Making Money In Real Estate

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The Healy Project’s quixotic lawsuit to save 2320 Colfax hit a major snag earlier this week when a judge denied their request for an injunction. And for anyone who’s followed the saga, there were some interesting and amusing tidbits in the judge’s ruling (p 4-5).

The Healy Project’s two “experts” were each judged unqualified to give expert opinions. What I find just as problematic is that they both “rehab old houses for a living.” I have little doubt they do good, honest work. But surely they get paid. Old houses are their livelihood. To paraphrase an old saying, If all you have is a hammer, then every problem is a fixer-upper.

And then there’s the Rehab Addict, Nicole Curtis–hero to local and international house fans alike–who analyzed the neighborhood housing market this way: “We need another apartment building in the Uptown area like we need a hole in the head.” That statement makes more sense when you consider that a reality TV show about apartment buildings sounds pretty unwatchable. I’m sure if her below-market offer on the property had been accepted, 2320 Colfax would have made for wonderful TV.

That’s not to say that any of the above individuals don’t have a genuine love of history, old houses, and apple pie. But we should take their clearly biased perspective, as the judge did in her decision, with a grain of salt. And maybe preservation maximalists can stop being “shocked, shocked” at the sight of money in real estate–at least until they quit their day jobs.

Which brings us to the No New Housing crowd’s cries about the corrupting influence of money and profit in the development process. That’s a reasonable thing to be cognizant of, as long as we’re not throwing around baseless accusations of corruption masquerading as arguments. But profits, in and of themselves, are no reason to oppose development. No house ever built itself. And only Jimmy Carter will build them for free. I’m sure even T.P. Healy cashed a few checks in his day.

There’s money to be made as a real estate developer. But my sleepless nights spent watching Armando Montelongo infomercials have convinced me it may be possible to make money from pre-existing buildings. For example: I pay money every month to a landlord in return for a place to live. Sometimes it can be hard to stop myself from imagining all the creepy, corrupt things that go on with that money once it’s out of my hands (just kidding; I love my landlord).

Speaking of easy money in real estate…

Do you need to replace a historically inaccurate chimney? Want to repair or replace your gutters or porch, or paint a newly replaced surface in your home? The Lowry Hill East Neighborhood Association will pay for half the cost using a pool of $235,000 worth of taxpayer money, and call it a “loan.” But don’t worry, this “loan” is more like a gift. If you manage to stay in the house for 10 years, you never have to pay it back; and there are no maximum income limits to participate. Just make sure you do these home improvement projects (and a long list of others) in a “historically accurate” manner. And don’t get greedy: Jacuzzis are off limits–that would just be unseemly.

So, we’ve got an organization run by property owners, who pay each other with tax dollars to do home improvement projects. I mean, I know I’ve been rough on these guys recently, but I really had no idea. And though it’s all perfectly legal, it’s hard for me to see how funneling free money to its wealthiest residents is good for the neighborhood as a whole.

There’s no doubt that money moves people–and not just developers. As long as we’re examining the financial incentives of the people who think our neighborhoods need more housing, we should also be questioning the financial incentives of homeowners and some of the neighborhood associations they dominate. Are they serving entire neighborhoods, or just helping themselves? It’s property owners–my neighborhood’s top 15%–who benefit from appreciating home values and rising rents that result from restricted supply. It’s the 85% of renters at the bottom who get slammed. When it comes to setting our city’s housing policy, it’s obvious we need a process that extends beyond the very narrow financial interests of many neighborhood organizations.

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5 Responses to Making Money In Real Estate

  1. Eric Anondson
    Eric Anondson June 13, 2014 at 9:14 am #

    Regarding the fund to do home repairs, that money is well spent to stabilize a neighborhood. This neighborhood has long ago passed through a rough stage. It is very hard to make that argument with a straight face now for this neighborhood.

    Full disclosure: when I lived on Hague in Snell-Ham in St. Paul about 15 years ago, there was a neighborhood grant (not even a loan) towards making home repairs. I used it to help pay for replacing the front yard retaining wall and sidewalk, the city inspector called both out as hazards, as well as pay for restoring a driveway that had been buried under the cheap ass collapsing old retaining wall. Creating off-street parking (we were next to O’Gara’s) I’m sure helped, uh, a lot, with the selling price of the house when we had to move.

  2. Cadillac Kolstad June 13, 2014 at 9:38 pm #

    While I agree with Mr. Edwards that there are problems with neighborhood groups and representation, this piece is a bit misleading. Let us consider that Lander got a “loan” of around $10,000,000.00 to build West River Commons. Around 8 million alone was in municipal bonds.

    Last time I checked over 7 million was still owed to the city (taxpayer). This means that Lander is using public debt to run up the price of the house at 2320 Colfax. So Lander’s offer is based on potential profit, and public debt manipulation, not “market rate”.
    Also the only information I had on the offer price was from the city and it appeared that the Curtis offer was actually not low at all.

    How do you figure the homeowners are at the top? It is the owners of large scale rental property who are at the top, many of the renters may also have more take home pay than a homeowner. A homeowner only benefits from the wealth in their home if they sell it.

    There was just a piece on here by C. Conway explaining that the city is going to spend 350,000.00 just to “study” if a bike / walking path would work on 29th street. That is 120,000 more than you are worried about! It seems like grasping at straws to so heavily criticize this minute amount of money to help homeowners.

    Some other developers recently,
    Fine associates got almost $50,000,000.00 in pub financing for their “five 15 on the park”, 260 units.
    Longfellow station got 26,700,000.00 for 180 units
    Greenway heights got over 1,000,000.00 for 42 units
    that was just a few residential projects last year over 77,000,000 in “loans” being used to enrich a few developers ( they take a 7-10% fee in addition to gaining the equity).
    These are the real citizens at the top of the wealth scale skimming millions. Since you contend renters are at the bottom it’s hard to understand the reasoning of renters on here who are advocates for some of the biggest wealthiest landlords.

    Renters get a tax credit too, called the renter credit it usually amounts to about a 2 month per year refund on rent. Or a max of 2,000 per person in 2013. This allows a renter to afford more and the Landlord to charge more! A 100 unit building renting for $1,000 per unit generates $200,000 in tax refunds each year!

    I’m sure there are places where we would find common ground, but this is not one of them. I had to put some of this out there to add perspective.
    -I do not live in the Wedge- So I have no personal interest in this fix up fund.
    Thanks

  3. Peter Erkkila June 14, 2014 at 1:35 pm #

    I think density advocates need to focus less on all the precise ways preservationists are wrong and more on ways to work with developers to get the kind of projects we want. I know most people who think like I do have a hard time convincing themselves that the kind of developments Doran, etc. are building have any sort of aesthetic value, or that they’re providing affordable housing.

    Let’s make our activism about something more meaningful than patting ourselves on the back. The best way to prove the other side wrong isn’t to tell them they’re wrong, it’s to show them we’re right.

  4. Janne Flisrand
    Janne June 15, 2014 at 3:34 pm #

    Peter, what’s your favorite argument to show density advocates are right?

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  1. Sunday Summary | streets.mn - June 16, 2014

    […] for New Urbanism conference in Buffalo, NY (and promises more posts about the conference soon).  Making Money In Real Estate will not tell you how to make any, but does offer some critiques about those who have/do as well […]

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