Before I purchased the Graff House I had to evaluate my options before proceeding with the project. As I stated in the previous post New Albany has a problem with rental properties, and one of the negative effects from having so many sub-par rental properties is overall lower than average property value. Overall lower property values are one element that creates the New Albany dilemma. In New Albany, like so many other mid-west cities, this concentration of rental properties can be found in older historic neighborhoods. The irony is that the historic properties that make New Albany unique are the very properties that contribute to the lower overall property values, which lead to economic depressed areas. The overall lower property values create a market ceiling that inhibits property investors, like me, who want to restore older historic homes and bring them back to their former glory. I have seen many investors who have good intentions invest well above the neighborhood’s max appraised value only to discover that when it’s time to sale the house banks aren't willing to lend enough money to prospective buyers who would be willing to pay the amount that the investor needs to turn a profit.
Another negative effect from the lower property values in historic neighborhoods are from property investors who don't consider the value of historic properties. These investors only look at the property as a structure and to them the cheapest route to return the house to livable condition is a good enough philosophy. Typically, what happens to the house is it's stripped of all its historic characteristics both inside and outside of the house.
From the narrow point of view this would seem better for the investor because it would appear that the investor is maximizing profitably, but in the long run as more houses in historic neighborhoods lose their historic characteristics the neighborhood then loses its uniqueness. It is this unique character of older neighborhoods that give their appeal to certain market of people that a city and its residents want to attract as prospective neighbors. Once an older house is stripped of its historic elements it becomes a house that has to compete with a wider range of newer houses that are more functional in design.
Historic home enthusiasts have to be honest with their selves, and acknowledge that older homes have certain drawbacks compared to newer homes. As an example it is harder to heat and cool older homes unless they have gone through very expensive upgrades. Construction methods have improved over the years: mechanical, electrical, plumbing, foundations, insulation, windows, roofs, etc. are all constructed better than they were 60 years ago. If it wasn't for the slow growth wood used in older homes most would all on the ground by now. Slow growth wood's ability to resist rot, insects, and it's structural strength when compared to new growth wood is one of the few positives an older home has over a newer home. As older homes lose their historic characteristics, and therefore their value, the property investor looking of a quick profit, drives him or herself out of business in that neighborhood. As an example I recall reading in the local paper of a property investor complaining about the trouble he had with a property he owned along 8th Street that he couldn’t put money into without a loss, nor could he find a buyer in the shape it was in, nor could he find a renter to rent it. He was trapped by the New Albany dilemma.
The inverse of the narrow point of view is when historic neighborhoods are properly invested into. If most of their historic characteristics are maintained or restored the historic neighborhoods uniqueness is strengthened creating an investment product that can compete with newer homes. This is true from the simple understanding of supply economics. Older historic homes that are well maintained are limited in supply and demand is typically strong for such properties, so prices tend to be higher. As home values and prices within the neighborhood increase investors and homeowners benefit from the increased property value. Allowing both investor and private property owner to invest more into their asset then the otherwise could. Understanding the relationship of appraised value versus ability to sell is vital at being successful for future projects and identifying this relationship is identifying one element that creates the New Albany dilemma.
Understanding this dilemma, I approached the Graff House with the intention of doing the exterior work, which requires more specialized equipment and working with heights that many people aren't willing to deal with. The interior had some water damage from the leaky roof and hidden gutter that was going to need attention but the rest of the interior was in decent enough shape that I felt it would pass the critiques of prospective buyers and at the same time allow me to keep the overall asking price within limits of neighborhood appraisal value. At least that was the plan before I made my purchase offer.
