Have you ever flipped (gentrified) an entire neighborhood?

Question

Hey Ya'll;

There is this (potentially) great little neighborhood close by me. It's sandwiched between the small downtown, the fancy gated community with a golf course, a large undeveloped tract of land and the river. It's in a great school district. It's within miles of Charlotte and a major interstate. Shopping and amenities are not far off either.

There is no reason it needs to be so rundown and shady... but it is. It's kind of down a background with a dead end, no reason to go in there unless you are living there.

A house came on the market for 35k not long ago and is listed as sale pending. It needs a lot of work so hopefully someone will buy it cheap and fix it up. With a million bucks you could buy up most of the neighborhood - if it were for sale.

A wild dream though would be to buy the whole neighborhood up, fix it up and then flip it off dramatically improving the quality of residents and values of the homes in the process.

Question is - does anyone have any experience doing this sort of thing - taking on an entire neighborhood as a pet (yet profitable) project and flipping the whole thing over the course of years or a decade?

This really is a diamond in the rough...

Account Closed · Answer

@Josh Stack

I hate to be the one to mention this, but internationally, organized crime does this carefully in well-chosen urban-residential pocket neighborhoods. First they drive the value of the neighborhood into the ground. Then they engineer a complete turnaround.

Drug ghettos, by definition, need to be easily accessible from multiple areas of the city. You need to be able to get in, buy your product, and get out. The drug trade will drive values into the ground. But once the ground has been properly poisoned, the gang running the neighborhood buys just as much property as they can and moves in. Much of the property is converted into war zone apartments. Sooner or later, the pocket neighborhood is going to come under serious scrutiny and the cops move in. The gang moves out, which stops the drug trade and much of the crime. They keep the war zone apartments and get paid, because the tenants know who they're renting from and no one screws a hooked-up landlord on rent. Neighborhood prices inevitably rise. The war zone tenants move out. The area starts to gentrify. The real estate investment herd stampedes. The neighborhood is "revitalized."

The politicians take a bow. The gang sells the (now prime) property it's been holding for a massive profit. Win for the local authorities, bigger win for the gang.

JD Martin · Answer

I have worked with a few developers that attempted this strategy. Inevitably, some of the homeowners refused to sell, and some of the investor-owners decided to hang on and ride the gravy train of appreciation. In the cases I can remember, the developers ended up doing their project, then parceling out the properties in the "soon to be gentrified" areas, in most cases barely touched.

It's certainly possible but I think you'd either have to see one major opportunity and get lucky, or just do it philanthropically. Otherwise, there's lots of places like North Charleston that developers would already be doing it in.

Josh Stack · Answer

Morning James,

Intersting point though not specifically applicable here (I hope!). Reading through your post, I couldn't help but think of Baltimore and "The Wire".

Ned Carey · Answer

Not personal experience, but from watching others in Baltimore, this can be tougher than it sounds. It can take a substantial number of properties to be renovated before the neighborhood reaches critical mass.

In a neighborhood with negatives that caused the decline it can be a race between the slow deterioration and the renovations. The first few sales in the area can be very tough.

Ozzy Sirimsi · Answer

Years ago ( like around ten) I see this block of houses in Remington Baltimore and had an idea to buy the whole block and renovate it. Next to JHU.

At the time, I didn't have money laying around, and was jokingly telling everyone to invest together. Years later, this company came in and bought the same block wanted and they did more and renovated the who neighborhood. If I knew what I know now, I would not jokingly tell everyone, I would convince my friends, relatives, or other investors to buy one or more if I cannot come up with the money to buy the whole block.

If you really believe into it, start talking and calling people. If it makes sense people will respond.

Scott Innocente · Answer

I think if your timeframe is long enough (2-3 years) then it is possible. Investors seeing 2-3 + homes being renovated in the area is likely to attract more investors. If the location is solid, as you say, then I'd say it's worth a shot.

Josh Stack · Answer

Thanks @Jd Martin,

I guess that's always the contextualized answer, as @Brian Ploszay alluded to. It will be entirely difficult to capture enough of the market (neighborhood) to make a difference unless there is some philanthropy involved in the deal as the marginal price of each acquired property will continue to rise as the neighbors grow wise to what is happening.

That said, gentrification and neighborhood revitalization are real constructs; so they must start somewhere...

Josh Stack · Answer

Hey Brian,

True that, double true that it's tough to gain control of an entire neighborhood but what if it was possible. What if you could gain control of just a couple houses and put them on the up and up such that it was clear that the neighborhood was ascending rather than in decline.

Surely someone on BP has experience in this....

Brian Ploszay · Answer

Generally, it is not so easy to get control of enough properties to make a difference. A whole neighborhood is generally a movement.

But it starts somewhere. If you are successful and there is profit to be made, others will follow you quickly.

Have you ever flipped (gentrified) an entire neighborhood?

Have you ever flipped (gentrified) an entire neighborhood?

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