Shrinking City of Youngstown OH… an opportunity for making money?

The Wall Street Journal recently printed an article (entiled “Ohio Town Plans for Population Decline“) about Youngstown, OH, located about an hour away from Pittsburgh. Facing the reality of substantial population decline, loss of its tax base, and declining economy, this old steel city has decided to shrink:

Faced with the devastation of Oak Hill and other depressed pockets of the city, Youngstown is trying an unusual approach: Allow such areas to keep emptying out and, in some cases, become almost rural. Unused streets and alleys eventually could be torn up and planted over, the city says. Abandoned buildings could be razed, leading to the creation of larger home lots with plenty of green space, and new parks. …
Another goal is to wipe away the most obvious blight. The city estimates it will take about four years to bulldoze the biggest eyesores, including about 1,000 abandoned homes and several hundred old stores, schools and other structures.

Driving around the outskirts of Pittsburgh I have seen some blighted neighborhoods, left in the wake of the steel industry’s decline. But to raze large neighborhoods and shrink a city seems pretty extreme. Still, someone must be making money during this process. With the declining economy, population flight, house prices must be extremely low, and there must be lots of tax liens on abandoned or foreclosed properties. As can be seen on this map, a large number of houses have unpaid taxes and are subpar. Is it possible to make money in real estate despite all those drawbacks? Is the government paying landowners their land? Seems like speculators would want to flock there to buy cheap homes and wait to be bought out by the government if it were indeed the case.

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3 thoughts on “Shrinking City of Youngstown OH… an opportunity for making money?

  1. David May 6, 2007 / 1:04 pm

    So, did some more research and found the following at http://www.atfs.com/news.htm:

    April 30, 2004 – ATF Creates Investment Opportunity for Mahoning Investors

    In April of 2004, American Tax Funding purchased the vast majority of Mahoning County’s (Youngstown, Ohio) delinquent taxes through a negotiated purchase. Read about the details of the sale. Our purchase has created an opportunity where in many cases you can purchase a lien

    FOR LESS THAN WHAT IS OWED!

    So you not only earn 18% on the face of the certificate, and can potentially realize additional yield if the lien pays off.

    View the Mahoning listings. Read more about the Mahoning County relationship.

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  2. David May 6, 2007 / 1:09 pm

    Also of interest, from http://www.atfs.com/governments_mahoning.htm:

    Mahoning County technically sold virtually their entire portfolio of over $40 million in delinquent tax liens to ATF, who became servicer for the entire pool of liens. As part of our partnership agreement with Mahoning County, ATF has an arrangement that the County can direct ATF to transfer ownership of tax certificates on vacant and low value/abandoned parcels to rehabilitation investors, property owners and other municipal redevelopment authorities at a nominal cost to the investor / re-development agent (generally the cost of foreclosure).

    The program resulted in a significant, immediate short term cash infusion, as well as long term benefits to the County, including:
    • Elimination of huge accumulation of unproductive delinquent liens from the County books. This caused a substantial improvement of the County′s delinquency ratios that may allow for an upgrade of the County’s bond rating.
    • The transfer of hundreds of properties to investors, municipal redevelopment authorities and property owners at a nominal cost to the investors. This transfer helps in the rehabilitation of these parcels and, over time, will convert what were previously non-productive, in many cases, blighted parcels to productive performing assets.

    Like

  3. Matt Huberty August 30, 2007 / 3:50 pm

    Hi David,

    Nice website David! I really like the idea– it looks great, seems like a great way to network, and is a great talking piece– interviews, etc.
    I was doing some research on what stocks to buy and short for our game project. Here’s my two cents on Youngstown. As a native of Youngstown and someone who spent several more years there in the real estate industry– I’d say– stay away unless you really know what you’re doing. I did well originating loans there up until about 2004, but saw a decline much sooner in real estate than in the rest of the country. You could probably make money there, but you could probably make a lot more in California or Florida. Most young people want to leave the area– and most do after high school or college.
    What’s really unfortunate about the city is that in the past 8 years when we had the real estate boom, Youngstown saw very little price appreciation in most areas, esp. in comparison to other parts of the state and other areas of the country. As far as purchasing tax liens on vacant homes– whom are you going to collect from? Most people there have little money. I’d stay away… good luck in game.

    Like

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