A two-year-old housing rehabilitation program in Ellis County has fixed up and sold five distressed houses so far, with a sixth ready to close anytime.

A program of the county’s economic development agency, the Grow Hays Housing Rehab Program started in 2017 with a $400,000 grant from the Dane G. Hansen Foundation, Logan.

Another three homes have been purchased and are being renovated now, one each in Hays, Victoria and Ellis.

“It’s doubtful any of those deals would have happened without this program,” said Grow Hays Executive Director Doug Williams. “When these other three are sold, that’s 18 total transactions that just wouldn’t have happened without this Grow Hays program. So I think it’s paying dividends locally. We’re just trying to figure out now, can we expand it and how can we expand it?”

Designed to ease the county’s affordable housing shortage, the program makes interest-free loans to developers to buy, renovate and resell distressed properties to owner-occupants. The loan pays 100% of the purchase price and improvements. Developers have nine months from start to finish, or pay 5% interest if they go over. The house must resell for $145,000 or less.

“You’ve got to have some experience. You can’t just come at it cold. Some of these things are not for the faint of heart,” Williams said.

“There’s a lot of things that can go wrong.”

Rebuilding

Josh Roy and Brady Reed are two developers in the program. Reed, in partnership with his brother Tyler, has bought, renovated and sold two houses, while Roy started on his second one in October.

The three did a good job, Williams said, bringing their projects in on time, performing quality work, and leaving buyers pleased.

“The first one Josh did, he basically rebuilt it,” Williams said.

“All the way down to the studs, the exterior walls were basically the only thing left,” Roy added, noting he had to reconfigure the interior of the small house on 15th Street off Hall Street. Built in the early 1940s, it had very few updates, with a layout that wasn’t very functional.

Roy had looked at five other houses, but that one had been on the market for about a year and he was able to get it at the right price. As a longtime rental, it had seen a lot of abuse.

“You’ve got to look past that, and see the potential in it,” Roy said. “This one did have new siding on it, so it wasn’t necessarily the ugliest house on the block, but once you walked in the door it was definitely in need of some TLC.”

He bought the house for about $70,000, put about $40,000 into it, and sold it for $140,000 to a college student.

“He may have made $1.25 an hour,” Williams said. “They’re the ones who have to decide at the end of the day if it was worth their time.”

Roy, who’s more of a hands-on contractor, said he was ready for a break, but then another house came along, which he’s working on now.

Reed’s first house sold for $142,000, and his second for $145,000. He largely gutted the second house, but it was sold before he’d finished it, to a young single woman who liked the work he’d done on his first house.

“There haven’t been any of the houses that have been on the market for more than a few weeks, once they were done, so it’s clearly hitting a niche that is needed,” Williams said.

Patience

Finding the right house to renovate can take awhile.

There isn’t any particular neighborhood in town that’s a better fit, nor is the age of the house. It helps if it’s been on the market awhile.

“You’re looking at price,” Reed said. “You want to make sure you buy it at the right price, and more than likely it’s going to be something that needs a good amount of work to be able to get it at the price you like.”

Grow Hays requires developers hire a realtor for the loan application to appraise the house based on the improvements that will be made, and what it will be worth when done. The project goes to a Housing Rehab committee that accepts or rejects the project. Evaluators are realtors, builders, a plumber, a banker, a general contractor, and a title company lawyer.

“We tried to create a committee that would understand these things and recognize a red flag if they exist,” Williams said. So far, they’ve rejected two or three applications.

“Primarily the committee felt that the property was not a good one for the program,” he said. “Either they felt that the developer had underestimated what it was going to cost to fix it up, or they were paying too much for the property relative to what it was going to sell for in the end.”

Underestimating experience

Experience is a requirement. While none of the developers have been general contractors, they’ve all had some remodeling experience. Reed is a realtor by day, and Roy is a cabinet maker.

“The ones that work best are the ones where the developer does at least some of the work themselves,” Williams said, citing Roy and Reed as good examples.

Generally, developers underestimate the task. Roy and Reed have both learned that it always takes longer and costs more than expected, they all said.

Williams said the program benefits the community in more ways than adding housing, but also by improving neighborhoods, like the one Reed did on Willow, which took a duplex back to a single-family residence. The neighbors thanked him.

It also allows developers to make some money; gives work to plumbers, electricians and drywallers; creates more demand for materials from suppliers; and usually boosts the tax base for the city and county.

“If the day comes we lose money on one, that’ll be a bad day, but up until now we’ve kind of watched our Ps and Qs and we’re hoping that won’t happen,” Williams said.

He hasn’t heard of similar programs elsewhere, but other communities have inquired about it, including the Western Kansas Rural Economic Development Alliance, where Williams was asked to speak about it to economic development officers in Norton.

The committee has thought about expanding the program and expanding the sale price to $165,000 or $175,000.

“We feel that would open up a lot of opportunities,” Williams said, “but we would have to get some additional funding.”