The Beauty of Regentrification

Obviously, most of us get into real estate investing with an eye to creating wealth and achieving work life balance for ourselves. Real estate investing can, however, bring even more inspiring and emotional satisfaction. Minimally, the types of projects we are involved with always include some level of value added investing. Taking a property in its current potentially run down state and making it a beautiful home for a family.

Take that up a notch to participating in the regentrification of entire neighbourhoods. Regentrification is really about going into run-down and dilapidated communities and turning them into safe, secure and valuable properties. From a real estate investment perspective the approach we take is to purchase dilapidated/run-down properties that are one or two streets off of neighbourhoods that are higher class.

The lower class properties afford opportunities to purchase at much lower costs. Then we engage our typical approach to add value through simple renovations to complete reconstruction of the property. Then effectively what happens is we borrow from the value of the higher class neighbourhood and sell or rent the property for just slightly less than the value in the neighbouring properties.

Over the course of a relatively short period of time, we can rinse and repeat that process along the same couple of streets. Eventually, the overall value of the properties on that once run-down neighbourhood begins to rise. As the property values rise, so to the economic viability and safety of the neighbourhood goes up.

In the time that we’ve been investing in Philadelphia we have had lots of first hand experience in regentrifying neighbourhoods and have experienced the beauty of building new and improved communities. I remember my first trip to Philly and particularly to the neighbourhoods we were looking to invest in. I was, frankly, shocked by what I saw: boarded up windows and doors, roofs caving in, yards filled with tires and garbage. I had never seen anything like it back home in Canada.

But, we were convinced by the process and we invested. Over the next few years, every time we’d go back and tour the neighbourhoods we saw tremendous change. Three years later the neighbourhood was transformed. I remember seeing young mothers walking down the street pushing their babies in expensive strollers. I remember meeting pub and restaurant owners, who also lived in the community talking about the renewed sense of pride people had in their neighbourhood.

What really stuck out to me was a conversation we had with a woman who owned a little pub. After a long day of work, we stopped here for a bite to eat and an ice cold beer. The owner came over and sat down with us for a few minutes. She told that she had owned the pub for several years, but had not invested in it because the neighbourhood economy was simply not viable for her business, nor did she feel particularly safe.

Fast forward three years and the pub owner told us that she watched carefully as the community was transforming from a virtual slum to a vibrant and happening place to live. I remember vividly when she told me that, unlike three years prior, she now had no concerns letting female patrons leave the pub by themselves.

I was, and continue to be, awestruck by the power of community regentrification. I have to say that the talk with the pub owner not only was a powerful demonstration of how real estate investing can build beautiful new neighbourhoods, but in brought home to me how I could be part of the process. I may not live there, but I can tell you there is a tremendous sense of pride when I do visit these communities knowing that I’ve been a part of a process of making something beautiful and economically viable.

David Capra

The Wealthy Lawyer