Doing What Actually Works

Last year I engaged in a failed attempt to renovate and expand an old house in an 1890’s era neighborhood in Ohio. It ended badly. So I thought I’d do a follow up on what actually does work given the legal parameters and cultural context.

I sold the house to a smart young local guy who bought eight similarly run down properties on the same block within a short period of time. He gathered private funds from a group of personal investors to finance the venture. Then he hired a family owned contracting company from across the river in Kentucky to renovate all the homes. He’s selling the properties as they become ready for market and distributing the profits to his investors, keeping a percentage for himself. It’s a really good economic model with a fast lucrative turn around.

The new owner and his contractor never dreamed of changing any of these buildings in a way that would have required any kind of special permission or variances from the city authorities. That way lies ruin. This smart team of savvy professionals brought these abused and neglected husks up to respectable middle class standards quickly and efficiently in a way that only marginally involved municipal officials with plain vanilla over-the-counter permits and ho-hum inspections. Once the new kitchen cabinets and fancy appliances go in along with the new windows and flooring these homes have instant market appeal. They’ve been selling very well, particularly because the collective renovations of multiple buildings at the same time in the same concentrated area feeds a palpable sense that the neighborhood is rapidly gaining value.

It helps that the new owner went to high school in the area. In a provincial town like Cincinnati these things really matter to the locals. And he’s selling single family homes, presumably to future owner/occupants. In contrast, I was reviled in social media as both a carpetbagging gentrifier who was driving out long time working class residents and an absentee slumlord who would dump “the wrong element” on to the neighborhood and degrade property values and the quality of life for nearby homeowners.

The end result is that the house I paid $15,000 for will ultimate sell for six figures even though it’s still exactly the same size and shape – give or take a nice cosmetic skin job – after it’s flipped at a generous profit. So the folks who worry about gentrification will experience the same resultant condition relative to what I had in mind for the place. And there’s no guarantee that it won’t eventually be purchased by someone who will choose to rent the property rather than live in it themselves. But all that is beside the point. The regulatory environment and cultural perceptions are the defining constraints. The new owner is just a whole lot better at effectively piloting his way around those shoals. I have to respect his business acumen.

Over the past five years I’ve followed a variety of young talented industrious people in the neighborhood. One couple has been engaged in another business model that works beautifully. They buy a distressed property at a reasonable price point. They move in and occupy the space themselves for about a year while they renovate it. Then they buy their next property, move in, and rent the one they just completed. Instead of flipping properties they’re steadily building a long term portfolio with positive cash flow and equity. They’re currently managing a dozen units and filling them with good quality people from the community.

The crucial point is that they never buy a property that requires special permission to upgrade or needs extraordinary amounts of structural work to bring it up to code. They buy a solid shell and clean it up. Full stop. If they encounter an otherwise great building that happens to need fire sprinklers, or an elevator, or a zoning variance they steer well clear of it. Let some other poor bastard kill themselves in the meat grinder of endless bureaucracy and public outrage. (That was me…)

To do absolutely anything else is technically possible, but hideously time consuming, difficult, and untenably expensive – and your neighbors will call you all sorts of terrible names and project all their fears on to you. For folks who believe in building great new places that mirror the charming old compact mixed use walkable neighborhoods of a century ago… Let it go. We have the dregs we inherited from previous generations and they can be shined up. But that’s it.

John Sanphillippo lives in San Francisco and blogs about urbanism, adaptation, and resilience at granolashotgun.com. He's a member of the Congress for New Urbanism, films videos for faircompanies.com, and is a regular contributor to Strongtowns.org. He earns his living by buying, renovating, and renting undervalued properties in places that have good long term prospects. He is a graduate of Rutgers University.

All photos by Johnny Sanphillippo