Folly #12: Social Impact Real Estate
Can a personal rental property serve the public good?
This is my story in all it’s glorious imperfection. I'm sharing to get your advice.
Twenty years ago, my then-partner and I thought buying a second home as a rental property would be a “safe” investment. A beautiful, rustic property in West Marin, it’s a house with a separate in-law studio. Tenants have always been local folks who work in the community.
First Folly: Buying rental property in Marin. I live in the epicenter of the nation’s most expensive housing, where the median home price just dropped to $1.7M. Positive cash flow is nearly impossible with a Marin mortgage.
Second Folly: Deferred maintenance. Because of the First Folly, I haven’t had cash to take care of small and large projects – new septic tank, new roof, and a few expensive repairs. Most of my assets are tied up in this house, so I don’t have moola to spend on fixing things. And I can’t cover these costs if I continue to offer the house below market rate to achieve my goal of offering affordable housing.
Third Folly: Despite objections from family and friends, I tried to sell at a price substantially under market to a local family who, unfortunately, couldn’t afford enough to cover the costs that went into the house plus a small amount of appreciation. Giving away all my equity didn’t seem right, but figuring out the right amount to give away isn’t easy either.
Fourth Folly: List for sale? I’m finally wising up to the fact that I have no business owning this home with the resources I have. If I sell, I feel 99% certain that anyone who could buy the house at “market value” in Marin will be a person of wealth, likely buying it for their second or third home. Meaning: two fewer units of rental housing will be available for people who actually live and work in the community.
My choice feels like more local displacement or higher rents, and neither is aligned with my values around money.
I have been really intentional about that. In 2022, I moved from a corporate bank to a regional credit union. I shop on Etsy instead of Amazon. I buy clothes at consignment. My money may be peanuts in the scheme of things, but I’m inspired by the collective impact of values-aligned spending and investing.
How does someone who is lucky to have a second home leverage it for social impact? For larger, urban developments, there are terrific programs that build community equity, like Toronto’s School of Cities. If I borrow money to convert an outbuilding into another residence, Marin County requires a completely new septic system (at a cost of $100k-150k), so that doesn’t pencil out. If I sell, could I invest the equity into an affordable housing fund – or donate it to a nonprofit local housing provider? Would that be enough to make any impact??
Tell me. Please.
Hindsight Folly: We probably should have put that downpayment into a mutual fund all those years ago. It would have made more money (see First Folly), we’d have more to donate, and it would have been a whole lot easier.