Improving Flint from afar

The Charles W. Nash House, owned and cared for by Flint Expatriate Rich Bennett, who points out it was pink when he bought it, so he doesn't want any complaints from historic preservationists. (This photo and many other great shots of Carriage Town by sarrazak6881.)

Yesterday's post on out-of-town property owners in Flint looked at some of the negative aspects of absentee investors. It prompted Flint Expatriate Sarah Swart to comment: "I'm wondering if any of these out-of-towners (which, remember, are only one of numerous OOT options, including bank ownership) are actually expats. Personally, I am tempted by the $900 home in Carriage Town and by one on Forest Hill Ave listed for $4,000. I'm not a real estate investor, I'm pro-local and -civic action, and I'm very tempted. "

You're not alone, Sarah. I've been tempted as well. And in the past week I've had the chance to reconnect with another Flintoid who has already taken the plunge. Rich Bennett went to St. Mary's School and graduated from Powers in 1983, so he has deep roots in Flint. He's now a real estate agent in San Francisco and the proud owner of the Charles W. Nash House in Carriage Town, a fine example of Queen Anne-style architecture that's designated as a Michigan Historic Site. He also owns two other Flint properties.

In typical Flint fashion, Rich and I met at a bar, The Latin Amercan Club, to catch up. When we were done discussing the relative merits of the paddle versus the ruler from the nuns at St. Mary's, we talked about Flint real estate. Unlike some absentee owners, he's restoring his properties and working to improve his neighborhood away from home. His sister is local, so she helps him with the projects, and he's hooked into the network of local preservationists, contractors and urban homesteaders. He makes regular trips back to Flint and hopes to eventually rent some of the properties. But right now the goal is improving them.

"It's seems like Flint's leaders have always been looking for one big project to fix everything — Autoworld, Water Street Pavilion, Windmill Place," he said. "Flint is going to improve with a lot of small efforts all added together."

Rich's effort is buying a few houses, fixing them up, and making them an asset, rather than a detriment, to the neighborhood. The fact he's in San Francisco doesn't matter much at this point. He's improving Flint from afar. It's an approach more absentee owners should take to heart. It's also the approach many local property owners could embrace. After all, the majority of Flint's slumlords are probably local.

Land grab

Is this house at 3902 Keyes a good investment? At $899 a naive investor in Tucson might think so.

If you examine the Flint real estate market, you might be surprised by what you find. As of today, there are more than 1,200 homes for sale in Flint, along with dozens of commercial properties. With the well-documented socio-economic problems of the Vehicle City, the question is who would ever buy one of them?

Apparently, many will be snapped up by out-of-town investors.

“In five years, the number of residential and commercial properties owned by out-of-towners has increased by about 17,000 parcels — out of only about 60,000 parcels in the entire city,” writes Joe Lawlor of The Flint Journal in an excellent story on Flint’s real estate situation. “Some properties have become rentals; many have been abandoned, foreclosed and turned over to banks; and others have been sold to out-of-towners or amassed by the government.”

That’s right, out-of-town investors are buying Flint real estate. I know what you might be thinking. Who are these lunatics? We have to find them and get them the help they need, right?

But after interviewing two local real estate agents, who asked not to be named, I’ve discovered it’s not as crazy an idea as it might seem. Okay, it is crazy, but with a lot of luck and a taste for adventure, it’s possible to make money at it. Or at least that’s what the out-of-towners think.

Obviously, the rock-bottom price of property in Flint gets the attention of investors. But another surprising factor makes it irresistible to many of them — rental prices in Flint are reasonably high. Take a look at Craigslist and you’ll find two-bedroom rentals going from $300 to $700 a month. And with the spate of foreclosures, the demand for rentals is climbing, which might bump up prices even more, despite the city’s steadily declining population,” according to one real estate agent.

Let’s use an extremely optimistic hypothetical example to illustrate how this might work.

An investor buys a house in Flint for $2,000 and puts $3,000 into fixing it up for rental. He rents it for $500 a month. That’s $6,000 in pre-tax revenue after one year, enough to cover the purchase and repair cost. At the end of the second year, he’s made $6,000 in pre-tax profit.

Now imagine if the investor owned 20 houses. Suddenly, he’s the Donald Trump of Flint — hopefully with better hair — pulling down $120,000 in rental income each year.

And don’t forget he gets to depreciate the value of the houses each year, which cuts down on taxes.

Now how would this scenario be even rosier for the investor? Well, if he was willing to be a slumlord and make almost no improvements to the property, he wouldn’t have to worry about repair costs too much. In fact, he could let the house “depreciate” over the years to the point that it’s uninhabitable and needs to be torn down. (This also eliminates the possibility of capital gains taxes if the property ever appreciated in value and he sold it.) He milks the house for all it’s worth and he’s left paying taxes on a vacant lot. And that’s often less than $20/year.

The problem is that even scrupulous, well-intentioned investors often don’t realize what it means to own property in Flint. Many times they’ve never even been to the city or seen the property. They’re not aware that renters might have drug problems. Or guns. Or both. Or, they may be struggling to survive and simply can’t pay rent sometimes. The investor just sees the cost of the house and the typical rents and gets excited. Plus, if the deal goes bad, a well-off investor doesn’t really care if he loses $10,000 on a house or two. It’s a write-off.

That’s why, according to a local realtor, investors sometimes buy several houses at once, or even entire blocks, sight unseen.

And what happens when the investment doesn’t pan out the way the investor in Phoenix or Chicago or Fenton, or Los Angeles planned? You guessed it. Many times the properties are left to rot, and the city, along with the neighbors, are left to deal with the fallout:

“David Hurley, a lifelong east Flint resident, mows his own lawn and the lawns of about a dozen properties he doesn't own in his neighborhood,” Lawlor writes.

“He mows lawns and plants gardens on property owned by banks, out-of-state owners and the Genesee County Land Bank.

“Nobody pays him to do it.

“He does it because he said if he didn't the neighborhood would be overtaken by weeds.

“He looks around his neighborhood and sees increasing numbers of rental homes, weed-strewn empty lots and shells of houses with doors broken off, the copper stripped and the siding stolen.

“The neighborhood is being hollowed out, house by house.

"’People from out-of-state are buying properties for $5,000, $7,000, for investment reasons. They've never even seen them,’ said Hurley, while driving through the east side.

“’These people moved away and left their house. There's rats in that garage. The Land Bank owns that one. These houses burned. That one exploded,’ Hurley said, pointing to each property from his van. "It's disgusting.’”

Click here for audio of Joe Lawlor interviewing David Hurley about his neighborhood.