Neighbors Got Together to Buy Vacant Buildings. Now, Renting to Bakers and Brewers

http://www.yesmagazine.org/new-economy/neighbors-got-together-buy-vacant-buildings-renting-bike-shop-brewer

by sebkomianos • 11 years ago

178 49 11 years ago

Brilliant! This is how you fight urban blight. Bottom up solutions may not scale up well, but they are efficient and the only sort that makes sense at this level.

akgerber• 11 years ago

These sort of bottom-up solutions are enabled when the right conditions come from the top, too, as discussed in the 'Policy to help investment co-ops spread' section.

taurath• 11 years ago

Sometimes the goal is to scale at exactly the size of the group doing it, and stay there. If everything is mass market then there's no individualism or culture.

bswen• 11 years ago

Indeed. But these kinds of tactics can scale by being replicated by other, similarly small, local groups.

wozniacki• 11 years ago

  If everything is mass market then there's no individualism
  or culture.

Would you expand on this? I'm interested in knowing how you mean this.

I ask in the context of the larger debate of who deems a commercial establishment - a place of commerce - culturally relevant and which ones culturally distracting.

Does the neighborhood take a poll on a NextDoor bulletin board as to whether let a Wine bar set up shop, down the street but not a Gastropub, because you know it attracts a culturally misfitting crowd? So the majority wins? As simple as that?

Then what's stopping a billionaire buying up some four blocks and instilling his own brand of culture, you know cigar shops, vintage firearms shops and a boutique golf shop, through a bunch of proxies and trusts?

These are very valid questions that need answering if we want to meaningfully advance the debate of who gets to manufacture "individualism" and what is vended as "culture".

cbd1984• 11 years ago

If everything is mass market then there's no individualism or culture.

This is just a total misunderstanding of what culture is.

eldavido4• 11 years ago

What about it doesn't "scale up well" and why is this a concern?

I've been thinking about creating a tech platform to facilitate coinvestment. I have a brother who lives in Houston and we often talk about buying a rental property together, I'd like a way to track that.

Just the mechanical process of processing the payments and doing accounting for shared stuff like this can be a real pain. But I think it's a really good thing when neighbors get together and buy stuff like local buildings; rental real estate ownership (especially commercial) has been seen as something only the rich do for a long time in US, and I have no idea why that's the case.

TTPrograms• 11 years ago

I'm under the impression that one of the primary challenges with coinvesting is valuating time or effort spent on the investment, especially in the case of real estate where one person might act as the landlord and/or perform repairs. At least, this seems harder compared to the effort of maintaining an excel spreadsheet with the appropriate divisions of cost and revenue.

brudgers• 11 years ago

Non-profit redevelopment corporations have long been a tool for urban redevelopment. Often they are public-private partnerships, but often they are independent.

jubjub• 11 years ago

These businesses are not non-profits. That's a common misconception about cooperatives.

ChuckMcM3• 11 years ago

I think this is really awesome. At the same time it illustrates the serious impact that losing 'home town banks' has had on a lot of places.

eldavido4• 11 years ago

If banks are just capital aggregators, do you think another party could play that role in the future? Like a mini-family office where 2-3 families get together, put in 10-20k each to get enough equity, and invest in a portfolio of assets?

Or am I just living in a bubble where people aren't in massive consumer debt and have disposable income?

ChuckMcM3• 11 years ago

Capital aggregation isn't the only role of the bank but it is an essential one. And certainly groups of people can provide that same service, at some point though it might seem simpler to simply be a bank[1] :-) but putting that aside it is almost exactly the VC model.

[1] I know that sounds ridiculous, because being a bank is anything but simple, but back in the 90's I watched some investment "clubs" become large enough to attract the attention of the SEC which then required a bunch of legal work and various other financial regulation compliance issues until it seemed like they had morphed into banks.

drpgq• 11 years ago

You can do things other than just invest in regular stocks and mutual funds with your RRSP? I've got to look into this.

khuey• 11 years ago

In the US equivalent, the IRA, you have to be very careful with this. You're not allowed to e.g. buy a blighted property with your IRA, fix it up with your labor/materials purchased with money from outside the IRA, and then sell and accrue the gains in the IRA. If you were it would effectively allow you to circumvent the contribution limits.

remarkEon2• 11 years ago

I grew up in Minneapolis and went to high school in downtown right off St. Anthony. I haven't lived there since 2006, but have been peripherally aware of the "revival" going on in Minneapolis and how it's been just a little bit different than other types of urban gentrification you see in other cities (like Seattle, where I'm living now). Minneapolis has always been a "friendly" city, so to me it's no surprise that something like this has popped up. This seems to be an investment instance where incentives are aligned in the right ways - community buy-in is necessary for this to work.

The homeowners who are members know that the healthier the commercial corridor is, the more their homes are worth.

Indeed, and I hope this continues. I spent a lot of my childhood driving to rural Minnesota, Iowa, and South Dakota and doing those drives now can be depressing. The failure of community banking has left the towns dotting the 212 between Minneapolis and Watertown destitute. Curious if there's any way to adapt this model to rural areas that are faced with things like the forced-consolidation of school districts, among other issues.

aaron6952• 11 years ago

Although trolling the second comment in the article I think said a lot

"TL;DR: White folks stay winning."

This is not a sustainable model and I really don't get why people think because a place once had people it always should have people.

Some people fear change I guess, things should stay the same as it has always been within their life span, this realy isn't aimed at the poor who can't afford to move.

remarkEon2• 11 years ago

I think this comment is ill-conceived. There is no reason this model is exclusive to whites. Northeast Minneapolis in particular is considerably more racially integrated than other satellite urban areas. Here's a great visualization of this fact [1]. If you take a look, you'll notice that there are areas of Minneapolis that are considerably less racially integrated than others. In those cases, again, I do not see a reason why this model is exclusive to whites.

[1] http://demographics.coopercenter.org/DotMap/index.html

aaron6952• 11 years ago

It's more around first world problems. This article is a rich person problem. Only they are so arrogant they think the suburb should fit them. Poor people just struggle.

The white bit is purely about dumb rich white people thinking the world is about them because their hundreds of thousands dollar morgage weighs them down.

The two billion on 2 dollars per day are mostly not white

laumars• 11 years ago

Regenerating existing areas makes a considerable more sense than abandoning and moving to a new plot, where you'll be faced with all of the same issues minus the existing infrastructure to utilize.

GigabyteCoin4• 11 years ago

I suppose if the buildings every go up for sale, this would be a possibility.

In my hometown, approximately 50% of the retail space in our downtown has been vacant and listed "For lease" for I'd say about the past 2 years now.

The owners are very wealthy, continually raise rental prices, eventually driving everybody out.

The problem is, they never intend to sell.

I witnessed an old bank building sit vacant for literally 20 years before they found a new tenant who was willing to renovate and start paying. Somebody was paying the property taxes on it the entire time, and they weren't even actively marketing it's lease as much as they could have been.

Another old store went under about 2 years ago, and it has been empty ever since with a for-lease sign on it. Nobody has entertained the new lease, but the owners refuse to lower the price or sell the property.

In fact, I have never in the life of me seen a for sale sign on any of the downtown retail properties. It just doesn't happen.

Old money can be one hell of a burden on old communities, it would seem.

x0x0• 11 years ago

If you called with a serious offer, do you think you would be turned down?

Though I guess stuff like this happens even in sf. Que Tal -- a coffee shop in mission -- got kicked out by their landlord massively increasing rent in August 13. I walked past their old location a month ago and it was still empty, and it didn't look like there was construction going on. So the landlord has eaten 17+ months of rent so far.

seabee• 11 years ago

Seems like potential gains aren't as motivating as actual costs.

GigabyteCoin4• 11 years ago

In the case of the beautiful old bank building that sat vacant for 20 years. There wasn't even a number to call.

Everybody just walked past it for decades saying "I wonder what if anything they'll ever do with that place?".

I'm assuming you had to know the "right people" to even get an appointment to purchase or lease, but I'm not sure why.

stickfigure2• 11 years ago

Perhaps property taxes in this area are not high enough? There needs to be more than just 'opportunity cost' for squatting on valuable space.

Shivetya• 11 years ago

No. No. No.

The power of government should never be used to force people from their property. Eminent domain is already horribly abused with seizure laws no person's property is safe. Why do others become so draconian when its other people's stuff? It is easy being generous when its not your pocket that is being emptied.

yitchelle• 11 years ago

I think this problem is present in most large, well to do cities. The Guardian ran a similar story a couple of months bank.

http://www.theguardian.com/society/2014/jan/31/inside-london...

Steltek• 11 years ago

No. London is suffering from foreign investors buying freshly listed properties solely in order to squat on them. Currently, the value is pretty much guaranteed to rise so they're actually fairly good investments for the buyers.

I think the more typical downtown vacancy problem is better characterized by 'Someone' in the comment above.

eli_gottlieb• 11 years ago

And this is why property tax should be charged as a percentage of sale price when selling and a percentage of asked rental price when rented.

nosuchthing• 11 years ago

on property tax & speculative hording: http://www.gamasutra.com/blogs/RaminShokrizade/20130405/1899...

Someone• 11 years ago

Deosnt have to be old money. Investors can get stuck in a weird catch-22, too.

For example, suppose you have buildings valued at 10 million, 8 million in mortgages, and 2 million in the bank. That looks like a healthy company. Now, a tenant leaves. If you lower the rent, you have to lower the value of the building in your books and, possibly, for other buildings in the neighborhood.

Before you know it, you have buildings valued at 6 million, 8 million in mortgages, and 2 million in the bank. That's close to bankruptcy.

Another approach is to guess that the lack of demand at the asked price is temporary and sit it out. That may cost you a few hundred k in lost rents a year, but keeps your balance sheet healthy for at least a few years. Problem, of course, is that your pockets may not be deep enough to outlast the bust period.

Is that denying reality? You only know after a few years. If the market rebounded soon, it was a good business move. If it doesn't, you are on a slow trajectory to nowhere.

eldavido4• 11 years ago

"Looks like a healthy company" to who? Any businessperson worth their salt will look at operating cashflow, current/quick ratios, and P&L/income statement.

It's interesting, I think there's a lot of psychological parallels between the Japanese "lost decade" and these investors in the US. In both cases, large nonperforming assets (loans, or buildings) were held for a long time because the owners didn't want to admit defeat by selling at a big markdown -- in the case of the banks, due to capital requirements where a significant remarking of their assets might cause regulatory non-compliance.

Valuing things is hard.

Neighbors Got Together to Buy Vacant Buildings. Now, Renting to Bakers and Brewers

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