The house on the 4900 block of Rubicam Street in Germantown was in bad shape. The walls and ceiling had outdated popcorn spackling. A rotten beam on the top floor stretched across half the roof. In front, the roots of a large tree had broken through a pipe leading to the main sewage line, causing a blockage.
Then along came Gabriella Somoza.
A rookie developer in Germantown, Somoza oversaw a complete renovation of the house, which had been broken up into several apartments. She added laundry units to the apartments, splashed fresh paint on the walls, and installed new electrical, heating, ventilation, air conditioning and plumbing. But she kept some things the same — the wood floors and charming wooden accents.
“Sometimes it’s not best to just gut everything,” Somoza explained. “If there is beauty in the property, you want to just brush it up because those types of accents can make the apartments feel like ‘home’ to the tenant.”
Somoza, who successfully rented the renovated house to two families this past March, is the first graduate of Jumpstart Germantown, which aims to revitalize Germantown’s sturdy but often neglected housing stock by providing loans and special mentoring to local residents who want to become developers. The program not only helps stabilize neighborhoods but also helps residents launch new careers.
“Real estate is a risky investment. Having an adviser is great for people who do not have a lot of experience,” Somoza said.
Ken Weinstein developed the program
The adviser is veteran developer and Mt. Airy businessman Ken Weinstein, who hatched the idea of Jumpstart Germantown last April. Where others saw only a neighborhood plagued by absentee landlords, rundown properties and urban plight, Weinstein saw potential.
“Germantown is a community in which I have been investing for the past 27 years,” said Weinstein, who is president of Philly Office Retail, a real estate company in Mt. Airy. “Germantown is a community that can improve without being gentrified by experiencing slow growth through scattered-site rehab. It has great architecture and a low price point for those who want to develop, but don’t have much capital to get started.”
The low price point is key to Weinstein, and Germantown’s low price point is favorable compared to other neighborhoods in Philadelphia. According to Weinstein, a recent study found that the average sale price of a Germantown property is $95,000 compared to most high demand neighborhoods, which have average sale prices of $250,000-$450,000.
Weinstein and his group understand the difficulty of being a real estate developer in Philadelphia without a stable financial backing. So Jumpstart Germantown has a developers’ network, which allocates the sharing of resources that include tenants, contractors, vendors and potential properties. All of the developers and resources can then focus on Germantown and work together to be more productive and profitable.
“I started this program … in response to growing demand by developer wanna bees to learn the development process so they can get started with renovating residential properties,” Weinstein explained. “At the time, I was overwhelmed with requests from individuals who wanted to help revitalize their community and improve their family’s financial future.”
Higher rehab costs
However, Weinstein noted that Germantown properties, such as the one on Rubicam Street, are more expensive to rehab because of years of deferred maintenance and the number of twin and single houses, which are more difficult to rehab.
Jumpstart Germantown has a couple of unique features — its mentoring program and its loan program. Somoza went through the first of the programs in 2015 and received and paid off the first loan, which she used for the Rubicam Street project. “My application was responded to immediately,” Somoza said. “Ken is very quick to come out and evaluate if a project could work.”
Prior to the mentoring program, Weinstein said he would meet with people for about an hour to explain how he got started and how he has progressed. After he was ambushed with a lot of meeting requests by developers who wanted to be involved, he understood he had to do something more efficient. As a result, he designed a nine-hour mentoring session that better prepares young developers for getting into the development business.
The mentoring program occurs four times a year, and mentees are connected with mentors to help guide them along their first development project.
“To date, we have received 202 applications for our mentoring program and more than 300 experienced and less experienced community developers have asked to be involved in our developers’ network,” Weinstein said. “The last developers’ network meeting attracted nearly 150 people who gathered to network over dinner and hear from former Philadelphia Eagles defensive end Brandon Bair, one of my mentees over the past two years, who spoke about ‘Tackling Your Fears.’”
Last year, the mentorship program graduated 75 mentees. This year, Weinstein said he plans to graduate 80 more mentees from this program. “Last Wednesday, we finished our first 9 hour session with 20 participants. We plan to hold three more sessions in 2016 and will keep going until everyone who applied has been accommodated.”
The Jumpstart Germantown loan program has closed 15 loans in 2015, and Weinstein hopes to close 30 more loans this year.
Traditional financing difficult
“These loans, for the most part, are offered to newbie developers who otherwise cannot obtain financing from a traditional bank,” he said. “They are acquisition and construction loans, which banks don’t like to offer. Banks typically don’t offer financing to inexperienced developers. If Jumpstart Germantown developers can get a couple project[s] under their belt, they can then obtain financing outside the Jumpstart Germantown loan program.”
Somoza said her project on Rubicam Street took about four or five months, but that could be higher or lower depending on how much work has to be done on a particular property. “We had a few issues with contractors not performing and delaying the schedule,” she said. “This is a common occurrence, so when you find a good set of contractors, hold onto them!”
Somoza has since launched her own real estate firm, S7 Real Estate, and she credits Weinstein and the program for her success. “It was very helpful to have a network of contractors… Ken is doing something great,” she said.
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