sizeable, the application process can be intensive.
Each program has its own eligibility requirements, often involving an extensive review process. Moreover, the rehabilitation work must meet the Secretary of the Interior's Standards for Rehabilitation to preserve the property's historic character.
The application process typically has multiple stages, including a proposal, detailed application, and post-completion review. It's a process that calls for careful planning and documentation, so having a team with experience in historic rehabilitation projects is a smart move.
5. Influencing Investment Decisions: The Hidden Advantage
Historic rehabilitation tax credits can be game-changers in your investment decisions. They can make historic properties financially viable, offsetting the higher costs of rehabilitation.
Not to mention, investing in historic properties often translates into additional benefits, like increased tourism and access to other grants or funding sources. By understanding these tax credits, you can incorporate them into your investment strategy, creating more profitable opportunities.
6. Peering Into The Future: The Continued Role Of Historic Rehabilitation Tax Credits
Looking ahead, historic rehabilitation tax credits incentivize investors to be part of revitalizing old neighborhoods and preserving our architectural and cultural heritage.
They also align with the growing emphasis on sustainability and responsible investing.
As the government recognizes the importance of preserving historic structures, we may see an expansion in these tax credits' scope and availability. For you, as a real estate investor, keeping abreast of these changes can put you in a prime position to capitalize on these opportunities.
In real estate investing, it's all about finding value where others don't. Historic rehabilitation tax credits provide an excellent opportunity to do just that. Whether you're a seasoned investor or just starting out, understanding and utilizing these tax credits can add a significant edge to your investment strategy.
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