Kansas City East Side Land Grab
A month-long Star survey examines how a neglected part of the city has become a hunting ground for real estate speculators and why many black residents feel once again being exploited and left behind.
For years Erin Royals was vaguely aware of the bright red, yellow and white signs that read things like “We buy ugly houses” and “Cash for Homes”.
But the messages hit her quite differently when she started walking her dog on the East Side of Kansas City in the summer of 2020.
“Once I started to notice the signs, I started to see them everywhere,” she said. “And it really caught me off guard.”
Royals, a geography doctoral student, sees the cash for houses industry as a predatory movement that targets poorer communities, robbing homeowners of their greatest wealth.
“Someone has convinced them that this is the only way to deal with debt or other financial problems,” she said. “It’s like taking advantage of vulnerable people and not giving them the full range of information and options. “
To retaliate, she’s gathered these panels, filled her trunk, and amassed a collection of hundreds of panels which she stores in her parents’ suburban home.
Royals, along with Jordan Ayala, a doctoral student at the University of Missouri-Kansas City, also mapped the location of the signs throughout the city. The researchers were not surprised to find that most were concentrated in neighborhoods east of Troost Avenue, the historic dividing line between race and wealth in the city.
“Things don’t just happen,” Royals said. “Our lived experiences are not random. These signs are not placed at random. They are not along Southwest Boulevard. We don’t see them on Ward Parkway.
Investors who display these signs or send postcards or text messages are not breaking any laws. They try to find increasingly valuable real estate without going through the traditional housing market. Although they are active in almost all parts of the metro area, these investors are particularly aggressive on the East Side of Kansas City, where a disproportionate number of homes are owned by investors and not by residents.
Selling to a “We Buy Houses” group can allow sellers to get money for a house in a matter of days. This may be desirable for a house with a lot of problems or for a distant seller who may have inherited a house and does not intend to live in it someday.
But the prices by design are significantly lower than what a seller would receive on the open market. And the researchers say this has major implications for communities of color, which collectively have far less wealth than their white counterparts.
Some investors are looking to buy homes that they can rent. Others want to take an obsolete house and flip it for a quick profit.
Others, like Damon Caldwell, are not looking to buy at all.
Caldwell is what is called a wholesaler, an intermediary in the world of real estate speculation. As a wholesaler, he buys and sells contracts, not the houses themselves.
This is how it works: he has to buy at a discount and then, as quickly as possible, resell that contract at a profit to another speculator. The speculator can then choose to repair and flip that property again for another profit, or rent it out as a longer term investment.
To find potential real estate deals, Caldwell slowly scours block after block in Kansas City looking for homes that are shabby, empty, or burdened with tax privileges that make them vulnerable for sale on the courthouse steps.
He’s helped by a $ 50 per month app that pulls public data about every property he passes, showing its owner, listing data, and sales data from the Multiple Listing Service, the database used to manage. traditional real estate transactions.
Caldwell will knock on the doors of occupied houses that will pique his interest. He will also look for adult children or even grandchildren who might have ended up in an empty house in the old neighborhood where they no longer live.
“I don’t consider it to be beneficial at all,” said Caldwell, 33. “I see myself as a problem solver. If I sell it to someone who will improve this house, it will help this neighborhood. I have been in houses where the house next door is an eyesore. Nobody wants to watch this all the time.
In 2017, Caldwell put his first home under contract for a sale price of $ 21,000. He then quickly sold the house contract to Vineyard Estates for $ 23,000, pocketing the $ 2,000 difference for himself.
Kim Tucker has stated that there are bad actors and righteous operators in real estate investing, just like in any industry. She is an investor, real estate agent and executive director of the Mid-America Association of Real Estate Investors.
She said investors have an array of tools to find prospects. There are cold calls and unsolicited postcards. They can buy listings of homes at risk of foreclosure, those with property violations, or those with absent owners.
Tucker said investors traditionally seek to spend no more than 70% of what they think a home will be worth. This figure includes the cost of buying and rehabilitating a property and typically gives the buyer a 30% cushion for insurance, taxes, commissions, and ultimately profits.
“Now it’s down to 20%. A lot of investors are working on a very low margin right now, ”Tucker said.
BEHIND OUR REPORTING
How we made this story
In order to provide a full account of the changes that have taken place in Kansas City’s East Side neighborhoods, The Star launched a multi-month investigation that included a review of the majority of the 208,000 plots that make up the Kansas City real estate landscape. .
The project started with a central question: who owns the East Side?
This question sent a team of reporters into the depths of city, county and state documents, multiple datasets, mapping, research reports and, of course, neighborhoods and life. people.
On the East Side and elsewhere, The Star has conducted over 150 interviews with people whom we are grateful for having been given the time and openness and without whose help and frankness this series would not be. Not possible.
They include landlords, tenants, realtors, landlords, investors, vacationers, wholesalers, contractors, developers, housing advocates, East Side neighborhood groups, politicians, government officials and sociologists. . Experts on breed and development have also been helpful in institutions such as University of Alabama, Rutgers University, Tulane University, Bard College, Princeton University, University of Missouri -Kansas City, Mid-America Regional Council and Legal Aid of Western Missouri. . Read more by clicking on the arrow at the top right.
How did the journalists analyze the property data?
Data mining began with information compiled by the city and made public on the OpenDataKC site. The data allowed The Star to identify by name and / or company the largest real estate owners in the city and to break this list down by the six municipal districts of the city.
Journalists then created physical maps showing the name and city, state and country of each owner of thousands of plots in several neighborhoods on the east and west sides of Troost.
The property, sale and purchase prices were verified through Jackson County’s online real estate and tax records. Agents representing LLCs (limited liability companies) have been identified by the Office of the Secretary of State for Missouri. The eviction cases have been verified by the Jackson County Circuit Court.
US Census data was used to plot changes in rental rates and the racial makeup of the area over time.
OpenDataKC was used to identify parcels owned by the Kansas City Land Bank. Other documents related to the inner workings of the organization were obtained through inquiries from Missouri Sunshine Law.
On the East Side of Kansas City, many investors are looking to buy turnkey properties to turn them into rentals or renovators that they can renovate and lease. There are also palms that only own the house during renovations. More often than not, these investors repair houses that are in poor condition and turn them over to larger corporations that own hundreds or thousands of rental properties.
“For the most part, if someone flips a home on the East Side, they’re primarily giving it to an out-of-state or out-of-country investor,” she said. “At one point our biggest buyers were from Australia. “
While Caldwell doesn’t view his work as predatory, he understands the wider implications.
Raised on the East Side, he sees homeownership as a path to generational wealth. His father and mother-in-law lived in their Vineyard Estates home throughout his childhood.
His advice is unwavering.
“Don’t sell it,” he said of their house. “When their time comes, of course, that will be up to us. And when our hour comes, it will be left to our children. It’s something that we can build on. We leave a legacy for our children.