Real estate investment as a social enterprise

[Marylin OShea]

Hello everyone, I would like to position my investment strategy as a social enterprise, and haven't been able to find relevant conversations about that subject just yet.

I am interested in "investing for good" in the Annapolis, MD area, not so much for the purpose of cash flow generation, but to support my community - buying small properties, affordable for a low-income family, and helping out those who may lack credit or references yet are in a truly dire financial situation - whether they are vets, victims of domestic violence, documented immigrants, etc.

This may sounds suspicious to you all, but I am happy to hang on to the equity and not make much cash. I am lucky to have a solid FT job (which is also geared towards social services) and I am a very conservative spender -- so I can allocate part of my reserves to helping families cope.

Can anyone refer me to resources (books, online) or users who have experience with similar initiatives?

Thanks in advance,
Marylin

[Thomas S.]

What you are talking about is a charity. There are most likely charitable organisations in your area that can assist you in this endeavor as opposed to investors.

Charity and business are at opposite ends of the spectrum. Most investors prefer to donate money to their preferred charity rather than intermingle the two. It rarely works out well for a investor to gear investments to affordable housing projects.

[Robin Watson]

Marylin OShea I do exactly this. But, I run the charity as a part time non profit on the side. I flip houses geared toward low income first time home buyers and add a developers fee. The agency purchases the property, rehabs it, and sells it. The profit goes back into the non profit to support our other program - owner occupied home repairs for low income seniors and those with disabilities.

I take a very small salary when the cash flow is there. My goal is to build up the agency with sufficient funding to hire a full time Execute Director. At that point I will sit on the board and continue to help with fundraising.

Also, the banks we used for financing gave us a zero interest loan. Since we are a non profit affordable housing agency, the banks are eligible for a 10% CITC (community investment tax credit) AND it counts toward their CRA points. Win/win. And the neighborhoods improve.

Hope this helps.

Robin

[Robin Watson]

Also you might read "Start Something that Matters" by Blake Mycoski. He's the founder of Tom's shoes. There's a niche business model called social entrepreneurism that's been quite successful. It's exactly what you are talking about.

[Mark Holencik]

See Poverty...Be The Difference by Dr. Donna M. Beegle 

I invest in depressed area's. I do my work as a social enterprise. You have to get past the sterotyping  "that by making money you are not for the social good". Being profitable is a necessity to carry on the work you want to pursue. Most of my profits get invested back into the neighborhood through employment, fixing up another property, and giving the tenants a place they are proud to live in.

Buying a home that needs work and bring it up to a level that you are proud to be the owner is real good for the neighborhood as a whole. 

This may sounds suspicious to you all, but I am happy to hang on to the equity and not make much cash. 

 It does not sound suspicious. It is naive. Do not expect any equity. You may receive some equity, but the little equity you have will be hard to get when times get rough. Frustration will be your worst enemy. What you are planning will take a lot of work with little thanks from the people you are trying to help. 

Remember you are an outsider. I will help you any way I can.

[Marylin OShea]

Thanks for the recommendations, @Robin Watson, I've placed a hold at the library for that book. I am familiar with his story, but no the book.

I've involved with a lot of nonprofits (and I work FT for one!) and I am hoping to learn more about yours, seems like a formula that works for you and I was happy to learn about the bank incentives. Exactly the type of info I was after.

Your response was quite inspiring, I am definitely open to creating a 501(c)3 to support my idea. @Thomas S., you are correct, if I want to be able to scale my impact, I need to find a way to bring money in at some point. I wasn't implying that making money wasn't promoting social goodness, sorry if my post came across that way. Of course, I commend you for supporting your community by investing in depressed neighborhoods.

As for "the little equity you have will be hard to get when times get rough" - I intend to be conservative with how much of my personal money gets allocated to this project, so hopefully I never have to pull the rug from underneath someone who benefits from affordable housing. Good food for thoughts however...

I am very appreciative of all the feedback and comments, thank you so much.

[Bill Manassero]

Hey @Marylin OShea

It's great to hear of your interest in utilizing real estate as a social enterprise.  This is my goal!  I have a nonprofit in Haiti that I hope to fund significantly through my real estate investing income.  The nonprofit is called Child Hope International and it has been operating in Haiti for 15 years. 

I am currently seeking to acquire 1,000 units by 2020 with the end goal being to generate retirement funds and income for the nonprofit (the majority of the funds).  I explain my goal on on BP podcast episode #191.

If you are interested in chatting, just DM me.

Best,

bill

[Marylin OShea]

This is my update, 2-years in, hope you enjoy it! thanks for the kind words once again, @Robin Watson, @Mark Holencik and @Bill Manassero

https://www.biggerpockets.com/member-blogs/11976/8...

[Robin Watson]

@Marylin OShea

Wow, great update. I’m so glad you were able to make it work! I have a rental that seems to have worked out similarly. I’m renting it out as a sober living house to recovering addicts. It’s not without its drama at times, but to see the stark difference in people when they catch even the smallest break it awesome.

Keep up the great work!

[Thomas S.]

@Marylin OShea

Keep in mind that the value of your property, as a rental, is driven by the rental income. Depending on how much rent your tenants are paying if you are forced to sell during their lease your property is likely not worth what you paid for it. To protect your investment you should have your tenants on M2M leases.

Although you may not plan on selling the day comes when every investor is forced to sell. 

[Chris Seveney]

@Marylin OShea

I think you are referring to impact investing. An example is with my business I invest in non performing mortgage debt and work with the borrowers in an attempt to keep them in their home versus foreclosing on the borrower. It's a win win as it does provide a return to investors as well as the physical and mental stress of being foreclosed upon can be avoided. It also reduces blight and REO's / lower home prices by dealing with vacant homes.

There are opportunities in the space to do good and have it be a solid investment

[Caleb Heimsoth]

@Marylin OShea. Make money first and do social good second. I have seen first hand what a single investor has done to a large area of a city I’m invested in over the last 5 years just by buying, rehabbing old propeties and making better affordable housing for people.

That aside this individual also makes a lot of money and if you don’t pay rent he evicts you. So keep that in mind too