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The frustration of trying to invest in my hometown

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Re: The frustration of trying to invest in my hometown

#61

Post by Traster »

macspoofing wrote: post #51
Traster wrote: post #38

Earlier quoted context omitted.

If I say you have to be 5'9 to get a loan, I'm not discriminating based on gender. It's just a total coincidence that more than 50% of men qualify and less than 10% of women qualify.

Every policy you can create will have differential impact on any group you create. The question is, was the policy created with the intent of racism. And this is for policies in the abstract. Debt is an incredibly dangerous tool. It is not charity to give someone a loan they cannot afford - I've personally experienced it and I've personally seen it destroy lives. When I see someone get denied for a loan or a mortgage…

No, the question is absolutely not whether ther policy was created with the intent of racism, because we don't live in a world where racism is defined as a guy in a pointy white hat who also happens to be the bank manager stringing black men up for cat-calling his daughter.

Every policy has a differential impact, that doesn't mean we chose not to address them when we see them.

Re: The frustration of trying to invest in my hometown

#62

Post by reportgunner »

b112 wrote: post #7

This could be a chicken and egg problem, too. Banks lend on statistics, just as insurance companies have rates based upon the same. And insurance companies, for the most part, can assign rates based upon average accident rates, for identifiable traits. Like one's sex. Or where they live (a common way to get statistics without 'race/colour'). So what do I mean by the chicken and the egg, here? Well, imagine that black…

Well why don't black landowners simply not go bankrupt and change the statistic over the years ? Why don't black landowners support each other to make it easier for them to get a fiscal injection when needed ?

> He had enough cash to buy eight buildings, all around 100 years old, in his majority black neighbourhood of Ensley, but he needed a banking loan to redevelop them. He thought it would be just a formality.

Why did he not buy 4 building instead not needing the loan ? Something is fishy here.

Re: The frustration of trying to invest in my hometown

#63

Post by aliante »

etchalon wrote: post #59
aliante wrote: post #56

Earlier quoted context omitted.

Check out the area where he wants the bank to “invest.” 608 19th street Ensley. Look on Google Streetview and Google Earth. Roofs have collapsed. Half the windows around there are smashed. A few large holes in walls. What would you value buildings in that area at?

Set that aside. Imagine instead that he has found undervalued property in an area with low-labor costs and high potential demand. It’s exactly the type of investment opportunity banks and financiers should be looking for. It’s literally how our housing system gentrifies. He didn’t ask the banks to buy the properties. He was seeking an LOC with a personal guarantee and the buildings as collateral.

> high potential demand.

That would require growth. Birmingham is not growing.

> the buildings as collateral.

Except the buildings are not worth much of anything. I may as well offer my shoe as collateral.

Re: The frustration of trying to invest in my hometown

#64

Post by DoofusOfDeath »

chii wrote: post #26
b112 wrote: post #7

This could be a chicken and egg problem, too. Banks lend on statistics, just as insurance companies have rates based upon the same. And insurance companies, for the most part, can assign rates based upon average accident rates, for identifiable traits. Like one's sex. Or where they live (a common way to get statistics without 'race/colour'). So what do I mean by the chicken and the egg, here? Well, imagine that black…

> imagine that black landowners go bankrupt more often. And sadly, this could be because black landowners go bankrupt more often! But to fix this is "simple" - lend to those higher risk businesses at a higher rate. If those businesses are actually _not_ in reality more likely to fail, then the lender makes more money. As lenders are able to make more money, there should be more competition to lend to those risky-seem…

If Rice's risk/reward assessment is correct, it seems strange to not have even one lender offer a loan that aligns with his analysis.

I have no clue about how prevalent racism is in the lending institutions that serve that geography. But I'd expect at least one of them to have looked at this carefully, in order to maximize the value of their portfolios.

Re: The frustration of trying to invest in my hometown

#65

Post by nicoburns »

ethagknight wrote: post #55

I recently led an $80mm mixed use investment in a 10 derelict properties in an offbeat part of Memphis next to a few large government housing projects. Some takeaways reading the article. Banks are not the problem; banks are just doing their jobs by trying to make securable loans. Appraisals aren’t the problem; appraisers are hired and paid to be non-creative and non-biased they assign a value to property. If a group…

You say banks are just doing their job. But you also admit that they're short sighted. Doesn't that suggeat that they're not fulfilling the role that we need them to fulfil in society. I don't want to live in a society where you can only take on a project like this if you are wealthy or have a wealthy backer. Do you?

Re: The frustration of trying to invest in my hometown

#66

Post by reportgunner »

gwd wrote: post #31
macspoofing wrote: post #25

Earlier quoted context omitted.

There is no 'chicken and egg' problem. Banks don't use race as criteria for loans, just as auto insurance companies don't use race as criteria for setting rates. I also find perspectives like yours very perplexing. Debt is not charity. It is not charitable to provide debt to someone who cannot afford it. Not for the debtor, nor the lender. I've seen people suffer for years drowning in debt they could not afford. I've…

> Banks don't use race as criteria for loans, just as auto insurance companies don't use race as criteria for setting rates. If this article is correct, then this claim is wrong. Banks may not directly use race as a criteria, but the claim is that they use race as a criteria for property value , and then use property value as a criteria for loans: > Five of his properties were in a decent state of repair and some had…

> Counting a building with active tenants paying rent as being valued at $0 is ridiculous.

No it's not. If they live without running water, no toilet or heating with a leaky roof the tennants don't magically add value to the building.

Re: The frustration of trying to invest in my hometown

#67

Post by etchalon »

aliante wrote: post #63
etchalon wrote: post #59

Earlier quoted context omitted.

Set that aside. Imagine instead that he has found undervalued property in an area with low-labor costs and high potential demand. It’s exactly the type of investment opportunity banks and financiers should be looking for. It’s literally how our housing system gentrifies. He didn’t ask the banks to buy the properties. He was seeking an LOC with a personal guarantee and the buildings as collateral.

> high potential demand. That would require growth. Birmingham is not growing. > the buildings as collateral. Except the buildings are not worth much of anything. I may as well offer my shoe as collateral.

Why would that require growth?

An underserved market exists on its own. If I find 100 customers willing to pay X for a service that no one is offering, I do not need that 100 number to grow. I just need to make that existing base profitable.

Second, garbage buildings as collateral combined with a personal guarantee is the least uncommon thing in real estate investment you’ll find.

Re: The frustration of trying to invest in my hometown

#68

Post by luckylion »

Traster wrote: post #61
macspoofing wrote: post #51

Earlier quoted context omitted.

Every policy you can create will have differential impact on any group you create. The question is, was the policy created with the intent of racism. And this is for policies in the abstract. Debt is an incredibly dangerous tool. It is not charity to give someone a loan they cannot afford - I've personally experienced it and I've personally seen it destroy lives. When I see someone get denied for a loan or a mortgage…

No, the question is absolutely not whether ther policy was created with the intent of racism, because we don't live in a world where racism is defined as a guy in a pointy white hat who also happens to be the bank manager stringing black men up for cat-calling his daughter. Every policy has a differential impact, that doesn't mean we chose not to address them when we see them.

In that line of thinking ("banks are racist"), what's the exaplantion for why there's nobody disrupting the market, providing loans (at a premium) to minority investors and making off with large profits?

Re: The frustration of trying to invest in my hometown

#69

Post by raziel2p »

tomcam wrote: post #44

Sadly, these buildings just aren’t good investments, and he’s not a good investor. Buildings that old are subject to all kinds of safety regulations, and Birmingham is not an easy town to work through that kind of thing. No one in the city is going to stick their neck out to cut through decades of regulations only to lose their job when there’s a fire or collapse. Any new owner will be tied up in red tape and rehab r…

How are you able to tell the state of the buildings in such details from the article alone? Unless I'm missing something, Rice pretty much addresses your comment in the article:

"It's one thing to do this with one building," he says, "if it is small and falling apart. It's another thing to do it with eight buildings with sitting tenants."

Re: The frustration of trying to invest in my hometown

#70

Post by DoofusOfDeath »

JshWright wrote: post #40
jaclaz wrote: post #22

Earlier quoted context omitted.

Yep. The point is - as I see it - a little different, the valuation is lower (or in this specific case next to nothing) because the bank does not want to invest in a black neighborhood (racism) or because the bank has historical data saying that black neighborhoods (in general or that particular one) have lower value (pragmatism)?

You see how both of those are actually "racism", right?

> You see how both of those are actually "racism", right?

I suspect you and GP are using subtly different definitions of "racism".

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