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September 22, 2006

Poinsettia Commons, Carlsbad, CA

How to establish your own beta community

There's a key neighborhood street block in your downtown that could be the catalyst and benchmark for inspired urban design and investment to attract the next generation of downtown residents and tenants. Is there a way then, that these emerging populations in your could city get together to design and develop their own neighborhood, buildings, workplaces, third places and homes at attainable prices? They can via a beta community (evolved from crowdsourcing), a progressive community of future tenants that work with willing developers and investors to do just that.

Here are the key components in establishing a beta community in your town:

- Motivated residents - It all starts with the demand. When the residents become an organized group working together to establish a collective vision, they become a beta community.
- The forward-thinking developer - Someone needs to actually understand and be passionate about implementing this vision, of course, along with the investment capital.
- An agreement If a developer hasn't signed an agreement to work with the beta community to implement their vision, then the effort is largely being wasted. In exchange for the developer reducing risk, unsold inventory, marketing costs and realtor costs, the beta community deserves something like a 10% pre-sales discount on homes and permanent 'founding member' status (ie 10% discount) with participating restaurants/bars/stores that open as a result. Not uncommon at all.
- A leader (eg CoolTown Studios) - Someone's going to have to organize these next gen residents into forming the beta community, securing a partnering developer, and drafting the agreement.

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September 21, 2006

Longwood University, Farmville, VA

Saving on housing costs (part 2) - no more 6% fees?

Continuing yesterday's entry... The Last Stand of the 6-Percenters - that's the NY Times story that's got home buyers excited and realtors needing to rethink their business model. The current system awards 3% to the seller's agent, and 3% to the buyer's agent. Louisville is pioneering a better model with its beta community.

"Traditional agents spend very little time brokering a deal. Most of their time is consumed looking for new clients, which is of no benefit to consumers,“ states a Berkeley professor who studies real estate commissions. Referring to the current realtor-controlled system, "It’s a thousand tiny shackles on innovation,” says the chief executive of Redfin, an online realty service that offers 2/3 of the buyer agent's fee (3%) back to the buyer, and replaces seller agents (3%) with a flat fee of $2000 to list in the MLS. In the book, Freakonomics, realtors are even compared to... well, let's just say cults - more here. The Times article further states that realtors don't even make that much given the amount of work and sacrifice (weekends) they put in.

Thus, enter the beta community model: No buyers agents. No listing agents. No fees. You get to participate in the development of your home and the building it's in. The developer provides those savings to you, oftentimes as a 10% pre-sales discount. Marketing costs for developers are instead directed over to establishing the beta community, which also reduces risk and inventory - or as Dell likes to call it, having negative inventory and negative working capital.

Image: This is the phase (design and planning) where resident-driven attainable home buying should begin.

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September 20, 2006

Mass customization

How to cut home prices AND get what you want

'DIY' - Do it yourself. This is not DIY in terms of becoming a home builder, but using skills that have come to bear naturally by the internet generation. Ordering exactly what you want also saves the company significantly (and I mean significantly) because it eliminate inventory, risk and interest - just ask Dell Computer, or any business school teacher. Then there's that one little thing called customer satisfaction, as this one reader puts it, "Why is it that I can customize a $10,000 Kia more than I can customize my $500,000 loft?"

Savings #1: Join a beta community, where in exchange for telling developers/the city/investors just what kind of housing you want, you'll get a 10% pre-sales discount. Louisville is the first of many that has established such a program.

Savings #2: Order your condo up as a blank canvas. That is, as an option, developers are offering unfinished interiors where the buyer can choose their own interior colors, appliances and kitchen cabinetry, or choose from a palette provided by the developer to take advantage of economies of scale. For do-it-yourselfers, this can be a major reduction on your mortgage.

Savings #3: Most people know of this one, which is to buy furniture that you assemble yourself, the most familiar to the creative class without a doubt being Ikea. There's a new company called Real Simple Furniture that provides a more contemporary alternative.

Savings #4: Study the Not So Big House series of books intensely - homes that are well designed can be twice as livable as those twice the size, and this is not an exaggeration. Big is out. Open floor plans, large windows and tall ceilings help you ratchet down your home size for what is the biggest factor in cutting down your home price and getting both a more livable home and neighborhood.

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September 19, 2006

Adams Morgan Day, Washington DC

A little help establishing a sense of community where there is little

It's not uncommon for many of the residents of a neighborhood not to know one another, much less do anything together. However, what if they'd like to change that? Not through homeowner associations, which focus more on what you can't do than what you can. Think nonprofit organization - this New Urban News article looks at the Seaside Institute's New Institutes Program which helps communities establish a nonprofit to do just that.

On such community taking action is East Beach, a transformed naval base in Norfolk, Virginia. In this case, the development company took the lead in establishing the community-building nonprofit, stating “You’ve got to find out what turns on your particular residents. There’s not one correct answer to doing this.” Examples of events resulting from the program include house concerts, where “you bring in a regionally known singer - one or two or three of them - and people bring a covered dish,”; steel drum concerts on the beach; a sand castle contest; lecture series; organized water activities, etc.

How is this paid for? Homeowner's association covenants typically assign 1% of the purchase of a home to the nonprofit, and ongoing revenue is raised through events, donations, memberships and sponsorships.

For neighborhood commercial districts and downtowns, a is the way to go.

Image: Adams Morgan Day, Washington DC, organized by both a nonprofit and a BID.

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September 18, 2006

Louisville beta community

Louisville establishes a beta community!

You know how real estate is... 'wait until they build what you want', which could be years from now if ever. Well, last week some of the most creative, entrepreneurial and intelligent in Louisville, KY took it into their own hands not to wait, meeting at the University of Louisville and other venues to establish what is the only official, active beta community to establish a vision for partnering developers and investors to implement.

Focusing on the downtown, they wanted a place that stimulated intelligent discussions, price attainability, safety at night, a critical mass of pedestrians and residents, a sense of community, vibrant energy and life, more local independent nightlife venues, events like a nearby art gallery night, and more places to go with local friends. Stirred by a progressive independent restaurant owner and facilitated by CoolTown Studios, the group came to a proposition with the developers that if they supplied the base of tenants for development via a 500-member beta community, that the developers would permanently recognize that group as the 500 founding members of that new community, providing a pre-sales housing discount (10%) and working with commercial tenants to pledge a 10% founding member discount as well - it's presently called the Neighborhood of Tens.

The first targeted area was a couple of key buildings in the core historic block of downtown, and the presence of the beta community inspired a key building owner to add three adjacent buildings to the beta community program within 24 hours of the group's first ever meeting, which he didn't even attend.

You can track growth and progress of the initial beta community of 24 individuals here, and better yet, join or refer others to the group (general email link at the bottom right) if you have connections to Louisville, and meet some great people in the process.

Image: the initial beta community meets for the first time at the University of Louisville (above); the key historic downtown block (middle); a vision for what it could look like (below)

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