Lucky Realty Homes Inc., a Baltimore-based firm known for buying blighted houses, refitting them and selling them to low- and moderate-income buyers, is opening offices for the first time outside Maryland with hopes of nationwide expansion.
Arnold Politzer, president of the company, has targeted Dallas to be the first city for its expansion. The firm will open its Dallas office later this month and plans to add two more in the Dallas/Fort Worth area by year's end.
"We never set out to be as large a company as we are. It happened," Politzer said. "To do what we do effectively, we had to grow, and it was only when we reached the realization that we've grown so big here in Baltimore, that we can't support ourselves the way we'd like without growing larger."
As his company begins to blitz the Dallas market with the same kind of radio and television advertising that target Baltimore sellers and buyers, Politzer, 49, will also be looking for other national markets for expansion. At the top of his list are areas such as San Bernardino and Riverside, Calif.; St. Petersburg, Fla.; and Indianapolis.
Politzer said he hopes the company is coast to coast in the next three years. "We need to sell an awful lot of houses to make financial sense out of [our company] infrastructure," he said. "So even though we sell a lot of houses in Baltimore, we found that we could take what we do here and effectively use the infrastructure that we have here to expand our market share without radically increasing our fixed expenses."
Lucky Realty, which has 18 full-time employees and 100 workers on independent contracts, will not relocate personnel to Dallas. The first office will open with "several people under contract," and the firm plans to hire a project manager to oversee the operation by the time the third office opens, Politzer said.
"We really want to do this as lean and mean as possible," he said. "The key to this is to extend what we do in Baltimore, not to replicate what we do down there. The technology is so advanced now, and that's what we are capitalizing on now. A lot of the [office] functions that we perform here would be absolutely no different whether we are selling houses in Baltimore or Fairbanks, Alaska."
The company typically sells between 130 to 150 homes a year, mostly to buyers who hadn't considered purchasing because of their financial situation, Politzer said. But he has been successful in this market by seeking out distressed properties, primarily in stable city neighborhoods, buying them with cash and updating them to give a feeling of "an almost new home."
Politzer, an attorney, then deals with low-income buyers, who may have poor credit, works with them and their creditors to improve their credit records and helps them through the mortgage process.
"We don't care really too much about the condition of the property, because we literally gut it and redo it anyway. We do very much care about where the property is located because ultimately our buyers care very much where it is located," Politzer said. "Our focus is really on maintaining and stabilizing // neighborhoods as opposed to saving neighborhoods that are already gone. And because of that, the number of appropriate properties is certainly more limited."
Politzer, who started Lucky Realty in 1969, said he first thought of expanding several years ago but didn't act until September, when he started a pilot program in San Diego, where he lives part time and owns high-income rental property.
He employed the same marketing techniques, though he modified them to address the Hispanic population, and learned that the Lucky Realty buyer in San Diego was no different from the one in Baltimore. He purchased, remodeled and sold six homes in a three-month period, which proved to him that "this would work on a national basis," he said.
Politzer then acted on a suggestion from a former Fannie Mae official who worked in the Dallas area to take his formula to the Southwest, where home prices are typically much lower than Baltimore or California.
His exploratory trip to Dallas astonished him, he said. He saw "safe, clean large areas" where low- and middle-income people lived, and found that a typical $120,000 Randallstown detached home could be bought in Dallas for $50,000 to $60,000.
Politzer said his company buys Baltimore homes ranging from $70,000 to about $120,000. "The purchase price down there [in Texas] is going to be 10 to 15 percent lower than what we pay here, which is not all that significant," he said. "The significant difference is the construction, because there are no basements in Texas. So the property we work on sits on a slab.
"Our typical construction prices on a [Baltimore] rowhouse are in excess of $30,000. Our construction price on an individual home is in excess of $40,000. Since the homes that we would work on in Dallas are all individual, instead of a $40,000 price we are probably looking at about $25,000. So the savings is in the construction.
Large pool of buyers
"And the key to it is, the wages of our clientele really don't differ that much from area to area; minimum wage is the same across the country. If you have a similar income, and yet the ability to buy a house for literally half of what it would cost here, you have a much larger pool of potential buyers and effectively an easier task."
Politzer, who does not know of a similar for-profit operation such as his, would like to be to real estate what Home Depot is to hardware.
"I look at Home Depot as kind of a role model for us," he said. "Why has nobody duplicated what we have done? I guess because there is not a model out there to show that this has been done successfully. I guess we have to be the first."
Pub Date: 6/07/98