What's a slumlord to do?

Question

I'm in a small but growing community in the Deep South. Some of the nearby neighborhoods have assessments under $10,000, but the homes are past the end of their economic life. It's not unusual for the properties to have no heat, water, or sewer because the occupants couldn't pay the bills. Unfortunately it's not feasible to rehab these properties because the break-even point is decades into the future. Redevelopment authorities are working on solutions but it's a slow process and the money available is far from what is needed. These are textbook examples of F locations.

I currently have opportunities to buy in a couple of these locations.  In one particular neighborhood I can pick up several vacant lots, "abandoned" homes, and some SFR properties (which presently appear as though plotting an excruciating death for their occupants).

The general consensus seems to advise avoiding these F locations; however, there is a catch. The zoning is awesome. If I can capture whole blocks at a time (as it looks like I'm about to do) I can build whatever I want. Multifamily? Sure! Mixed use? Yep. There are caveats (sewer is a big problem), but these F areas border A and B+ areas. I've got a vision for these F-bombs and believe I can redefine the neighborhood creating an A location - but it will take years.

What would you do in this scenario? Draw it up and present to anyone who will listen? Or would you pass and focus on something else? And please give your reasoning if it's not too much trouble.

Bhekizwe M. · Answer

changing the neighbourhood fits the strategy but the risk factor?

core competencies to avoid expensive lessons.maybe partnering with somebody that has gone the route would be better

Russ Scheider · Answer

@Mark Vejnar

In 2014 we started buying properties in Charleston that fit your description perfectly.  We are wholesaling or "prehabbing" these properties rather than all-out rehab/flip.  I have found that the keys to making this work are:

1. having buyers in place who are interested in doing community redevelopment.  I have collected a buyer's list of owner-occupants for the C&D class properties and "big-thinking" investors for the F-class lots and houses.  There are speculative investors buying in every market, it is just a matter of finding them.  Some of my buyers are local, but many are from out-of-state. I know some New Yorkers who are pretty hot on the Upstate market.  I can hook you up with them if you like.

2.buying them CHEAP.  We are buying vacant houses for $5,000 - $15,000, Occupied houses for $15,000 - $25,000 and vacant lots for $1,000 - $5,000.  I have looked at a few deals in the Greenville/Spartanburg area and I would want to buy them even cheaper in your market.

More recently - I have negotiated a deal with a local investor who wants to build a portfolio of 20 Class C-D rental properties, but he wants me to provide them in "turnkey" condition.  We just signed our first agreement for a property purchase last week.  We have worked out an arrangement where I find properties, tie them up under contract, assign the contracts to him , and he puts money in escrow for the repairs.  I manage the repairs and coordinate with my property manager (a close friend) and get them rented and managed for him.  Lather, rinse, repeat.  This is a great way to turn the "F" properties into C or D properties and revitalize neighborhoods.    If you would like to talk more about putting something like this together in Spartanburg, Please call me to discuss.

Michaela G. · Answer

You're not too far from Greenville, so, Simpsonville is not an isolated little town in the middle of nowhere. While Greenville might not be as big as Atlanta or Charlotte, it sort of runs into Spartanburg.

What if you were to approach the artist communities in the area and ask them what they thought of a fully fenced, affordable artist community that can be live/work, because the zoning is not a problem.

Artists love to live together to inspire each other's creativity. They like it a little gritty and not fully formed. They would be willing to pay more in rent than the people currently in that neighborhood, because it would be still below rental rates in the fully renovated artist communities with big lofts etc.

I'll leave the rest up to your imagination.

Derrick S. · Answer

I really like the big thinking here. One piece of wisdom I've been shared was "buy the ugliest house on the lot." Sounds like you're right there!

I'm just brainstorming, but what about this: flatten everything, build it into a mobile home park for the time being (which sounds like an improvement, easy rents), then once the area is in gentrification you can either not renew leases, pull the mohos, and build what you like or sell to a developer.

Of course putting in a park will take a little development, but it sounds like you are already up for that?

Jeff B. · Answer

Ok, you can capture control of a geographic area, but what's the economic growth going to be like,

next year, five years ... ten years out.  City planners struggle with this all the time, but a grant for a Redevelopment District takes years to write and get approved.

Assume you go it alone, is there any brand name stores in walking distance - - think "Why would someone want to move here"?

John Coleman · Answer

ll talk specifics, I love the  outskirts of 'Downtown Greenville'.  Not Mainstreet or the already  yuppie areas, but the fringe.  I have my own beliefs on the area would  love to know what the BP blogosphere is involved with.  Within  a mile or 1.5m of downtown I see houses being bought for under $50k and  sold/trying to sell for ~$100k (289 Werts, 253 Reeves, 9 Deering).   That's on the south-west side of town that historically has been rundown  mill houses (Sullivan, Dunean, Sterling)  All the boarded up houses  have sold in the past 3 years and not much is for sale that isn't the  back end of a flip.  West Greenville is farther along but same story-  Mill houses being upgraded or knocked down and rebuilt entirely.

What are everyone's thoughts on these changes?  Does it have legs? Is it worth chasing?

What streets are 'good'? what streets aren't worth messing with?  Anyone have success stories or stories of disasters?

This is just a screen shot of the city limits (red line).  Full  disclosure, admittedly, I am talking up my holdings, I'm focused that  randomly shaped area north east of Dunean.  Its called Mills Mill.  Its a  mile from Fluor Field and a mile and a half from Greenville Health  Systems.  Its textbook.

Anyone in the area take a drive down  Stafford Street.  Palmetto Adhesive just tore down the dilapidated back  end of their factory/plant.  If you look on zillow the lots have already  been subdivided.  The city moving into that area is just one aspect.  I  see the neighborhood changing.  New construction is popping up here and there, houses are being renovated on every street.

I  would be interested to hear from other investors in the area -or- other  investors who have looked at this area of focus -or- comparable areas  in Greenville.

Russ Scheider · Answer

@Mark Vejnar I look forward to speaking with you soon.  I am an old-school "talk on the phone" kind of guy.  I find web forums a good place to meet people, but a difficult way to have a meaningful conversation.

Mark Vejnar · Answer

@Russ Scheider

I've only been to Spartanburg twice in my life. Why the interest in Spartanburg? Is it because they are just now starting what Greenville started 30 years ago?

Most of what I'm finding is Greenville county, and some in the city of Greenville. Have you razed any of those neighborhoods and started from scratch with new development? What's been your experience with buyers' perceptions.

A friend bought in the Berea area of Greenville. He has a nice home and safe neighborhood, but the reputation still seems to supersede reality. Have you experienced this?

What's a slumlord to do?

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