Brandon Irving and Christopher Williams are standing in front of an unpretentious, stone-clad twin on East Germantown’s Rittenhouse Street and thinking about the future.
They bought the house in April for $96,000 and are now having it fixed, with hopes to see it on the market by October. Along with another house in the neighborhood, this is their first attempt at real estate development — although they’ve been talking about getting into the profession since they days at Central High School a decade ago.
Their hope is that this house, on this quiet street, will be beginning of a business that will revitalize dozens more like it in this often-neglected corner of the city.
“We wanted to redevelop the neighborhoods that we know and grew up in,” said Williams. “We noticed how other houses in the neighborhood were being [redeveloped]. In some cases, you would see people coming in and not really doing the best jobs they could.”
But the two men, both of whom are in their early 30s, didn’t have much luck finding the funding to pursue their real estate dreams through traditional financial institutions. That’s where Jumpstart Germantown comes in.
The development mentoring program, created by Northwest Philadelphia-based Ken Weinstein, is two years old. The program includes training workshops and a mentorship program. But this month it hit $5 million in loans made to aspiring developers, like Williams and Irving, a significant milestone in the program’s development.
“Jumpstart Germantown has really exceeded our expectations,” said Weinstein. “I had no idea that two years in we would be announcing we’d already lent out this much capital. A lot of our mentees have already left their fulltime jobs to go into real estate development full time.”
At any given time, the program has about $2 million lent out to novice developers. Over the last two years, that’s added up to over $5 million overall with $1.4 million already paid back into the line of credit from JPMorgan Chase to fuel further lending to new developers. They usually offer 85 percent loan-to-cost ratio, which is considerably higher than what banks offer.
The program has closed on 48 loans to date, for 40 developers, and the loans range from between $45,000 to $500,000 per project. (193 would-be developers have graduated from Jumpstart’s training program, some of whom have gone on to invest in properties without help from the loan program.) There have been no defaults.
Almost all of the money goes towards the purchase and rehabilitation of single family homes like the one on Rittenhouse Street, along with some three-to-four bedroom units and one mixed-use property that includes coffee shop.
Williams and Irving’s two projects, and their reasons for pursuing them, are of a piece with Weinstein’s vision for Jumpstart Germantown. The idea is to stave off blight by incentivizing development in neighborhoods where the real estate market is lukewarm. It is also meant to ensure that the housing stock is rehabilitated by responsible developers.
“I saw their mission statement and their financing options and they seemed like a good fit for what we’ve been trying to do,” said Williams, who learned about the program from a Philadelphia Daily News article he read on a lunch break from his day job.
“We were trying to figure out how to go about our first project, especially the financial aspects,” said Williams. “I’m just grateful I happened to come across that newspaper.”
The neighborhood definitely needs developers like Williams and Irving, who are willing to invest in an area that could use a splash of the capital that is washing over neighborhoods like Point Breeze and Fishtown.
The census tract that contains the young developers’ two properties suffers from a 13.6 percent vacancy rate among its housing units, which is actually low in comparison with adjacent neighborhoods. The tracts to the east, south, and west are all more than 20 percent vacant.
Weinstein and his firm, Philly Office Retail, have long been unusual for their focus on Germantown, a once-wealthy corner of the city that suffered terribly from systemic racial discrimination in housing and lending markets. The Jumpstart program is designed to incentivize further reinvestment thereby restricting its generosity to the neighborhood and those that surround it, like West Oak Lane and parts of North Philadelphia.
“Germantown is what they now call a ‘middle neighborhood,’ which is a neighborhood that is challenged but stable,” said Weinstein. “When there are two or three vacant properties on a block a lot of banks don’t want to lend money to buy and rehab those properties. Programs like ours need to step in and loan people money so they can get started.”
It may seem counterintuitive for Weinstein to incentivize new developers to enter a market where he is so heavily invested. But in the real estate business, the more interest there is in an area, the more money there is to be made there. And in an area like Germantown, troubled by blight and vacancy, there’s more that enough property to go around.
Jumpstart reports that interest has been sprinkled throughout the geographic area. But particular areas of focus include the neighborhoods around the Wayne Junction SEPTA station, areas close to La Salle University, and many sections west of Germantown Avenue.
In the last half year, the Jumpstart model also spread to Kensington and Mt. Airy. Weinstein says he’s heard from interested parties in Newark and Salt Lake City who are looking to implement similar programs in their cities.
It doesn’t take much to get Irving and Williams to start enthusing about Jumpstart. The program offered them loans with very generous interest rates and stuck with them while they put in offers and applications for 20 or so properties before they landed one.
When they tried to save money on general contractors by doing the manual labor themselves — an experiment that ended in frustration and splinters — Jumpstart helped steer them towards reputable contractors.
“I dreaded every day of the demo, coming here after work, dragging our friends here on the weekends,” recalls Irving. “I can’t thank them enough because it was 18-square feet of rubble, dust, dirt, and newspapers from the 1920s. A lot of nails to the foot. Never, never, never again.”
They recall how Weinstein himself methodically walked through their prospective houses, offering them tips and observations. Williams says the veteran developer responds to their emails as late as midnight or 1:00 AM.
Without the help, they say they wouldn’t be standing on Rittenhouse Street, watching contractors work on a house that they can call their own — even after they’ve sold it.
“Every day the rest of my life when I’m in this neighborhood, I’m going to drive down this street,” says Irving. “Even if it’s out of the way, because that’s where it all started. I’m going to teach my daughter that me and her godfather made a lot of mistakes, but this is where it all started.”