“When we try to stabilize neighborhoods, rather than being scattered in approach, we try to buy as many properties as possible in a given location and then protect our investment over time.” — Jon Grabowski, president and partner, Precise Associates
When real estate developer Jon Grabowski and financier Gideon Pfeiffer launched Precise Associates, a for-profit, real estate investment firm, in 2007, they set their sights on the rising number of foreclosed properties using a long-term investment model that would send financial returns to investors who were “tired of volatility.” Grabowski had been a market-rate developer for over 10 years, but after the housing crash, at least in Detroit, he needed to reinvent, and began to focus on rehab for lease-purchase. “Our goal is that all of our tenants eventually become homeowners, but right now there is no liquidity” for mortgages in Detroit, he says.
Though the for-sale market is weak in Detroit, rental demand is high, and with a detailed knowledge of the city, Precise is confident they have a sound business model. “We can do a great rehab and pay double-digit returns to ourselves and to our investors. In an investment world with a lot of volatility, good, old-fashioned rental real estate is providing a stable return,” Grabowski says.
With $20 million from mostly local investors in the redevelopment of 600 homes throughout Detroit, Grabowski says a long-haul mentality is essential for getting neighborhoods in Detroit back on their feet. “We genuinely believe in the city’s rebirth. While there are a lot of landlords stopping at tenancy, we care about holding units around schools and in neighborhoods with strong community backing.”
Precise partners with Focus:HOPE, a 44-year-old community-based nonprofit, to provide credit counseling for their lease-purchase tenants. Focus:HOPE also trains construction workers who Precise can hire, “creating a cycle of sustainability,” says Grabowski, who specifically seeks out investments in neighborhoods where Focus:HOPE works. “With real estate, it’s cyclical. Once you tackle all the houses on the block, then you’ve got to move on to beautification, commercial spaces, etc. There’s always something more. Beyond real estate, you’ve got to address community programs, services, amenities, and education. This is why I like investing in a neighborhood with a group like Focus:HOPE. I know in 20 years there will be something else for me to invest in.”
Precise also collaborates with Detroit’s Project 14, a citywide pilot project that gives incentives to police officers to buy homes and live in Detroit through partnership between the city’s department of Housing and Urban Development, the Detroit Land Bank Authority, Bank of America, and other local investors. Grabowski says this type of program contains the long-term visioning on which the Precise model is based.
Project 14 uses NSP funds for acquisition and rehab as well as to help officers with downpayment and closing costs. “We invest in neighborhoods that the city is also investing in with federal dollars,” Grabowski says.
While it’s true NSP presents some funding limitations, Grabowski, seeing how those funds are used, is not critical of the program’s structure. “When it comes to NSP, we understand that profits are limited and that the box is so finely knitted, but we also understand that it’s crafted that way for a reason. Anything those dollars can do to increase the value of the dollars we’re investing is a positive. I’m never going to be critical of federal money being invested in my city.”