KC neighborhoods’ latest scourge: a “bulk home buyer” called Go Invest Wisely
There’s a house on the East Side of Kansas City, Missouri, with bullet holes in the windows and gang graffiti on the front door.
Few readers will be shocked by this news. What’s unusual about this particular battle-scarred residence, which sits near East 33rd Street and Garfield, is that someone wanted to buy it.
Sixteen months ago, the Bank of New York sold the house for $6,000. The buyer was Go Invest Wisely, a corporation based in North Ogden, Utah, of all places.
Property records indicate that Go Invest Wisely began buying property in Kansas City in the spring of 2008. The company owns close to 60 houses in the urban core, and many of them look as uninhabitable as the place on Garfield.
A hole in the porch of an empty Go Invest Wisely house on East 67th Terrace serves as a trash can for the Wild Irish Rose bottles emptied by meandering tipplers. The front lawn of a house — a shack, really — on East 54th Street is full of shoulder-high weeds and strewn with computer monitors and a soiled mattress.
A Go Invest Wisely house on Olive got a visit from the city’s Dangerous Buildings and Vacant Property Operations Division in February. Several months later, a window on the second floor remains open to the elements.
Karen Porter lives next door to a house on Olive that Go Invest Wisely bought and sold earlier this year. Porter says the house became vacant two years ago; the only maintenance it gets is when a city mowing crew shows up.
Porter’s home is surrounded by houses with plywood for doors and windows. “It’s not a lot of people that even live on the block anymore,” she says.
So why did Go Invest Wisely want in?
The company appears to be a player in the “bulk foreclosure” trade, the latest innovation from a housing industry that brought us the subprime mortgage and other economy-wrecking ideas.
Last year, I described the circumstances by which Deutsche Bank, a $46 billion global investment bank, came to acquire a bunch of foreclosed homes in Kansas City (“Deutsche Bags,” August 21, 2008). Deutsche Bank and other investment houses served as the trustees on securities backed by subprime loans. The big banks got stuck with the houses when, in 2006, borrowers began to default on their “liar loans” and other idiotic debt contraptions.
A German investment bank has no interest in tending to properties in Kansas City’s urban core. Enter the bulk foreclosure buyer.
Go Invest Wisely’s business model appears to consist of buying houses for four digits in the hopes it can find another investor or a tenant willing to enter a lease-purchase arrangement.
I took a look at eight Go Invest Wisely homes in Kansas City. A few have signs advertising the terms of the lease purchase and a toll-free number to call. A sign outside the 54th Street hovel proposed terms of $500 down and $300 a month.
The company says it’s doing a good thing. “This great new program allows those who typically couldn’t be approved for a home to become a home owner,” says the company’s Web site.
Go Invest Wisely seems to focus on depressed areas of the country, such as Youngstown, Ohio, and Flint, Michigan. Brad Hess, the company’s president, has said Go Invest Wisely’s efforts help cities cope with the high number of foreclosures. “Part of it is getting people into the home, and a big part is making it affordable,” Hess told the St. Louis Post-Dispatch earlier this year. (I left messages with Hess’ secretary, asking for an interview.)
Critics of lease-purchase agreements say the deals leave tenants vulnerable to abuse. An unscrupulous landlord may look for a reason to evict a renter who has put down money and made improvements.
But the rent-to-own component is not what frustrates neighborhood groups. Instead, they complain about Go Invest Wisely’s piss-poor attempts at property management.
Last month, Legal Aid of Western Missouri sent Hess a three-page letter outlining the concerns of seven inner-city neighborhood groups. The “vast majority” of Go Invest Wisely’s properties are vacant and in poor condition, the letter notes. Echoing Karen Porter, the letter states that Go Invest Wisely properties typically receive care only after the city hires a contractor to address a codes complaint.
To drive home the point, Legal Aid attached a spreadsheet and photographs. “The decay, the vandalism, and destruction that these properties suffer when they sit vacant and unmaintained for such a significant period of time is devastating to any neighborhood,” Legal Aid staff attorneys Gillian Ruddy and Jeff Williams wrote.
Go Invest Wisely officials have tried to suggest they were unaware that the long-distance properties they purchased were in such poor condition. Tony Larson, a Go Invest Wisely sales manager, told a business newspaper in Youngstown that the company “screwed up” when it entered Ohio. “We didn’t know what we were getting into,” he said.
Really? You didn’t anticipate that a $6,000 home in the Rust Belt may need more than an enthusiastic seller and a little tuck-pointing?
Dealing with people this stupid or dishonest is never easy.
On September 17, Hess spoke with Legal Aid attorneys and neighborhood leaders by phone. During the teleconference, Hess apparently indicated that Go Invest Wisely was open to selling its properties to a local investor.
This is not happening. Jackson County tax records indicate that Go Invest Wisely retains ownership of most of the homes it bought. Few families have moved into the houses that Go Invest Wisely has managed to sell. Last month, the county recorded Go Invest Wisely’s sale of six houses to a corporation, Mohawk Diversified, based in Virginia.
Then there are the houses that remain in Go Invest Wisely’s inventory. In the Legal Aid letter, Hess was asked to fix all the nuisance and property maintenance violations by November 13.
The date passed, but the houses look the same.
It’s dispiriting to see dangerous-building notices yellowing on their doors. Such notices threaten $1,000 fines, but that’s obviously not enough to deter Utah investors from buying homes that they are not able to maintain or have no interest in keeping up.
Codes inspectors and Legal Aid can only do so much. What the city needs is someone in power — a council member, a judge, a prosecutor — to decide to make life hell for house-flipping profiteers.
In Cleveland, a municipal housing court judge, Raymond L. Pianka, fined Washington Mutual $100,000 for a vacant property. An appeals court overruled Pianka. Still, according to a New York Times Magazine story in March, Cleveland’s municipal housing court was able to collect $1.6 million in fines from defendants who didn’t show up for trials.
Go Invest Wisely came into Kansas City to make money. Taking away what the company holds most dear seems like a good way to get its attention.
