Buying and gentrifying a neighborhood

Multi-Family and Apartment Investing
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Buying and gentrifying a neighborhood

Robin Casper
Contractor · Syracuse, NY · Member since 2019 · 54 posts · 58 votes

I am trying to buy off market properties on a downtown street I invest on. The whole street starting at the corner consists of a duplex #1, a single family, Duplex #2, duplex #3, Six Unit #1, Six Unit #2. I currently own duplex #1, The SFH, and duplex #2. I am in contact with the owners of the remaining properties. Duplex #3 and Six unit #1 are owned by the same person. The problem is he is under water on them and they are in awful shape. The main problem I'm having is with the duplex #3. There are 19k owed in back taxes and the owners currently owe 53k on their loan. The house needs about 50k worth of work and was recently appraised for 45k. I have contacted the bank that holds the mortgage and informed them that the city is going to foreclose on them for unpaid taxes to see if they would entertain a short sale, but the bank said they would pay the 19k in taxes to keep the property and then raise the interest rate to 14% for the home owner! (Which makes no sense because the homeowner can't afford payments as it sits and they will just stop paying. Then the bank will have to foreclose. I'm working with the city and can probably get them to waive the back taxes because it is in their best interest for me to buy the remaining properties on the street and gentrify the newly rezoned downtown neighborhood. I'm determined to find a way to make this deal work because aside from a good cash flowing portfolio, the city has also alluded to giving me grant money to renovate the street with. I am moving forward with Six unit #1 & Six unit #2. Any suggestions for the duplex? Sorry if this was confusing

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Will Chamberlin
Rental Property Investor · San Rafael, CA · Member since 2015 · 190 posts · 90 votes
7y

@Robin Casper, what part of the city is this? I'd make sure there is an actual ability to gentrify the street and that you have enough funds to carry a bunch of empty units until you can attract the sort of tenant you want in there. 

As far as the Duplex #3 in question (I think), if it is a crucial part of your gentrification strategy I would offer the owner what he owes on it and pay the back taxes. That at least eliminates the bank issue and you acquire it cleanly. As long as your plan can handle the higher cost of acquisition and rehab, then it shouldn't negatively affect your long-term game plan as much as a falling down eyesore on your block would.

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  • Luke Miller
    Investor · Front Royal, VA · Member since 2013 · 586 posts · 418 votes
    7y

    @Robin Casper what's your exit strategy? If you're forcing appreciation on these and it is truly in the path of progress, then you should be able to spread that risk out among the entire portfolio. Over paying for one property to own the whole block doesn't seem like the worst thing for me, but I have no idea what Syracuse is like. It's certainly more of a speculative play, but if the zoning is flexible and the City will work with you on back taxes, it seems like a good deal. The only hesitation would be banking on the City for funds. Those projects, especially if they are federal, are under more scrutiny right now. 

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  • Robin Casper
    OP
    Contractor · Syracuse, NY · Member since 2019 · 54 posts · 58 votes
    7y

    @Luke Miller thanks for the reply, I’ve been trying to run the numbers and think of it as one big property like you were saying instead of looking at the individual houses. This would be a buy and hold for me. I’m looking at the city funds as a bonus, making sure it’s still a good deal even if I don’t receive any grant money or tax breaks.

    1Reply
  • Will Chamberlin
    Rental Property Investor · San Rafael, CA · Member since 2015 · 190 posts · 90 votes
    7y

    @Robin Casper, what part of the city is this? I'd make sure there is an actual ability to gentrify the street and that you have enough funds to carry a bunch of empty units until you can attract the sort of tenant you want in there. 

    As far as the Duplex #3 in question (I think), if it is a crucial part of your gentrification strategy I would offer the owner what he owes on it and pay the back taxes. That at least eliminates the bank issue and you acquire it cleanly. As long as your plan can handle the higher cost of acquisition and rehab, then it shouldn't negatively affect your long-term game plan as much as a falling down eyesore on your block would.

    2Reply
  • Pat GoodyearPro Member
    Syracuse, NY · Member since 2015 · 77 posts · 48 votes
    7y

    Robin might I suggest holding off until it becomes available? Just my situation, I live on the upper east side of Syracuse - Beattie St. Over the past 20 years I have purchased 8 homes on my street to improve my neighborhood. I did overpay for one property and it was a big mistake. Payed $80K in 2002; illegal 3 family, needed a roof, etc. PM if you want to chat

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  • Mike Alt
    Rental Property Investor · Santa Monica, CA · Member since 2017 · 40 posts · 27 votes
    7y

    I've been looking at ways to do this.  I would be interested in working together with other investors to raise the standards in Syracuse city neighborhoods.   We could do something like target a specific block at a time and buy the properties up and keep the standards high(er) with tenants and renovations.  

    We could work the deals independently or together, as necessary, but if we all can trust that the guy next door has the same goals or improving the neighborhood condition, we don't have to worry as much about scumbag deadbeat landlords stinking up the joint.

    @Robin Casper what are your thoughts?

    1Reply
  • Mark Costa
    Investor · Cazenovia, NY · Member since 2017 · 57 posts · 17 votes
    7y

    @Mike Alt love the idea of restoration through targeted investment. I have two buildings around Lincoln Park. Not far from SU with some nice houses to start. However, there are a few rundown buildings that, if updated, would lift the neighborhood.

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  • Mike Alt
    Rental Property Investor · Santa Monica, CA · Member since 2017 · 40 posts · 27 votes
    7y

    Hi Mark -- What side of lincoln park?  N, S, E, W?  

    I think in order to make it work, you'd need several investors with resources to agree on a small radius to concentrate the efforts.  I'd made a couple recent offers in that area actually, but none of them panned out to closing.  Do you have resources for more investment in that area, are you actively looking ?  

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  • Robin Casper
    OP
    Contractor · Syracuse, NY · Member since 2019 · 54 posts · 58 votes
    7y

    @Pat Goodyear I am going to walk away from the underwater duplex #3 and Six unit #1 for the time being. Got a chance to walk through the property and with the repairs it would cost too much to clear the liens. Just going to sit back and wait until it goes to auction. Worked out a good deal for Six unit #2 though which I’m excited about! Also I almost bought my first rental on Beatie st. 5 years ago but ended up buying a different duplex.

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  • Robin Casper
    OP
    Contractor · Syracuse, NY · Member since 2019 · 54 posts · 58 votes
    7y

    @Mike Alt Currently I invest solely in Auburn/ Skaneateles just because that’s where I grew up and started out and that’s where my management and contractor team is. I plan to move into Syracuse in 2 years when I’m done working overseas. When I’m back local I plan on doing exactly what you’re thinking in Syracuse and would love to combine forces with other investors. 

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  • Ronald Starusnak
    Property Manager · Syracuse, NY · Member since 2016 · 601 posts · 384 votes
    7y
    Originally posted by @Robin Casper:

    @Mike Alt Currently I invest solely in Auburn/ Skaneateles just because that’s where I grew up and started out and that’s where my management and contractor team is. I plan to move into Syracuse in 2 years when I’m done working overseas. When I’m back local I plan on doing exactly what you’re thinking in Syracuse and would love to combine forces with other investors. 

     Hey Mike, if you see any build-able lots over in Skaneatelesfor sale, feel free to send them my way. :] 

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  • Robin Casper
    OP
    Contractor · Syracuse, NY · Member since 2019 · 54 posts · 58 votes
    7y

    @Ronald Starusnak you’re a day late! Sold my lot in Skan village for 45k yesterday with a tear down house on it. If I see anything else I’ll send it your way

    1Reply
  • Mike Alt
    Rental Property Investor · Santa Monica, CA · Member since 2017 · 40 posts · 27 votes
    7y

    I only invest Syracuse and Jacksonville, FL right now. Just bought two duplexes NE of Schiller park that need renovation

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