The Power of Home Restoration: Turning Old Buildings into Profitable Multifamily Properties
You’ve probably seen home restoration videos all over YouTube, TikTok, and Instagram. This niche market is growing in popularity with younger audiences because it encapsulates the ideas of home restoration, profitable real estate, and simply recycling something that was once a cornerstone of a community.
An excellent example of such a home restoration project was in Homestead, Pennsylvania (no pun intended). Here, three investors took a broken-down local high school and transformed it into a 31-unit apartment building. With only an initial investment of $100K, they were able to generate a business that ran anywhere from $31,000 to $70,000K in monthly gross revenue.
This is only one example. Towns across the country have old community buildings, mill structures, rundown libraries, schools, and large farmhouses that can solve the current housing shortage. America is currently around 3.2 million homes below the housing demand. Those are families looking for a reliable place to rent, and a multifamily unit from a recent home restoration fills that missing gap.
Restoration vs. Renovation
There is a trick to home restoration that investors often overlook. If you buy a rundown building and then tear out all its unique characteristics and architecture, you are likely to run into some headaches at the local town office and compliance team members.
A renovation doesn’t capture a building’s personality. It upgrades, adds, or restyles the property for a different use. A restoration is different. It brings the style back to its earlier glory while also making minor improvements to infrastructure.
You have to walk a fine line between the two goals so you are adding new housing to a space while also preserving the unique qualities of a building.
An excellent example is the old Gothic Revival building on State Street in Portland, Maine. Originally built in 1923 as a parochial school for boys, it has since been renovated and restored into 38 single-occupancy spaces with communal bathrooms, kitchens, and gathering spaces for those with mental health or other life challenges.
While the space’s purpose changed, its original features’ integrity was maintained and celebrated.
Why Multifamily Apartments?
As you can imagine, this is a lucrative investment sector. Communities want new life breathed into legacy buildings, families wish for a secure and thriving space to live in, and investors want a strong ROI in a stable market.
So, why focus on multifamily units?
- First, you get a fantastic economy of scale. The overall cost of maintaining a multifamily structure is lower than that of a single-family home. For example, if the roof goes, there is only one to repair for multiple units instead of one per family.
- Second, it is stable. Even when you have some vacancies, the rental income from other units covers the short period of occupancy needed.
- Next, it earns. Multifamily apartments appreciate in value over time. They are an excellent source of cash assets and hedge well against future inflation.
Finally, there is exceptionally high demand. We need more housing across all areas of our country, from high-volume urban areas in San Francisco to rural communities in Oklahoma. As long as you can find an appropriate building to restore, you should have a valuable investment property to leverage for years to come.
Final Thoughts
Home restoration isn’t for everyone. There are a lot of concerns you’ll have to navigate, like preservation efforts, repurposing in different zones, and checking for legacy materials with contaminants like lead or asbestos.
However, if done with eyes wide open, focusing on multifamily apartments promises to generate a significant return on investment compared to a single-family home. Best of all, a lot of these historic buildings are easy to find and purchase because most investors think they are “too much work.”
The only real trick is having your contractors and subs lined up well ahead of time before you make a purchase. Do yourself a favor and contact the local historical society in the area you are considering. They’ll connect you with all kinds of specialists who understand what you want to do and are willing to help.
Communities want this reinvestment, especially when it means a “local favorite” structure continues to be a presence in their towns.