Real estate, Community, and Tangible & Intangible Returns
It is not uncommon to hear real estate investors refer to their businesses as “supporting the community.” This statement is highly accurate, given that the U.S. Small Business Administration (SBA) estimates that there are nearly 28 million small businesses in the country and, of that 28 million, roughly 10 percent are classified as real estate-related and employ more than two-thirds of real estate-related employees (more than three million individuals). This estimate should be considered conservative, as it does not even factor in the broad-reaching effects of real estate investing businesses on other sectors in local economies or the estimated thousands of investors who invest passively, anonymously through business entities, or who simply invest on a personal level and are not traceable through the public record.
The ties between the real estate investing community and investors’ broader communities go much deeper than job creation, consumer confidence and spending, or even restoring blighted houses and stagnant communities. Real estate is, at its heart, all about community because the heart of real estate, physical property, is literally the land upon which physical structures sit. Real estate investors work with the literal foundation of every community.
This is likely why real estate investors have such varied and exceptionally impactful ideas when it comes to how they feel that they should personally and professionally develop community in their investments, their local areas, across the industry, and on a national level.
“For me, the goal is not just to run a very successful company, produce homes for families who need them, improve neighborhoods, provide quality investments for my clients, and, during all this, make money. The goal is also to give back to my community both by being a positive impact by educating, creating jobs, and, in the future, creating more homeownership,” said Michael Jordan, founder and CEO of Detroit-based Strategy Properties. “We’re working on a project right now where we are converting part of our company’s new warehouse facilities into teaching facilities so that we can teach people how to do really in-demand, real estate-related work like HVAC, plumbing, electrical, and carpentry, in addition to providing a venue for investing training. We want to have a lasting, ripple effect in southeastern Michigan,” he added.
Jordan admits his training center is a “tall order,” but interestingly, he is far from unique in his drive to better the industry by involving more local people with the investing population. “Investing in your community can be incredibly rewarding,” observed Ben Rao, a serial entrepreneur, professional community-builder, Think Realty coach, and founder of Kanas City-based Bridge Space, a co-working facility and business incubator housed in a rehabbed post office. “No real estate investor will ever tell you we don’t want to make money, but when financial benefits and building up your local community align, it can be a magical opportunity to do something meaningful and give back in a sustainable way,” he explained.
Think Realty Magazine spoke with dozens of real estate investors about the concept of community and how it affects their real estate investing. We identified three primary ways real estate investors are driving community and reaping more than just financial returns:
Effective Community Development Rewards Investors with Higher Returns
As Rao noted, very few real estate investors are not interested in generating (and improving) their financial returns. Frequently, the search for ways to accomplish this goal leads directly to community growth on an impressive scale.
For example, when Bruce McNeilage of Kinloch Partners and Harpeth Development bought an apartment complex in Nashville seven years ago, the property was certainly “on the fringe” of town. “We renamed the complex The Park at Five Points and began thinking about using an adjacent three acres for affordable condo housing called Solo East,” he recalled.
“We wanted to push homeownership,” McNeilage explained, noting the development of both properties spurred additional growth in the area both in terms of retail and residential development. Recently, The Park sold for a record-setting $12.7 million, and about 80 percent of the owners in Solo East are Millennials in their first homes enjoying the benefits of substantial positive equity.
“There is a shortage of high-quality, low-cost housing in Nashville,” McNeilage observed. “We feel that offering that initial access to affordable homeownership in that area helped the neighborhood turn and become the attractive place to live it is today.”
Tom Olson, president of real estate mastermind Good Success and a seasoned real estate investor with experience in turnkey rentals, fix-and-flips, and new construction, has an ambitious goal for his community as well. “I want to flip Gary, Indiana,” he said. “The geographic location is perfect already thanks to all the railroad infrastructure, interstate infrastructure, and proximity to Chicago and Lake Michigan. There is no good reason for this community to be struggling in value the way it has been, and I think part of the answer is to bring in real estate investors who will help improve the state of local properties and eventually change the entire culture of the city.”
Olson will host his inaugural “Community Go-Giver Event” this July in Gary. The event will focus on different ways that real estate investors can contribute to rebuilding communities through different real estate strategies, including fix-and-flip, turnkey and active turnkey rentals, and low-income housing. Each day of the event will also feature a community tour highlighting opportunities in Gary, where Olson describes the investment opportunities as “amazing” if investors could bring in more homeowners and renters who would have pride in their residences and the city itself.
“The timing is perfect for Gary and for investors because there is definitely not a lot of opportunity for investors [in a lot of major metro areas] so they are already coming into the Midwest,” Olson explained. “The city will thrive with increased, responsible, deliberate investor activity because cities really need three things: good schools, safety, and something to do [employment and recreation]. We can do that deliberately and with cognizance in Gary, Indiana, and create better home values, profits for our investors, and a vastly improved community situation at the same time.”
A strong community within a multifamily development can directly affect returns as well. Tammy Phelps-Keglovich, founder of Capital City REIA and the owner of several multifamily developments on the east coast, believes that the “strong bones” of community that make a residence a home are as vital to the success of her real estate investments as the “literal strong bones” that she and her husband, Jim, install when they upgrade and renovate a new acquisition.
"We force appreciation in our properties by putting in the time and capital to make the right kind of improvements to make these properties real homes for our residents, but we also force appreciation by building community within the community,” Phelps-Keglovich explained. The results, she said, are indisputable: longer tenancies, less damage to the property, and improvements that reach outward into the broader community and make the entire area more attractive to potential residents and business owners.
“What you build today affects your tomorrow, particularly in multi-unit investing,” she said. “In this space, building wealth for your future involves repositioning, stabilizing, and building up the community today so that it is a stable part of your future and your residents’ future.”
Linda Liberatore, president of property management service provider Secure Pay One, agreed. “Taking the time to build relationships in the communities where you invest will always pay off in one way or another when it comes to your literal returns,” she said. “Build relationships with neighbors, local business development offices, the school district, and local business leaders. Those strong community relationships help you better serve your tenants directly because you will have a relationship with the community where they live and indirectly because your contributions to the community will improve it.”
Intentional Investing and Outreach Yield a Larger, More Profitable & Productive Industry
Community building is not just about fiscal returns, however. Sometimes, the results are farther reaching. Many real estate investors find that as they evolve in the industry and experience success, they feel a certain sense of responsibility to the industry and to those who are not yet active, intentional investors.
“One of our proudest accomplishments at Renters Warehouse is helping people who were ‘accidental landlords’ after the housing crash realize owning rental property was not a failure, but the key to future financial security,” observed the company’s CEO, Kevin Ortner. Ortner lost his job as a corporate pilot during the Great Recession and relied on his own rental portfolio to support himself and his family. Renters Warehouse spearheads what is probably one of the largest investor outreach advertising campaigns targeting “non-investors” in the industry through its vast radio presence and Ortner’s book, Rent Estate Revolution™.
“From a business perspective, when we promote the idea of intentionally purchasing rental investments, of course we are creating our own clients,” admitted Ortner. “But we also feel really good because we are helping people out of a bad situation with real estate strategies they often had no idea were even available to them. That option to really turn a financial fortune around is what drives me personally forward.”
Philip Viti and Miriam McKinney have a similar drive, albeit for a different population in need of the advantages that come with real estate investing. Their company, This Land, sells vacant, rural land to people across the United States and provides low-cost, low-interest financing options. “We want it to be as easy for someone to purchase a piece of property as it is for them to buy an item off Amazon,” Miriam said.
“We cater to the bookends of investors,” Philip added. “Young, first-time investors, Millennials with student loan debt, anyone trying to prepare financially so that they can get to the next investment. We want people who are first-time savers to have the ability to put their money to work for them in a meaningful, rewarding way, and that also builds up the community of real estate investors out there who will accumulate wealth and hopefully be more active in the future.”
Socially Responsible and Charitable Initiatives Solidify Local Communities and Investors’ Place in Them
As innate entrepreneurs, real estate investors tend to be more likely than most to simply start a new organization to address a need in their communities. Take as evidence the 18 finalists for Think Realty’s 2017 Honors: Those 18 individuals alone either founded or provided key support to more than 22 charitable organizations.
“As a real estate investor, you interact with the community around your investments in very surprising, personal ways,” said Rob Barney, CEO and owner of Texas-based DHLC Investments, a private-money lender, and the founder of associated 501c(3) organization, DHLC Now, which serves active military members, first responders, veterans, and their families. “DHLC Now exists because we saw a need in the community that we felt as real estate investors and real estate professionals, we could address,” Barney explained, noting that many times real estate professionals have insight into these types of projects that a service provider may not offer.
“For example, last year we helped a veteran who was caring for his mother, who was suffering from Alzheimer's, in a home with no hot water for three months because the plumbing companies that he had called to replace the hot water heater told him he would have to bring the entire house up to code in order to have the replacement heater installed,” Barney recalled. “His house was grandfathered, and the water heater was not a big enough replacement to trigger that compliance requirement, but the technicians who bid the job for the veteran either did not know that or didn't care. With the help of our local contacts, we bought him a hot water heater and had it installed in just a few days. That was when I realized what a unique position a charitable organization run by real estate professionals would be in when it came to meeting the needs of a community.”
Chicago-based Rogers Park Builders Group (RPBG) demonstrates this unique and perfect fit as well. RPBG is a group of landlords who have been holding meetings since 1992 and have made it their personal mission to make their neighborhood a safer, better place for both residents and real estate investors. RPBG has partnered with local Sullivan High School for several years, collaborating on projects that saved the school from closing including the construction of a specialized teaching facility, a rehab of marching band equipment, and the establishment of the nonprofit Friends of Sullivan. Through this partnership, the landlords have made meaningful contributions to the community and been a positive force for local education and real estate investor outreach.
Your Community is Bigger Than You Think, and Your Reach is Farther Than You Know
“It is so important for every real estate investor to think carefully about how they can improve the industry and the bigger community because we are a relatable industry with a big perception problem,” said Aaron Norris, vice president of The Norris Group and an experienced expert in community outreach, brand management, and nonprofit fundraising, such as the annual “I Survived Real Estate” event his company hosts to benefit organizations like Susan G. Komen, St. Jude’s Children’s Hospital, and the Make-a-Wish Foundation. “I do it partly because I’m tired of investors being seen as sharks,” he admitted. “When we show up for our communities and our industry, we emerge. People see the beautiful work we do and that we’re very relatable. And, honestly, you never know where your next lead is going to come from, but if you are out in the community doing good things people will find you.”
Mentioned in this article:
Owner, DHLC Investments
Nonprofit: DHLC Now
President, Strategy Properties
President, Secure Pay One
CEO, Kinloch Partners
Co-founder, Harpeth Development
Vice President, The Norris Group
Event: I Survived Real Estate
President, Good Success
Event: Community Go-Giver
CEO, Renters Warehouse
Founder, Capital City REIA
Think Realty Resident Expert
Founder, Bridge Space
Rogers Park Builders Group (RPBG)
Based in Rogers Park, Chicago
Nonprofit: Friends of Sullivan