(This is the second in a two-part series on how cultural resource management professionals can further historic preservation by purchasing properties with historical buildings or archaeological sites. You can read Part I here.)
I started writing these two posts because, as usual, a fellow cultural resource management archaeologist swiftly dismissed my suggestion that we could just buy historic properties or archaeological sites and preserve them ourselves. It’s not the first time this has happened. It won’t be the last.
Purchasing archaeologist sites seems like an impossible task for most of us CRMers who can barely afford our rent and student loans let alone buy land to save archaeological sites. When you don’t have money, doing things that takes a lot of money seems hard. Most people with that mindset won’t even read this far into my blog post, but I didn’t write it for those who don’t think this is possible.
This blog post is for those of you who believe it’s possible to buy archaeological sites and historic properties. If you’ve read the first post in this series, you’ve learned about some individuals and organizations that are doing what is recommended in this post. Now, I’ve got a couple suggestions on how you can address the elephant in the room: Putting together the money to pay for properties.
How the hell do you pay for the properties?
(NOTE: I am not a financial planner, real estate investment guru, or banker. I don’t know your financial acuity or risk tolerance capabilities. Most importantly, I have not actually tried any of the methods I’m about to suggest. All I’m saying is use caution while heeding this advice. These are just suggestions and important elements in my own personal plan of purchasing archaeological sites, older homes, and/or historic properties. Keep reading this blog if you want to know how my plan unfolds.)
Talking about money is where I always meet with opposition whenever I suggest we should just buy properties for preservation. Sometimes people don’t even listen to anything I say after I make that recommendation because they’re only thinking about their own empty bank account and the large sums that go into real estate.
I will readily admit I’m not a financial planner or real estate developer but, as with all things in this country, either you do it yourself or you have somebody else do it for you. So, you can either acquire the properties yourself, you can have someone else acquire it for you, or you can let others do the acquisition:
1) Finance it yourself: This is the most traditional and hassle-free form of acquiring property in the United States. You could build that investment fund until it was large enough for you to buy a property and you could go from there. You would be the owner and could preserve the property however you saw fit. This strategy would require a big investment on your part but would give you more freedom.
As I mentioned in the previous post, this is not always possible because of the ridonculous house prices in some parts of the country. My wife and I saved to buy a home in Seattle for about 4 years and weren’t able to even buy a townhouse. We didn’t become property owners until we moved to Tucson. Saving to buy a house in more affordable locations will be easier than in expensive parts of the country, but, with the right price, location, seller, and combination of financing, buying an older or historical home is still possible.
If you took this route you could strategically leverage the equity you had in your properties to acquire more properties. Remember that self-made real estate millionaire from Boise I mentioned in the previous post? He got his start in the early 1980s when he bought a family home with his wife so they could have somewhere to live. He was an elevator repairman and she was an elementary school teacher. They bought a small house in a neighborhood they could afford and did the home improvements themselves. Most importantly, the paid off their mortgage as quickly as possible. He worked overtime and she took a second job during the summer so they could pay that mortgage ASAP.
Once they’d paid off their first home, they borrowed against the first property to buy a bigger, nicer home elsewhere in town and rented out their first home. It took about 15 years to pay the mortgage on their first house but paying off the second house only took about 7 years. When that second house was paid off, they took out an equity loan against it and bought another one. This time, it only took five years to pay back all the money they borrowed because renters were paying more than the equity loan while he and his wife made payments too—effectively paying the equivalent of three to four mortgage payments each month. After the fifth home they stopped personally paying on the equity loans because their tenants were doing that for them.
By the 2010s, he and his wife were multimillionaires that enjoyed five figures in passive monthly income. He retired. She still teaches elementary school.
When I talked to him last year he told me preservation is not one of his motivations but he tended to purchase older homes that need repairs or rehabilitation. Some of the houses are in historic districts and he benefits from tax incentives on these properties. Others are perfect candidates for historic preservation. Either way, he’s a preservationist because he’s actively maintaining historic and potentially historical properties.
The “Buy and Hold” strategy is tried and true. This is how most of the people I know that own more than one property got their start. There are other ways that you can research elsewhere, but Buy and Hold is timeless and it can be applied to historic preservation efforts.
2) Have others help you: In the event you cannot build a big enough investment fund, there are other ways you can find others willing to help you finance your purchase. You will be taking on partners, which means you will be partially beholden to others. You will have to pay them back or share any revenue, but it is definitely a way to go if you’re having difficulty paying for the purchase, rehabilitation, and maintenance on your own.
You can also buy the house and have someone else help you pay for it. House hacking, a fancy term for renting part of your property to somebody else, is another excellent way to either pay your mortgage faster or pay for the right property in an expensive market. This is how two of my parents’ friends got started in real estate investing. As college students, they bought houses in need of repair, spent the summer fixing them up, and then took on roommates. When they graduated, the two partners owned about four homes that were fully rented out to college students they knew. One partner cashed out and started a workman’s clothing supply store. The other kept on buying, rehabbing, and renting houses.
I have heard of individuals who have found other real estate investors willing to partner on a deal that looks profitable. This isn’t a strategy I have any experience with but it’s a possibility if you’ve been making connections with local investors. You might also have a relative or friend willing to loan you the money for a down payment. For the right property, this might not be a problem.
For savvy real estate buyers, you could create a holding company for your property and solicit investors to help you buy it. One way is by issuing a Private Placement Memorandum (PPM) to raise money for your company (I believe LLC or Corporation) to purchase more investments. This is probably most useful for multi-family buildings or for after you have a number of asset properties because the people that buy shares through your PPM are going to expect returns on their investment, which means your properties will have to be generating income. When you become a preservation investment Beast, you can try to roll your assets into a Real Estate Investment Trust (REIT). These are even more complicated than issuing a PPM through your LLC, but they can be used to do big-time investment moves. While you’re building your investment fund, learning about PPMs and REITs is something you might look into.
There are a number of ways you can find somebody else to help you buy the right property. It’s how the Archaeological Conservancy and other preservation groups acquire properties. If it works for them, what’s to say it won’t work for you?
3) Let somebody else do it: Even though you’ve skimmed this post and the previous one, you can just forget what you’ve read and keep doing what most of you have been doing thus far when it comes to historic preservation: you can let somebody else do all the buying, managing, and maintaining. You can let the Archaeological Conservancy or National Trust keep being the financial muscle behind the preservation hustle, but I encourage you to at least volunteer or donate to these organizations. If you aren’t going to take up the mantle of preservation real estate owner, at least you should help those organizations that do.
Start your Education Today
Like I said in the last post, nothing will happen without action. You won’t be able to save sites from developers if you don’t have the economic means to combat them. Buying properties for preservation is one way you can save a small slice of history. Here are some resources that will increase your real estate investing and preservation knowledge:
BiggerPockets (https://www.biggerpockets.com/) Bigger Pockets is more than just a blog and podcast. It’s a community of investors, wannabes, and touristas. You can find people there willing to help you learn, locate, and, possibly, purchase properties.
National Trust for Historic Preservation (https://savingplaces.org/) The National Trust website is more than a list of historic properties. The website also contains a wealth of information on successful preservation campaigns, preservation strategies, and information on sustainability. If you can afford it, the National Trust also sponsors conferences where you can deepen your understanding of preservation.
The Archaeological Conservancy (http://www.archaeologicalconservancy.org/) The Archaeological Conservancy’s work is an example of how private citizens, local governments, and archaeologists can work together to save sites. Surf the website or read their magazine, American Archaeology, to learn more about what this organization is doing to save our archaeological heritage.
I’ve already told you my plan. Buying properties is a major part of it.
In case you didn’t already know, I am adamant about archaeologists using property ownership to further preservation goals. This is part of a business plan I formulated in 2014 and have been advancing in what feels like baby steps:
Buying historic properties and archaeological sites is just one of many tools we cultural resource management archaeologists can use to fight the fight for historic preservation:
As mentioned in the first part of this series, historic preservation was designed to incentivize property owners to preserve historic sites. Ownership is a critical component to all preservation strategies. We may not be able to purchase vast swaths of land from Federal agencies, but we can definitely purchase an older home, restore it, and protect it for a lifetime. None of this will happen unless some of us act.
Let’s get started. Write a comment below or send me an email.
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