James Wise and BiggerPockets Redlining?!?!?!
Anthony GaydenPro Member
Rental Property Investor · Omaha, NE · Member since 2014 · 2k+ posts · 3k+ votesJames Wise and BiggerPockets Redlining?!?!?!
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Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
7yOriginally posted by @Anthony Gayden:
I saw this article while browsing the web today.
https://www.citylab.com/equity/2018/11/redlining-cleveland-investors-home-prices/574153/
The blog, posted on the real-estate investment platform BiggerPockets, shows how Wise grades real estate for investors, grouping Cleveland’s neighborhoods into four color-coded categories: “A Neighborhoods,”shaded dark green; “B Neighborhoods”shaded light green; “C Neighborhoods,” shaded yellow; and “D/F Neighborhoods” shaded red.
Wise’s maps ring eerily similar to redlining maps, the color-grading system used by the Home Owners Loan Corporation (HOLC), the National Association of Real Estate Boards, and the Federal Housing Administration (FHA) in the early-to-mid 20th century to demarcate which neighborhoods were worthy of property investment. Redlining was technically outlawed by the 1968 Fair Housing Act because it facilitated racial and economic segregation in many U.S. cities, segregation that persists.
Thanks for posting this Anthony. I spoke to that reporter a week or two ago & was wondering what type of nonsense he'd post when he published his article. I checked google a few times but didn't see it until I got a BP keyword alert. It was clear from the beginning of the call that he was an extremist & was hell bent on painting me as a racist despite facts to the contrary. The guy has no knowledge of the Real Estate Industry, he couldn't comprehend that the income of a tenant base had a direct effect on the risk of the investment.
50 Replies
- Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes7y
It seems to me that the only thing @James Wise is pointing out is how poorly government regulations and policies have done to integrate and improve neighborhoods over the last 50-75 years.
- 7yAaron HowellBusiness MemberReal Estate Agent · Crozet, VA · Member since 2014 · 436 posts · 223 votes
Amazing what constitutes racism theses days.... Racist/Racism is probably the most misused/misunderstood word in the English language.
My interpretation of the Ultimate Guide has always be a SUGGESTION of risk vs. reward as an investor. I've bought in several zip codes since 2015 and my tolerance for risk has changed over time. In May I briefly had a 5 unit under contract in the 44102 zip code. I knew the property would be a little tougher (turnover, CAP EX, etc) than some of my other properties but I was willing to take that risk. Ultimately the deal fell through b/c the owner had a IRS tax lien on the property but my insurance quote on a $89,000 property was $4000/year so I guess the insurance company is racist too b/c they too assessed risk vs. reward. I asked why it was such a high quote and they responded that it was b/c of "theft, arson, fraud claims in that zip code." That is why the area is red on the map.
If you're offended (or fake offended) by the Ultimate Guide then that's on you. I don't believe there was any offense intended and some Hack writer trying to drum up readership doesn't surprise me.
Story House Real Estate529 Reviews - Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes7y
Well said @Aaron Howell This guy is such a hack his own audience doesn't even agree with him.
- Pittsburgh, PA · Member since 2017 · 36 posts · 9 votes7y
how hard is this to comprehend?
why wouldn't someone who is investing money want to know what areas to stay away from.
why would an investor buy a property in a war zone or an area with low income what sense does that make.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes7y
Originally posted by @Jamiel Jackson:
how hard is this to comprehend?
why wouldn't someone who is investing money want to know what areas to stay away from.
why would an investor buy a property in a war zone or an area with low income what sense does that make.
It's not even about staying away or not buying a property in a low income or war zone area. It's about understanding what you are buying when you buy one of these investment properties.
You can buy properties with a rent to price ratio above 2% in some areas & in others it's only .5%. Why is this? If an investors doesn't know why this is they would automatically assume they'd NET more money purchasing the 2% property every time. That is not always going to be the case in real life due to other circumstances such as evictions, non payment of rent, property damage, turnover etc....& that is what the Ultimate Guide To Grading Cleveland Neighborhoods is all about.
- Real Estate Appraiser · Mount Pleasant, SC · Member since 2017 · 56 posts · 51 votes7y
Originally posted by @Jay Hinrichs:
Jim is not redlining he is simply drawing lines on a map and describing neighborhoods based on age and theft and school data.. I suspect.
That is exactly what he's doing. Major sections of his "B' areas are predominately (or close to it) minority populated areas. This includes Garfield Heights, Richmond Heights,and South Euclid among others. Shaker Heights, an "A" neighborhood is close to half racially minority and well into predominantly minority if you add religious minority into the mix. Conversely, some of the "F" neighborhoods on the west side are significantly, if not predominately white. I am sure if you put the data in a spread sheet you wold see a near perfect correlation to income levels, a lower, but still significant correlation to education, and much lower correlation to race.
Which, by the way, is probably the way you want to address any blowback you might get from this James.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Tony Kohnle:
Originally posted by @Jay Hinrichs:
Jim is not redlining he is simply drawing lines on a map and describing neighborhoods based on age and theft and school data.. I suspect.
That is exactly what he's doing. Major sections of his "B' areas are predominately (or close to it) minority populated areas. This includes Garfield Heights, Richmond Heights,and South Euclid among others. Shaker Heights, an "A" neighborhood is close to half racially minority and well into predominantly minority if you add religious minority into the mix. Conversely, some of the "F" neighborhoods on the west side are significantly, if not predominately white. I am sure if you put the data in a spread sheet you wold see a near perfect correlation to income levels, a lower, but still significant correlation to education, and much lower correlation to race.
Which, by the way, is probably the way you want to address any blowback you might get from this James.
redlining technically is a bank term were the banks would draw a red line around a neighborhood and refuse to make loans to ANYONE in those areas.. this was outlawed as we know.. To my knowledge there are lenders lending in every neighborhood in the US regardless..
- Member since 2018 · 16 posts · 9 votes7y
I must say I do agree with most of the very misguided people on this thread that James Wise's article is not an example of redlining.
What it is, though is a very bold example of steering.
James Wise, I don't know your heart and it is possible that you had good intentions when you wrote that article but please understand that labeling neighborhoods as undesirable for whatever reason can negatively impact the livelihood and well-being of the people that live there, plus it's illegal.
- Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes7y
So, if you refuse to buy in certain areas due to drugs, crime, rental applicants, etc that makes you GUILTY! Are landlords guilty of a crime for refusing to rent to someone with evictions? Poor credit? No. That makes landlords guilty of being diligent running their business and trying to keep problems to a minimum. We have several areas I will not buy in. DUE DILIGENCE can make or break an investment. If someone wants to buy in a war zone, more power to them. I will buy in better areas, pay more, and expect better tenants. Others have the fortitude to buy in rougher areas and deal with the associated problems or tenant turnover. Redlining is ILLEGAL for banks...but not illegal for investors to determine where they want to risk their money. All RE is a risk-some more than others.
- Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes7y
It isn't steering or red lining. Hes not telling people to buy or not buy in any areas whatsoever. Investors buy in all class of neighborhoods, A, B, C, D, F. In fact investor concentrations will increase as you work your way downward on that scale. I imagine James sells and helps people buy multifamilies in every single location on that map.
Now if he were saying dont buy in neighborhood X because of the race of the neighborhood, that would be steering. But the opposite is in fact true. He is selling properties in these locations to investors whose risk profile fits the class of the neighborhood. There are far less investors investing in A class areas than there are investing in D/F class areas. Thats a simple fact illuminated by the owner occupancy rate in any given area.
District Invest Group546 Reviews - Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes7y
Originally posted by @Russell Brazil:
It isn't steering or red lining. Hes not telling people to buy or not buy in any areas whatsoever. Investors buy in all class of neighborhoods, A, B, C, D, F. In fact investor concentrations will increase as you work your way downward on that scale. I imagine James sells and helps people buy multifamilies in every single location on that map.
Now if he were saying dont buy in neighborhood X because of the race of the neighborhood, that would be steering. But the opposite is in fact true. He is selling properties in these locations to investors whose risk profile fits the class of the neighborhood. There are far less investors investing in A class areas than there are investing in D/F class areas. Thats a simple fact illuminated by the owner occupancy rate in any given area.
Correct on all accounts. This is something most people fail to realize. As you go down the list it swings from almost exclusively owner occupied purchases to almost exclusively investor purchases.
- Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes7y
@James Wise I'm not going to comment on right or wrong, since that has very little bearing on what a state regulator will consider lawful or unlawful according to their own contrived interpretations.
But FYI I do know for a fact that another real estate agent on this very forum had California Department of Real Estate regulators come after him for posting a map of a different city very much like yours with the colors and the letter grades.
My $0.02 for what it is worth (& I'm speaking as a fellow licensed individual here, not as a BP mod) is that it's best to err on the side of caution and let the unlicensed folks draw the maps with the colors and grades - can't threaten to take a license away from someone that doesn't have one. You might very well win your day in court, but how much would your volume and production have dropped off while dealing with that? How many of your would-have-been clients made bad choices because you were forced to muck about in hearings and whatnot, and unavailable to help?
Back to the 50k foot view, if anyone wants to see a current example of (arguably) actual redlining at the federal level, check this out: mortgage product availability by census tract, direct from fanniemae.com. Financing availability by the largest institutional backer of mortgages in the United States is going to have way more of an impact than a single real estate agent mucking about in Microsoft Paint, but no one talks about that do they?
- Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes7y
yeah this map got swept up into wrong category entirely, only lenders have the power to redline. There are some strong anti redlining laws where redlining once occured, like I think in Michigan you have to offer home loans as low as 10k to be licensed.
- Home Stager · Sussex, WI · Member since 2012 · 170 posts · 64 votes7y
So I guess the author would also take issue with any crime heat map readily available to the public on Trulia, Realtor.com, Neighborhood Scout, as well as school rankings on Great Schools.org? It's incredible the lengths some will go to misconstrue and misrepresent, almost to the point of slander, or worse.
- Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes7y
@James Wise, my dad always said never argue with a fool. Someone passing by might not know which one is the fool.
- Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes7y
Originally posted by @Carolyn L.:
So I guess the author would also take issue with any crime heat map readily available to the public on Trulia, Realtor.com, Neighborhood Scout, as well as school rankings on Great Schools.org? It's incredible the lengths some will go to misconstrue and misrepresent, almost to the point of slander, or worse.
To play devil's advocate, that's objective data in the public record versus OP's referenced map being opinion.
GreatSchools.org, which if they are 'grading' the schools would be opinion, also isn't a licensed real estate professional (I assume).
- Home Stager · Sussex, WI · Member since 2012 · 170 posts · 64 votes7y
Originally posted by @Chris Mason:
Originally posted by @Carolyn L.:
So I guess the author would also take issue with any crime heat map readily available to the public on Trulia, Realtor.com, Neighborhood Scout, as well as school rankings on Great Schools.org? It's incredible the lengths some will go to misconstrue and misrepresent, almost to the point of slander, or worse.
To play devil's advocate, that's objective data in the public record versus OP's referenced map being opinion.
GreatSchools.org, which if they are 'grading' the schools would be opinion, also isn't a licensed real estate professional (I assume).
I can understand your point and appreciate your perspective, as you have more expertise here. But when I look at Jame's document, it appears to be based on zip code demographics and factual data, readily available from the Census. Aside from the editorial commentary about "warzones" one could make the same assumption looking at the same demographic data on the many real estate portals. RealtyTrac also provides extended demographic information, including race. GreatSchools.org also includes race/ethnicity by school, and grades schools based on test scores, then partners with ZillowGroup to locate homes for sale in each location. Seems like a gray area comparing the two (opinion vs. objective data). Still, the author suggested redlining was occurring based on the drawing - would he not have to provide evidence of this?
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes7y
Looks like Brentin Mock managed to get his article published by another website. This one is called Pacific Standard
https://psmag.com/economics/redlining-in-cleveland-is-still-happening
- Home Stager · Sussex, WI · Member since 2012 · 170 posts · 64 votes7y
@James Wise - He doesn't seem to understand the definition of Redlining. You're not the lender determining loan approvals based on this data, and you're not publishing anything that isn't already widely published by every real estate portal, demographics and data analytics firm available to the public. As I mentioned above, even GreatSchools.org combines this data down to the school / neighborhood level with the ability to shop for homes on Zillow based on scores and demographics in that specific area. So much for accurate journalism.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes7y
Originally posted by @Carolyn L.:
@James Wise - He doesn't seem to understand the definition of Redlining. You're not the lender determining loan approvals based on this data, and you're not publishing anything that isn't already widely published by every real estate portal, demographics and data analytics firm available to the public. As I mentioned above, even GreatSchools.org combines this data down to the school / neighborhood level with the ability to shop for homes on Zillow based on scores and demographics in that specific area. So much for accurate journalism.
Agreed.
- Long Beach, CA · Member since 2017 · 107 posts · 82 votes6y
This is silly, if James Wise is guilty then all of us are. The A-D class descriptions for investing are used nation wide and are a helpful tool to establish risk. All James did was superimpose this same subjective measuring tool onto an area that he invests in and knows quite well. This does not affect bank decisions etc.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes2yJust got a vote notification on this thread so I figured I'd give ya'll an update.....
Quote from @Chris Mason:
@James Wise I'm not going to comment on right or wrong, since that has very little bearing on what a state regulator will consider lawful or unlawful according to their own contrived interpretations.
But FYI I do know for a fact that another real estate agent on this very forum had California Department of Real Estate regulators come after him for posting a map of a different city very much like yours with the colors and the letter grades.
My $0.02 for what it is worth (& I'm speaking as a fellow licensed individual here, not as a BP mod) is that it's best to err on the side of caution and let the unlicensed folks draw the maps with the colors and grades - can't threaten to take a license away from someone that doesn't have one. You might very well win your day in court, but how much would your volume and production have dropped off while dealing with that? How many of your would-have-been clients made bad choices because you were forced to muck about in hearings and whatnot, and unavailable to help?
Back to the 50k foot view, if anyone wants to see a current example of (arguably) actual redlining at the federal level, check this out: mortgage product availability by census tract, direct from fanniemae.com. Financing availability by the largest institutional backer of mortgages in the United States is going to have way more of an impact than a single real estate agent mucking about in Microsoft Paint, but no one talks about that do they?
5yrs later....Map still up & still an awesome tool for investors. The journalists who wrote the article, still a tool.
No government or real estate regulatory folks have bothered me. Map has now been published online for about 9 years and viewed by what I assume is millions of people at this point. - Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes2y
Quote from @James Wise:
Just got a vote notification on this thread so I figured I'd give ya'll an update.....Quote from @Chris Mason:
@James Wise I'm not going to comment on right or wrong, since that has very little bearing on what a state regulator will consider lawful or unlawful according to their own contrived interpretations.
But FYI I do know for a fact that another real estate agent on this very forum had California Department of Real Estate regulators come after him for posting a map of a different city very much like yours with the colors and the letter grades.
My $0.02 for what it is worth (& I'm speaking as a fellow licensed individual here, not as a BP mod) is that it's best to err on the side of caution and let the unlicensed folks draw the maps with the colors and grades - can't threaten to take a license away from someone that doesn't have one. You might very well win your day in court, but how much would your volume and production have dropped off while dealing with that? How many of your would-have-been clients made bad choices because you were forced to muck about in hearings and whatnot, and unavailable to help?
Back to the 50k foot view, if anyone wants to see a current example of (arguably) actual redlining at the federal level, check this out: mortgage product availability by census tract, direct from fanniemae.com. Financing availability by the largest institutional backer of mortgages in the United States is going to have way more of an impact than a single real estate agent mucking about in Microsoft Paint, but no one talks about that do they?
5yrs later....Map still up & still an awesome tool for investors. The journalists who wrote the article, still a tool.
No government or real estate regulatory folks have bothered me. Map has now been published online for about 9 years and viewed by what I assume is millions of people at this point.I guess that's California regulators v Ohio regulators for you.
Another interesting observation, 5 years on. I remember vaguely thinking it was weird that someone would accuse a non-lender of "redlining," since the classic definition is very much a lender-specific thing: drawing lines on maps and not being willing to do mortgages for properties on the "wrong" sides of those lines. However, more recently than this thread, I'd seen "redlining" thrown out, as it was in OP article, more and more commonly, as something 'bad' that's unrelated to mortgage lending. Insurance (property and health) redlining, police redlining, education redlining, etc. I have not seen it in academic contexts yet, but comments, forums, stuff like that. It's certainly a word whose use is trending upwards.
Kind of like how "violence" used to specifically be a physical thing one person or group would do to another person or group, but now it's metastasized, and mere words can be "literal violence, no cap" too.
Let's see what 2028 will bring!
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes2y
Quote from @Chris Mason:
Quote from @James Wise:
Just got a vote notification on this thread so I figured I'd give ya'll an update.....Quote from @Chris Mason:
@James Wise I'm not going to comment on right or wrong, since that has very little bearing on what a state regulator will consider lawful or unlawful according to their own contrived interpretations.
But FYI I do know for a fact that another real estate agent on this very forum had California Department of Real Estate regulators come after him for posting a map of a different city very much like yours with the colors and the letter grades.
My $0.02 for what it is worth (& I'm speaking as a fellow licensed individual here, not as a BP mod) is that it's best to err on the side of caution and let the unlicensed folks draw the maps with the colors and grades - can't threaten to take a license away from someone that doesn't have one. You might very well win your day in court, but how much would your volume and production have dropped off while dealing with that? How many of your would-have-been clients made bad choices because you were forced to muck about in hearings and whatnot, and unavailable to help?
Back to the 50k foot view, if anyone wants to see a current example of (arguably) actual redlining at the federal level, check this out: mortgage product availability by census tract, direct from fanniemae.com. Financing availability by the largest institutional backer of mortgages in the United States is going to have way more of an impact than a single real estate agent mucking about in Microsoft Paint, but no one talks about that do they?
5yrs later....Map still up & still an awesome tool for investors. The journalists who wrote the article, still a tool.
No government or real estate regulatory folks have bothered me. Map has now been published online for about 9 years and viewed by what I assume is millions of people at this point.I guess that's California regulators v Ohio regulators for you.
Another interesting observation, 5 years on. I remember vaguely thinking it was weird that someone would accuse a non-lender of "redlining," since the classic definition is very much a lender-specific thing: drawing lines on maps and not being willing to do mortgages for properties on the "wrong" sides of those lines. However, more recently than this thread, I'd seen "redlining" thrown out, as it was in OP article, more and more commonly, as something 'bad' that's unrelated to mortgage lending. Insurance (property and health) redlining, police redlining, education redlining, etc. I have not seen it in academic contexts yet, but comments, forums, stuff like that. It's certainly a word whose use is trending upwards.
Kind of like how "violence" used to specifically be a physical thing one person or group would do to another person or group, but now it's metastasized, and mere words can be "literal violence, no cap" too.
Let's see what 2028 will bring!
Can't compare California to any other location in the USA, except for maybe that dirty hell hole Portland.
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