All Forum Posts by: Benjamin Riehle

@Jake Arnold thanks my man!

What's up, BP? A few months ago, I posted an article on a flip that was in the beginning stages in a historic district of downtown Tucson: https://www.biggerpockets.com/forums/311/topics/55.... That project has now been completed, and the results are outstanding! Traditional, flipping a home in Historic Preservation Zones (HPZ), can come with great difficulty as these neighborhoods come with an extra set up rules and regulations to ensure that the "historical aspects" are well persevered. I will outline some of the regulations and hoops we had to jump through while completing this project. Previously a duplex, with one bedroom one bath units, we transformed the property into an SFH with three beds and three baths, the property has a ton of space, which is excellent for the crowded downtown location. On most of our rehabs, we add SQFT with an addition or by closing in a garage or carport (perfect example here: https://www.biggerpockets.com/forums/311/topics/55...). On this project, we were able to utilize dead space to add some much-needed square footage.

The Numbers

Initially, the ARV for this project was $360,000, with a rehab budget of $122,000 and a timeline of 9 months. We were able to purchase the property off market for $170,000. This property is now active on the MLS $425,000, $65,000 over the original ARV. The actual rehab cost was $125,000, and we have delivered the property on time. The original numbers made for a substantial return, but a competitive housing market in downtown Tucson has made this deal a home run. We are excited about the results and look forward to doing more projects for this investor.

Number Comparison (Budget VS Actual)

 Budget:                                                                                                                 

Actual:

Working in Historic Preservation Zones (HPZ):                         

When contemplating doing a flip in an HPZ, it’s essential to understand all the extra work and cost that goes into a project like this. I recommend contacting a company that has experience in rehabbing homes in HPZ for advice and mentorship. Although the returns can be very appealing for investors, If you are unaware of the additional procedures and cost, it may end up costing you more than expected. Luckily, my team has a reputation in Tucson of delivering high-quality homes. We have also built a relationship with members of the historical society, which has allowed us to operate in this challenging environment. A few of the challenges we had to face on this project were: keeping the historic exterior paint color, white with unique teal trim. Second, we had to use a custom-built wood front door. The door turned out amazing and might have be worth the added cost. Third, we used real wood floors in most of the living space. The genuine hardwood was more expensive than other alternative options, but HPZ requires the use of actual wood floors.  Fourth, and most costly was the custom-built wood windows. Although, not the most energy efficient window, it does give a great look to older home! Understanding, the added cost that comes with working in this area allowed us to provide very accurate numbers to our investor. Understanding the added expense is a key when working in an HPZ, lack of understanding could cause a good investment to go south.

Enjoy the before and after pictures and feel free to reach out with any questions!

@Naftali Tolibas, thank you for the shoutout. 

@Deepak Kumar happy to help. The college market around the UofA is rapidly changing.

Best,

 The cost to the investor is shown in the example. We did make commision on the purchase of the property, like a traditional real estate transaction. As for the construction, that is the total cost the owner was charged for the work. The Management fees are incorporated into the expense multiple of 30%. I would be happy to go into more detail if you would like.  

 Thank you! I appreciate it.  

Whats up, BP? It’s been a while since I have talked about one specific deal, but this was a huge win for an out of state investor, who is a longtime client and friend. We take great pride in taking problematic properties and turning them into cash flowing assets. Although the Tucson market was once quiet, there has been a huge amount of growth in recent years.

This is another successful BRRRR strategy investment. Don't know what the BRRRR strategy is? Do yourself a favor and take a minute to learn about this incredible investment tool . As the market becomes more competitive, the ability to be creative is an essential tool to have. On occasion, the current use of the property isn’t the most worthwhile or being used to its full potential.

Take this project for example, originally a mismanaged duplex; we decided the best plan of action would be to turn it into a five-bedroom three bath SFH to allow for maximum rental income. We have noticed that students at the University would rather live in a large SFH than two separate apartments. This allows them to pay lower utility bills and have more living space. This property is two blocks north of the University of Arizona and will be a great rental for years to come.

Before Project Photos

After Project Photos

Infographic

Although the Tucson market is currently very competitive, being able to identify the best use for a property has allowed us to create a massive win for the investor and for our team. As we continue to pursue investment opportunities, it is important to reflect and celebrate significant victories like this.

Our investment team was able to identify this project and the potential it had as an investment; the construction team completed this project efficiently and beautifully. Our management team had the property leased before the construction was complete, which is a massive feat by itself. Overall, we took a property that wasn’t being used to its full potential and remodeled it into a beautiful cash-flowing asset that should rent for many years.

 It depends on what the final product is, the district has been very flexible with the re-zoning process. 

@Rich Kniss I think this plan would be very successful in the right locations! I like the idea of the building being transformed into something that would benefit the surrounding neighborhood with the inclusion of businesses on the ground level, while still allowing a safe living space above. I also think the residents would enjoy the adequate parking and the outdoor living space as you mentioned. 

@Matt K. I do like the Idea of unique condo conversions. Although there are many buildings like these conversions that are already happening, the demand remains high for them, prompting investors to continue to transform old abandoned schools into beautiful living areas and work areas that often still feature some of the old character from the building it once was, like the old basketball court floor you mentioned. Hopefully this is a trend that continues, it allows for the recycling of buildings that would otherwise be demolished or sit vacant. 

What caused the vacant schools?

Kansas City is not the only metropolitan city that has closed schools in recent years; Detroit, Philadelphia, and Chicago all closed a large number of schools as well. Unlike the other cities, Kansas City was proactive in creating a program that allowed the communities to help decide what would happen to the abandoned schools. The Kansas City School District has lost their accreditation twice due to low test scores on state examinations, first in 2000 and then again in 2011. When it happened the first time in 2000, the loss was the first time in history that a large metropolitan school district lost national accreditation. According to the Los Angeles Times in an article titled ‘Kansas City Schools Lose Accreditation,’ “Kansas City's public-school district has become the first in the nation to lose its accredited status by failing all Missouri's performance standards, and could be abolished unless it improves.”  The loss of accreditation prompted parents to look elsewhere for their child’s education. The massive plummet in enrollment caused the Kansas City School District to close 21 schools in 2011, and a total of 30 schools in the last decade.

What is happening now?

This map tracks 48 schools that have been or still are Kansas City Public Schools properties, including 31 that are part of the district’s current repurposing program. The highlighted schools are a collection of buildings that have been sold for other uses (sometimes including school operations by other entities), are on the block to be sold, or have been put on the shelf for possible future re-use by the district. Some of the buildings will be demolished or already have been.

The schools that are closed have been assigned three different fates: for sale, mothballed, or demolished. The for sale properties have been deemed in good enough condition, and desirable enough location to be eligible for sale. “Mothballed” is the term being used for properties that might be sold or re-opened in the future. Demolished is self-explanatory, the property is either not salvageable or not in a location which deemed worthy of an investment. The empty lots where the schools once sat are also being used in different ways such as parks, recreational fields, or community gardens. 

A few examples:

(This information was found at http://projects.kansascity.com/2016/school-closings/)

Westport Middle School opened in 1923 and closed in 2009. It sold in 2014. It is a 166,650-square-foot building on 4.16 acres. It was purchased by Westport Commons: Center for Creativity and Innovation, a nonprofit community group. They bought the building to create a co-working meeting space and continuing community education site. The have also utilized outdoor space and created community gardens.

Norman Elementary opened in 1906, built additions in 1911, and was used for district and nonprofit offices between 1978 and 1986. It ultimately closed in 2005, and sold in 2009. It is a 41,050-square-foot building on 3.26 acres. It was purchased for $1.4 million by redeveloper Del Hedgepath, and it has stood vacant for a decade; the current $13.5 million plan calls for conversion to 39 apartments in the original building with new wings built for 22 more units plus a parking lot and swimming pool. Plan obtained property tax abatement.

West High, West Junior High, Switzer Elementary and Switzer Early Childhood Center were built in stages from 1899 to 1962, and closed in stages over three decades, and completely closed in 2006. The entire estate was sold in 2015. The five buildings total 124,797 square feet on 4.64 acres. Owner Foutch Brothers LCC created a $17 million redevelopment of the five buildings to 114 market-rate apartments and community meeting spaces. This was completed in 2016. The property received historic preservation tax credits and property tax abatement for conversion.

Faxon Elementary opened in 1910 and closed in 1997. It sold in 2009. It features a 61,968-square-foot building on 1.75 acres. It was converted to 45-unit senior housing apartments by Sunflower Development Group with assistance from Greater Kansas City LISC and Pioneer Group. Received property tax abatement and low-income housing tax credits for renovation.

Scarritt Early Childhood Center opened in 1925, had additions in 1960, and closed in 2010. The building has been badly vandalized but remains on the district’s “mothballed” list for possible future use as a school.

Bancroft Elementary opened in 1904, had additions in 1913 and 1922, and closed in 2000. It sold in 2012. It re-opened in 2013 as affordable apartments and a community center, a project of Brad Pitt’s Make It Right Foundation, BNIM Architects and Dalmark.

Willard Elementary opened in 1930, and closed in 1998. It features a 48,941-square-foot building on 3.15 acres. The district has a memorandum of understanding with the city of Kansas City, which will schedule the building for demolition at a cost of $300,000. The property is being considered for a future housing development. 

The purchase of vacant schools is not unique to Kansas City, but it is very influential in rehabilitating whole neighborhoods. As schools continue to be rehabbed, re-open, or torn down, the effects can be seen in the whole community. As we all know, vacant buildings in the middle of neighborhoods can cause trouble and cast dreary shadows, with vandalism, and undesirable foot traffic. The unique ways that the schools are being used and the tax benefits that are giving to the developers are all signs of growth in Kansas City.

What would do if you could rehab an old school? 

http://www.governing.com/topics/education/gov-repurposing-schools-offers-new-life-to-vacant-buildings.html