Ep 13: REI MBA - Redevelopment Authority: “Houses Have a Purpose, Just Like People”
On this episode, Kelly McEllroy from the Allentown Redevelopment Authority, joins us for an interview. "Houses need a purpose, just like people."
Kelly has been in the real estate industry since 1999. She started with her new construction Real Estate License at Traditions of America. After working several years for New Construction projects, she ventured into the resale market. She worked for ERA Rudy Amelio and Century 21 Pinnacle. Her main concentrations were in Foreclosures, Property Management and Resale transactions.
Kelly recently joined the Allentown Redevelopment Authority as the Assistant Director, where she works with grant funding and involved with the government processes involved with redevelopment.
One of the main things she has learned over the years is that houses need purpose, just like people; if they lose their purpose they start falling apart and it is costly to bring them back to life. This is especially true with Foreclosure’s and Blight properties. As with any transaction, being involved and invested from start to finish produces the best results. She loves seeing construction from start to finish and ending with a family falling in love with their new home.
You can reach Kelly through the Allentown Redevelopment Authority website at: https://www.allentownredevelopment.com/
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Interview Transcripts
Jeremy Moyer: Hello ladies and gentlemen to Real Estate Investor MBA for another exciting interview that we have lined up for you today. My name is Jeremy Moyer and I am one of the hosts for the program and I'm flying solo today. My co-host, Tejas Gosai, was not able to make it. Please check out our website RealEstateInvestorMBA.com. We are also available on iTunes, Stitcher, Spotify, Google Podcast, TuneIN and iHeartRadio. Please subscribe and download all the past episodes to listen to them. A lot of great content has been shared by prior guests. And if you think that we're providing value, please give us a 5-star review and leave us some feedback. In doing so more people will be able to find us and listen to the insight from our interviewed guests. Now for the show today, I'm excited to announce our guest Kelly McEllroy. Kelly has been in the real estate industry since 1999. She started with new construction at Traditions of America. After working several years for new construction, she ventured into the resale market. Her main concentrations were in foreclosures, property management and retail transactions. Kelly recently joined the Allentown Redevelopment Authority as the Assistant Director, where she was able to work with grant funding and learn more about the government processes involved with redevelopment. One of the main things that she has learned over the years is that houses need a purpose just like people. If they lose their purpose, they start falling apart and it is costly to bring them back to life. This is especially true with foreclosures and blight properties. As with any transaction be involved and invested from start to finish, produces the best results. She loves seeing construction from start to finish and ending with a family falling in love with their new home. Kelly - I want to thank you for your time today and joining with us.
Kelly McEllroy: Thank you for having me. I'm very excited.
Jeremy Moyer: I'm excited too as well. Can you briefly talk about how you came to the Lehigh Valley area and why real estate? What intrigued you to enter this industry initially in 1999?
Kelly McEllroy: Well, I actually started in 1999. There was...I was looking for a job and there was an ad in the paper for just some clerical work with Traditions of America. And when I started there I got very involved with real estate and I just kind of liked how you know people would come into the model homes and then they would just fall in love with them and the houses sold very very quickly. And you know, just like I said from being from the start to the finish, involved in the process, you know, it's just....it's very exciting. You know, the houses kind of speak to people and you know, they kind of find a house that they love and they want to have memories in it. And you know, it's just...it was it was a great thing. So I always just kind of loved being involved in real estate.
Jeremy Moyer: Absolutely. I love the...you gave me a little bio to read in the beginning that houses have a purpose just like people. I loved reading that because, I've bought a few homes, you know throughout my lifetime so far, to live in. And you kind of get, you're right. You get that feeling, you just know...this is, this is the one.
Kelly McEllroy: They have energy. They almost kind of speak to us; not that they really do but they have an energy and you just walk into the house and you're like this is...this is my house. So it's just really nice when you have that feeling and you can really obtain the property and it and it helps fulfill your family memories.
Jeremy Moyer: Absolutely. I love that. That's perfect. I just want to jump into your work at the Redevelopment Authority. Can you explain the blight property process for our listeners if they're not aware of what it is?
Kelly McEllroy: Sure. So can I explain kind of what the Redevelopment Authority does and then we can get into what process?
Jeremy Moyer: Yeah.
Kelly McEllroy: So we really are, you know, we're a separate entity from the city but we work very closely with the city as a useful tool. We actually have two ways to perform. So we have the ability to kind of help the city redevelop areas that are in need of redevelopment. With anything, you know, the world is constantly changing so, you know, they're maybe an area that you know needs, you know, some attention needs some, you know redevelopment with the growing population, just needs some updating with what it currently has. But we also have the ability to take properties through the eminent domain process. So that is for properties that are you know dilapidated. They have to be actually certified "blighted". They have to meet 1 of the 12 criteria of blight. And there is a law that we actually have to follow. It's with the Urban Redevelopment Law and it's '1712'. So there's 12 criteria of blight. And so that is how the property starts the blight process. So the blight process, because we work hand-in-hand with the city, the city actually will notify the owner of a property that has a blight issue. And then they notify the property owner that it meets one or more of the blight criteria. After that, there is a meeting that they set up with the Blight Property Review Committee and also the Allentown Planning Commission, that they bring in front of those...the properties in front of those both boards. And then what happens is they first determine that the property meets those criteria of blight. There is an appeal period for the homeowner to correct those issues. If those issues are not corrected within the appeal period, they then bring those same properties back again in front of those two boards, the Blight Property Review Committee and the Allentown Planning Commission. And then they actually certify the property blighted. Once the property is certified, we as the Redevelopment Authority can actually take the property through eminent domain. It doesn't sound very nice, but it's something we actually have to do, because we all just want compliance. You know blight...blight is...it's a sad thing, you know blight is you know, a property that lost its purpose. You know, it's either a homeowner that you know, couldn't make the repairs that were needed or they lost their job or it's an investor that you know wanted to make it big and wanted to do something, but actually didn't have the wherewithal to repair the properties.
Jeremy Moyer: That makes a lot of sense. So then, the how long does that process typically take from the initial identification to, and if it ends up going all the way through, to the actual the eminent domain of actually taking the property back?
Kelly McEllroy: So it is...eminent domain is, you know from the start from the building standards and safety department first initially notifying the owner of the notice of blight till it gets into our inventory, it is a very long process. Now if we didn't have you know, if we didn't have any hiccups or we didn't have anything in between from start to finish, it usually takes about a year. For what happens is, you know, we really don't want to take properties. Like that's not...we're not here to drop the hammer just whenever. We want people to, you know, stay in their homes, fix the home. We just want compliance. So then we have to add in, you know, the personal attributes because people want to fix their houses and we have to allow them to fix their houses. So every property is really different. So but a normal time frame is about a year.
Jeremy Moyer: Okay, and then if...I'm not going to ask you to list all 12 right here. If our listeners wanted to see what those criteria were, is it listed on the website that they can go?
Kelly McEllroy: Yes, so we are actually, our website is Allentown Redevelopment Authority. I'm sorry; www.AllentownRedevelopment.com. It's under construction. So actually they can go to the www.allentownpa.gov and if they go under 'Government' and they go under 'Authorities', the 'Redevelopment Authority' tab is there. And if they go to the blighted property review process, the blight criteria is there.
Jeremy Moyer: Oh perfect. This is really helpful. So this is a resource that will share in the show notes for everybody that's listening. As Kelly mentioned their main website is going to be, there will be a new one, but it's under construction right now, but at least for right now, this is a place that you can see inventory, do request for proposals, and then also see the blight process and those 12 criteria as well. Yeah, this is great. Thank you so much for sharing that.
Kelly McEllroy: Sure.
Jeremy Moyer: So next question that I have for you. So, you know, I look at a lot of data. Tejas, my co-host also looks a lot of data, you know with the housing market and also the larger business and job market locally here. And over the past year we've been talking with also a lot of experts in different sectors, several of them actually have been on our show previously. We always ask what are their predictions of what they expect to happen over the next few years, especially here in the Lehigh Valley. And most of the people believe or at least allude to they believe that the Lehigh Valley is somewhat insulated from a housing perspective, when you look at a lot of different factors when comparing to different markets. So we're seeing more investors coming into the market here, you know out of state or more people locally here that are interested in investing in housing here locally. I think they're coming to probably similar conclusions as well. What is the best way for investors to work with you and the Redevelopment Authority to assistant the City and you know removing the blight from the neighborhood? I want to say most of us want to keep our neighborhoods in a better condition and remove that blight. So what is a way that we can all help?
Kelly McEllroy: Well, so one way that they can help is you know when we take properties through the eminent domain process, you know, we kind of have to know what we're going to be doing with them because we can't just take properties and then say "What are we going to do?" We have to know what we're doing before we take them because that's just good...a good business plan. So if an investor is really interested in working with us, they can give us a call; they can email me or call me. And then we can add them to our distribution list. And you know, we advertise in The Morning Call and then we also...when we have a property that's ready to go out for an RFP, we will send an email to our distribution list, which will have a packet of information. You know, what the property looks like now. What we are looking for it to be and then they would submit a proposal. We are a board driven entity. So at a meeting the Board would review all their proposals and then select the awardee. And then we would just kind of follow the property until it's ready to go back out into the community as code compliant and tax right
Jeremy Moyer: Okay. That's perfect. So for listeners...RFP stands for Request For Proposal, right?
Kelly McEllroy: Yup, sorry about that.
Jeremy Moyer: No, that's okay. And then, when you put those out for bid, is always the highest price offer awarded or is the history of working with that investor comes into play? What are some criteria that help an investor win a Bid with the City? What does the City look at?
Kelly McEllroy: So it's really not always the best price. You know, we're really just looking for the best use so the property doesn't come back to us, you know in a couple years. We want it to you know, get its purpose and maintain its purpose. So, you know, if it's a 2-unit or 3-unit, you know, maybe it's de-converting it into a single unit, or if you know vice versa if it's a single unit and it needs to be a multi-unit. It's just that. And having you know, the correct materials to do the construction. If it's in a historic district, you know that they're following the rules of the historic district. You know, we just really want...it's really the best use of the property. It's not always the highest Bid.
Jeremy Moyer: Okay. And could investors engage with the City or your department to determine what the best use would be prior to bidding?
Kelly McEllroy: So, you know because it is Board driven and it's a public procurement policy, you know, we can't provide as much information to what we would kind of like it to be, but they they could present the proposal to the board and then the board would make the decision. But you know, we have to be careful with you know the conversations between until the awardee is selected.
Jeremy Moyer: Yeah, 'back-door' type of deal. That makes sense. I think this is... I'm asking the questions just to give our listeners all the information so they're prepared. So they can just go to the website to get onto the list? Is that the because best way of doing it?
Kelly McEllroy: Okay. They can go onto the website and it has my email. And then they can you know, give me a call or send me an email and I will gladly add them to the distribution list. And like I said we do have to to do a public notice. So that's advertised in the newspaper as well. So they'll know that. And they'll be ample time for them to you know, right up plans, you know, get their proposal together. We actually also have an open house at the property so they can kind of go through the property and see what really is entailed with with our properties because you know, our properties are not just like quick flips, you know, they're really blighted properties. They're called blighted because they really are. So there is a lot of work that's needed for our properties.
Jeremy Moyer: Okay, perfect. Thank you. So for some projects that come through the process, of the blighted process and eventually taking back, do they all go out to RFP to investors, or does the city take on any projects themselves?
Kelly McEllroy: So we...the Redevelopment Authority actually hasn't been functioning for a while before, you know, I got here. About 2017 is when we really started to get back up and running. So because we had some inventory that has been kind of lying dormant for a while, it had a lot of...they had a lot of deterioration. So we really couldn't put the inventory that we had out for the public, because it really wouldn't have been fair. You know the repairs that we had on them, you know were very expensive. So for somebody, even an investor or community group, to spend, you know, $200,000 on a repair to you know, get $125,000 back after they sold it wasn't really fair. So we took on the responsibility to do the internal rehabs. We have had amazing results. We actually have five projects that we've completed. We have four that have sold and we have one under agreement. And it really is amazing to see the transformation of the properties, you know from from the blight status. You know you walk into the homes and there's rain coming down and it's not even raining. You know, so and then now they walk in and they're just, they're beautiful properties. So that was very exciting. So we have been taking on some rehabilitation projects. Now going forward, you know, it's a lot of money and you know, we are government-funded, so, you know, we can't be taking on all the projects. So we are going to have you know, one or two projects that we will maintain in our inventory and then we'll RFP them out.
Jeremy Moyer: That's great. Do you mind sharing a past...one of the properties that are that you currently were able to rehabilitate and sell?
Kelly McEllroy: Sure, I can tell you all about them. Actually our first one was 147 Susquehanna Street. That one settled last July. It's sold for $164,900. We actually have non-restricted funds that we use on that project. It had multi offers. It was amazing. We also had 341 North 7th Street. That one we rehabilitated. We rehabbed into a residential. We sold that this year. And then we have 824 Tilghman Street. That actually was a property that was donated from Wells Fargo. It was a foreclosure so they donated it to us which was great. We rehabbed that and then that one settled. Our next project that we have, I'm a little partial to. It's 621 Front Street. That property has been a community nuisance since 2011 and we actually rehabbed that into a beautiful 2-unit and it actually is under...its under agreement right now and it's supposed to settle the end of the month. So I'm very excited about that one.
Jeremy Moyer: That's great. So the....is the idea then; I’m not 100% sure myself. So is the idea, it comes through the blight process to eminent domain and then it's determined if the city is going to take it; the board of directors right, it's determined if the city is going to keep / rehab themself if it's too costly or do an RFP? If the city, if they rehab it themselves, like what is...do you just use contractors that are approved with the city to do the work...is that how that works?
Kelly McEllroy: Yeah. So if we do internal rehabs, we have a waiting list of contractors that we've used before and they’re preferred and you know, they meet all the criteria that's needed as per our procurement policy. But when we send a property out for RFP, it's for you know, local contractors or re-developers that they have the ability to perform the work necessary to bring the property to compliance.
Jeremy Moyer: Okay. Great. Thank you. Can you also talk a little bit about grant funding and the governmental processes for redevelopment?
Kelly McEllroy: Sure. So we as an entity, you know, we are government funded. So when sometimes we take a property through the eminent domain process we do use grant funding for the acquisition. Because we do use that grant funding, there is restrictions on the end use of that property. So the end use of the property needs to be for a low to moderate income occupant, either a rental or a homeowner. And then the deed restriction will follow the property for 10 years just to maintain that low and moderate income level.
Jeremy Moyer: Okay, and is...if someone wants to find out more information on the grant funding, is that also on the website or is there a better resource?
Kelly McEllroy: Yep, they actually can contact the city's CED (Community Economic Development) department and there is you know, if a contractor wants to see what grants are available for them to perform work, they can contact them and they would be able to connect them in the right direction with what they have the ability to do.
Jeremy Moyer: Awesome. Great. Thank you so much. I think we are going to round up the interview. You've been extremely helpful explaining some of these processes and directing the listeners to some of the resources that are available. We asked the same question for every guest. What's your favorite restaurant here in the Lehigh Valley?
Kelly McEllroy: What's my favorite restaurant in Lehigh Valley? Thats tough. 'Tacos Y Tequila' is probably my favorite restaurant.
Jeremy Moyer: Awesome. Good choice! That's great. So we mentioned a few times before. If anybody wants to reach Kelly, they can go to the website (allentownredevelopment.com). Your email is on there. We'll put that in the show notes. Is that the best way of doing it?
Kelly McEllroy: Yes, definitely. Yeah.
Jeremy Moyer: Awesome. Thank you so much for your time today. You know, to our listeners. If you see value that we're providing, please leave us a 5-star rating on iTunes. Also provide some feedback on what you like about the show. Also tell 5 other people about our show so we can help change lives together. Everyone, this is Kelly McElroy with the Allentown Redevelopment Authority. I'm Jeremy Moyer with the Real Estate Investor MBA. Take care. Cheers.
Kelly McEllroy: Thank you.
