Healthy Prospects

A commercial real estate program offers investment opportunities

Juanita Simmons always wanted her own health spa. In fact, 15 years ago, she was bold enough to carpet her garage, install insulation, and begin operating a private exercise studio while she was employed at Salomon Brothers before it merged with Smith Barney.

“I used my earnings from my salary to open my exercise studio,” says Simmons, a 51-year-old single mother. She also took out an $8,000 personal loan to expand her enterprise before realizing that she needed a larger commercial space.

Simmons, who has been in the fitness business for 25 years, was seeking a new location for her business when she saw a flyer enclosed with her electric bill advertising buildings for sale in the StoreWorks program (212-519-2528; www.nhsnyc.org).

StoreWorks is a collaborative partnership between the Neighborhood Housing Services Community Development Corp. (NHS), the City of New York’s Department of Housing Preservation and Development (HPD), the Department of Housing and Urban Development (HUD), and participating private lenders, to rehabilitate vacant, mixed-use, city-owned buildings, before restoring them to private ownership. The program only operates in New York City.

“It was a blessing from God,” says Simmons, of her purchase. “I didn’t think it was possible to purchase a building on a working salary.” Simmons bought her building for approximately $240,000 in 2000. Located in St. Albans, Queens, New York, it has two residential apartments above a commercial space, which now houses Body Connections Health Club — her new health club.

William Kelsey, director of NHS, says there are no income limits for buyers to qualify for StoreWorks properties. Purchasers may be the residential or commercial occupants in the buildings, which are distributed through a lottery process that is supervised by HPD. In New York, buildings have sold for between $150,000 and $385,000, with additional development and rehabilitation costs ranging from $165,000 to $570,000. The buildings are also made more affordable through the use of HUD’s 203(k) mortgage loan guarantee program.

To make her purchase, Simmons tapped into her savings, retirement account, and cashed in stocks to come up with $70,000 for the down payment, attorney and architect fees, and closing costs. She needed an additional $20,000 to customize the building for her specific needs.

While she has made a substantial investment in the property, there are several financial advantages. The two residential apartments in the building are earning her approximately $2,500 a month in rental income, which helps pay for the building. The renovation of the building has increased the value of the property, improving her asset base. Because she owns the building, the overhead costs for renting commercial space is eliminated because her mortgage payments add to the equity in her property. And because she has a customized business space, her business is expanding again, and her attorney has advised her that she is on track for growth.

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