BiggerPockets

Hello All! My name is jeremy, and im a relatively new member of this greatly appreciated and informative site. Im thinking that ill be able to get some good advice and/or info on implementing an idea that ive had for quite some time....I live in an area of St Louis that really shows its 100+ years wear and tear. As with most old buildings, there is so much character, and I see so much potential for this south city neighborhood. To me the solution is simple: Buy up all the foreclosures and other cheap properties and control the market. Rehab much nicer than the area is used to (houses can be bought at 10-30k in this area) and sell or rent but on a very strict screening process. The area has what could be a very cool shopping business district and it would be wise to invite some creative minded entrepreneurs to begin their business in the area with some sort of grants. Im kind of rambling here but long story short the area could be Great and i wanna know others thoughts on moving forward with a plan and who to present to for financing/grants etc...Any input appreciated even "hey dummy you cant save the world, Move on!!" haha

you said what can be bought for but not 'exact' cost of rehab,,,and finished sale price. Keeping them all for long term rental would take deep pockets till you built the numbers. Once you own 10 to 20 properties free and clear then gaining more is easy.

My advice, start slow, go easy till you find exact finished cost. Those little things add up fast,,,and hidden must do's are uncovered every day.

Don i didnt speculate on the cost of rehab because it could range from 5k to 100k on these houses- the low purchase price gives you a little breathing room. the house prices will stay low here for awhile at least until these houses are bought up and even then, hopefully bought by good investors. regardless though the rents are pretty nice and my places are full and positive. i have a 4 family that nets 900/mo..and there are plenty to be had. i want more haha!

Jeremy you have an extremely lofty idea here. I'm going to give you advice based on one who has attempted to invest in a distressed area, informally along with other investors, hoping the area would eventually be revitalized. It never happened. I soon learned that in order for a neighborhood to be revitalized, eventually all of the players - residents, businesses and ESPECIALLY the local government - will need to be on board.

IMO, you can tackle this from two angles:

Pull together the local government, businesses and Investors (don't try and go this alone. Share the wealth and work involved. The revilization will be more effective the more diverse the investment.) and draft a plan to bring back the area. You will need the full cooperation of the police department and eventually the residents as you work to rid the area of one of the main factors bringing it down: crime. As crime is being pushed out you will have to work HARD to convince business owners, other investors AND homebuyers and tenants that this is the real deal. The biggest challenge (and this is what I had to learn the hard way) will be to overcome the decades-long stigma that has plagued the neighborhood and get prospective tenants to sign on. Most will only remember how crime-ridden the neighborhood was and will not be coming back in a hurry. Unless of course you will be primarily attracting the young, educated and professional crowd. If so then forget about the stigma as it likely won't matter much. They will just be concerned that this are places to eat, shop and do it safely. Which brings us back to the cooperation of trendy businesses, the local government and the police. Without them signing on, imo, this doesn't happen.

You will also want to get together with the responsible tenants in the area and encourage the start of homeowners associations. Your challenges will be to get them to work together to clean up the neighborhood. Some might be fearful of the criminals. Others may actually be housing them as family members and friends. Start with the responsible and brave ones first. The ones who don't give a damn about a drug dealer and will smack the lights out of one like he was his son. Get enough of them together and you can clean up a neighborhood. Again, this is a LOT of work.

Finally, check with the city's 'Master Plan'. Every major city should have one and it should tell you the path of improvement (there's actually a term for this which I can't remember right now) the city will take in the coming years. You may find out that the city already plans to start revitalizing the area in 5 years.

These are just my thoughts.

Not sure how much you're working with, but FNMA recently came out with a program that more or less has the same effect of what you have in mind. $5MM probably buys a heck of a lot more in STL than it does in these parts... I can only imagine!

A great example is Washington, DC.
S.E. was always joked about as being totally ghetto. But now its tuning into a hip yuppie area. You need to try to determine which way the gentrification is moving and jump in ahead of the wave. Buying up some properties as good rentals and holding them until you are ready to rehab and sell for big $$ is the best way.

Thanks for your responses- Youve inspired even more ideas on my project- mark ive split my area up into quadrants but i really like your idea of three in a row that makes perfect sense! I think my first step is really just buying what i can when i can- it will be hard at this point to find others. Ill pick up a commercial spot or two along the way- after a few houses have been rehabbed and a little buzz is beginning id like to find an up and coming chef that i could offer a free year lease to begin a new restaurant- my ideas get lofty i know but in reality im not trying to travel the moon!

Take my advice and stay out of the hood. Your tenants won't be housebroken, collections will be difficult, and you're likely not going to change the demographics of an entire city region just by picking up a few junky properties.

Look for stronger markets if you want to make money with good hardworking tenants who pay on time and respect the units.

You're asking for trouble going into very low income areas. You want to help, but likely no one wants your help there. And the caliber of individual you will deal with is so low you'll wish you never started. They are hard on the rentals, not to mention waiting for +40 years for an investment payout on a nickel and dime bet on housing in a very poor area is not a good investment strategy. Make a few more posts and have BP help you fine tune that thinking.

If you are bent on low income try picking up bigger buildings and section 8ing them for the cash flow because there will likely be no gains on the sale of that real estate.

@John you are exactly why i want to do what im doing- and that is not a shot at you because you are actually the majority in your thinking. By no means am i trying to be a hero, but your thinking has created a challenge and opportunity that doesnt outweigh the reward- Ive always been a risk taker, not for some "thrilling feeling", but because i know that no matter what happens, absolutely anything, EVERYTHING, EVERYTHING will be OK. I promise. The potential in this area in my eyes is unreal and the fear is nonexistent, maybe replaced with stupidity in your eyes, but thats irrelevant if im so naive to see it. This is what people call a vision, and this is what inspires great things. So while i thank you for your intentions im going to ignore your advice and do something worthwhile.
@Kyle thats awesome!

@John S. Your statements are generalizations. "Hood" is a broad term thrown around with absolutely no real definition.

Assessed values in my "hood" rose 23% this year. Know why? Because of people like @Jeremy Namen! Risk = reward. If you're happy with a 10 cap, do it. We're not & we're young enough, and smart enough to see the bigger picture. We value honesty, integrity, high levels of craftsmanship. We also respect architecture, history, culture, diversity, entrepreneurship. Our goals are lofty enough to make others laugh. Mainly because our passion is so great that we can actually accomplish what we set out to do.

We're the neighborhood investors, not the neighborhood exploiters. And when it's done right, it works better than you can imagine.

Cheers,
Mark