Maximizing ROI in Disadvantaged Areas of Durham

By Ken Gasch

Organizations or individuals that have invested in properties in transitional neighborhoods are aware of the element of risk associated with these investments and have likely factored that risk into their return on investment (ROI) model. However, these investors may not be aware that opportunities exist to further enhance that ROI and recoup an outsize return. Similarly, organizations or individuals that hold properties that have declined in value may not be aware that they can affect positive change in the neighborhood surrounding their properties and thereby improve their investment position.

The most salient element contributing to investment risk in transitional neighborhoods is crime. It is no secret that businesses are driven from crime-ridden neighborhoods, taking jobs and opportunities with them. Potential investors, would-be employers and prospective employees are scared away. Existing owners are deterred from making improvements on their property, and as property values decline, owners divest their holdings.

Investors who are working to maximize ROI in these areas find that criminal activity is seemingly uncontrollable. Investors, residents and landlords blame police for not responding to their concerns. Police blame landlords who they feel may harbor criminals just to “make a buck.” The community lays blame on the police, landlords, and our elected officials. This “blame game” gets in the way of working toward a solution. Everyone involved, with the exception of the criminal enterprises, want the exact same outcome – they want the narcotics trade, property crimes, violent crimes, and prostitution to end.

Most crime is generated by a small number of troubled properties that serve as “magnets” for criminals and their illegal activity in a neighborhood. Drug addicts who frequent these locations often steal, rob and take part in prostitution to finance their habit. Violent crime occurs when drug dealers engage in territorial disputes.

In order to fully maximize ROI, investors must be able to erase these crime magnets. Many methods exist to remove the criminal element. Most techniques are costly and time intensive. However, there are methods that are rapid, inexpensive and effective. When these methods complement what is already being done, dramatic and quick results will ensue.

Some of the techniques that have proven successful in Durham include:

Identifying the magnet properties by surveying residents and by obtaining police reports
Reaching out to landlords of properties where police drug raids have resulted in arrests to make sure the landlords understand how to use civil courts to evict the tenants because of criminal activity
Helping landlords plug the “hole” left by a vacating tenant with a stable, contributing tenant to ensure that another criminal enterprise does not move in
Bringing in community-minded investors to purchase and then rehab problem properties to be resold as owner occupied dwellings or be maintained as stable rental properties.
Working to clean up the most blighted properties in the target area by

Helping the property owner understand the real value in keeping property up
Involving city/county code enforcement officials
Finding community-minded investors for problem properties

Building relationships with existing neighborhood leaders to obtain their valuable perspective on the work that needs to be done and, when invited to do so, assisting neighborhood leaders with efforts to reduce crime
Ensuring that zoning violations are addressed by city/county planning, e.g., automotive repair shops that are storing junked vehicles on the premises
Working with area business owners to

Curb the sale of items that contribute to neighborhood instability, e.g., items that can be fashioned into drug paraphernalia or alcoholic beverages preferred by our city’s vagrants
Employ North Carolina trespassing laws to target individuals who engage in the sale of narcotics or prostitution

Transforming the “magnet” properties so that they will contribute to the health of the community and serve as a symbol to the neighborhood of the power of positive change

When carefully and systematically implemented and combined with other strategies unique to the location of the investor’s property, the above methods will improve an area rapidly. Coupling these efforts with media publicity results is a steep escalation of the desirability of the area, thereby increasing the value of the property and, subsequently, the investor’s ROI.