2505 Napoleon, in March and again in June.
Jean-Paul Villere
In less than six months in this calendar year of 2012, this once bank-owned Uptown duplex sold for 11% over its asking price, got renovated, and then promptly re-sold for well over twice its initial sale from the bank. From an asking price of $168,300 and a sale price of $186,000 in the spring to an asking price of $435,000 and a sale price of $414,000. For the record, I am a licensed agent and investor too but had no involvement whatsoever in facilitating any of these listings or sales; further full disclosure, I did have a client write an offer in the spring, but the bank chose otherwise. Nonetheless I followed the path of this property for a couple reasons, primarily because I live two or so blocks away, and this piece of Napoleon happens to be at the foot of Freret. And if you don’t know what’s happening on Freret these days, you’re probably not reading this either.
So I recently asked my next-door neighbor Sharon Goodson her thoughts on this, shall we say, chain of events, especially in light of the recent hubbub over higher assessments the city over. She replied:
“Our property tax is now two and a half times what it was in 2011, however when I bought my house in 1987 40 percent of the neighborhood was abandoned houses. Higher prices mean higher rent, which equals a better quality of renters and lower crime. Improved property excites future owners to invest and the quality of neighborhood increases. No one wants to be the first to renovate on a block, but if they see renovation activity, it stirs interest. Generally, high investment properties are maintained better over the years to safeguard their investment. Even seeing houses with new porches on them two blocks away energizes me to do improvements on my own house. No one wants to be the ugly house in the neighborhood — weird, OK; run-down, no. We don’t know if the house was occupied before and I assume after the sale that it will be fully occupied. New Orleans is no longer the blight capital of the US and I would like to continue our descent on that list to about 1,000th!”
But then I got to thinking about this specific flip, especially as the bank being the seller. The bank could have made a tidy profit here. And while I understand the bank is not exactly in the real estate business, maybe it should be. I mean if a private investor can come in and double the value of the property and then some — while restoring a blighted property to commerce — why can’t the bank? Answer is: they can. For all intents and purposes the bank can do absolutely everything this private investor did. Only it didn’t, and they won’t. Ultimately the bank operates strictly as the source, leaving the more profitable and albeit riskier role of middle man to private parties. And OK, let it go, the bank does what it does.
(Even if the bank did assume the role of slam dunking a duplex back into commerce to define market value, I highly doubt the proceeds from the sale would be reinvested back into the city or other real estate ventures. Conversely it would likely layer another golden parachute down the road, and no thanks! Enough bailouts and stock-optioned send offs.)
In this case the risk translated to reward, and the flip didn’t flop; the flipper benefited financially and so did we all figuratively. I want my neighborhood to have less blight and more occupancy, and to Sharon’s point we are on our way up and out. You want your ‘hood to do the same, don’t you? Of course you do. And this is how we recover. From Katrina, Isaac, or whomever. One house at a time. Private investment. Public risk. And a roll of the dice on timing.
Jean-Paul Villere is the owner of Villere Realty and Du Mois Gallery on Freret Street and a married father of four girls. In addition to his Wednesday column at UptownMessenger.com, he also shares his family’s adventures sometimes via pedicab or bicycle on Facebook, Twitter, and YouTube.
Additional Expenditures on Other Real Estate Owned (OREO) Property. National banks, under some conditions, may make additional expenditures on OREO property in order to facilitate the disposal of the OREO. Banks cannot make additional expenditures on OREO property for speculative purposes, such as ground-up construction and sale of completed residences in order to achieve greater return. 12 CFR 34.86(a). OCC Interpretive Letter 1129 (February 3, 2011).
Higher rent isn’t actually a good thing for a lot of New Orleanians. A search of padmapper.com for apartments under $1,000/month shows TWO Uptown. Zero Marigny. Zero Bywater. Zero Mid-City. Zero Broadmoor. Zero Riverbend. Obviously zero French Quarter. Someone earning around 35K a year (which is actually a decently high salary in this town) would spend about half of their take-home salary on rent. What happens to the teachers, bartenders/servers, nonprofit workers, administrators, etc? Are service industry workers and lower-middle-class professionals not “high quality” enough renters?
I recently bought my first double, renovated it, and now have my tenant paying most of the note. While you’re young you should live as cheaply as you can (with roommates) and SAVE until you can escape the cycle of paying rent every month (I know it sucks) by buying something needing a little TLC uptown. High demand drives this market and is pushing rents/prices up but investors wouldn’t be interested in the market if this weren’t the case. The benefits (less blight, less crime, construction jobs, etc) outweigh the costs (people getting priced out) for these neighborhoods as a whole IMO. Craigslist is a great source by the way, there were several rents under $1k in my neighborhood near Magazine.
Conversely Cate, if more out of commerce doubles like this were put back it use in theory based upon supply and demand the rents in our market would stabilize or actually lower. The sea of blight in our city is *maybe the biggest reason rents are so high. Want that to change? Change the law. As it stands blight cited properties benefit the delinquent owner almost into infinity. If all of the blighted property were occupied, rents would be lower across the board, no question.
Great article Jean-Paul. As an investor also, it’s great to see the media (at least an alternate media) recognize the benefit of renovating just one house on a blighted block & not be labeled some type of “speculator” or gentrification enabler….as if better housing, less crime, & construction jobs are bad things.
I lived in several apartments in New Orleans, Uptown on Magazine, in the Marigny, and in the Treme. Rents were always under $1000, sometimes significantly so. It’s great to see parts of a neighborhood improving, whether rents increase or crime increases, I’d rather that than the opposite. Try craigslist for cheaper rents, or drive-bys. New Orleans is old school, and the For Rent signs are abundant (and keeps our culture strong in neighborhoods). Great article.
I have no problem with flipping, but flippers are butchering our housing stock. They are doing the latest trends to sell to the out of towners with money and the current renovation trends are incredibly destructive. You can’t undo the things these flippers are doing. It’s cheap to rip irreplaceable plaster out of a 100+ year old home but putting it back it next to impossible. Drywall is not the same by any stretch. When I see the renovation jobs I want to just cry.