Much has been made of Detroit’s entrepreneur-driven comeback, with its plucky startups daring enough to set up shop in greater downtown.
Operating out in the wilderness of Detroit’s overlooked neighborhoods is the face of another kind of entrepreneur — or rather three faces, which can be seen on billboards all over the city. The billboards advertise Benjigates Estates LLC and CEO Antoine Hayes, CFO Keith Hudson and COO Eugene Broadway, clad in expensive-looking suits.
Maybe they’ve been left out of the entrepreneur story because, billboards or not, they’re hard to notice, operating as they do in those many neighborhoods often neglected in the Detroit narrative. Or maybe it’s because it’s hard to tell if these are the good guys or the bad guys.
The Benjamin Brothers, as they call themselves, are in the business of flipping houses bought at Wayne County’s tax foreclosure auctions — an emotionally charged business that brings a special array of challenges.
Auction buyers have a reputation as gougers. There are buyers who squeeze occupants through high up-front payments and rent increases, and buyers who try to sell houses at prices occupants can’t afford.
David Szymanski, Wayne County chief deputy treasurer, said there are buyers who rent out properties while not paying taxes, let them go to auction and then buy them back under a different entity.
“A large number just go in and evict … even before they get their deed,” said Ted Phillips, executive director of United Community Housing Coalition, a Detroit-based nonprofit that helps keep people in their homes. Phillips recounted intimidation and misinformation tactics, such as threats of police action and falsely telling occupants they aren’t allowed to participate in auctions.
That’s exactly the opposite kind of business the Benjamin Brothers aim to run, according to homeowners and peers. If the property turns out to have occupants, Benjigates doesn’t up the rent or kick them out. It cuts a deal.
“When we buy it and we come to the door and you’re in there, you get the first opportunity to own it, whether you were the owner, a renter or just took up residence,” Hayes said.
“When you put somebody in ownership, they’re more likely not to lose their property and want to pay taxes, want to keep their yard up, want to keep the neighborhood good,” Hudson said.
They haven’t gone unscathed in their fight, squaring off against lawsuits, stigma and the occasional armed drug dealer.
Shopping the auction block
Every fall, the Wayne County treasurer’s office auctions off tax-delinquent properties. Those that don’t sell at the first auction in September get shunted to the October auction, where bids start at $500.
Benjigates is among the top buyers, last year buying 442 properties. From its beginning in 2008 through the end of last year, Benjigates had purchased nearly 1,200 at the auctions for a total cost of $1.3 million, or roughly $1,100 per property, according to a Benjigates investor presentation. Of those, Benjigates has sold more than 900.
According to the website WhyDontWeOwnThis.com, which tracks the county auction, the Benjamin Brothers paid $500 to $14,100 for 440 properties at last year’s auction, 129 of them for the $500 minimum price. (Two more were acquired later.)
Benjigates then sells the homes in deals structured to be feasible for minimum-wage earners and people on fixed incomes, while still leaving room for profit, company executives said.
Benjigates operates in the lower-income neighborhoods of the east and west sides that arc around central Detroit.
Embry Webb, president-elect of the Detroit Association of Realtors, said regular market prices for homes in those areas vary widely depending on the strength of the block but usually range from $10,000 to $50,000. A typical house in the Brightmoor neighborhood goes for about $15,000.
But that’s assuming people have money for down payments on mortgages. If not, rental rates are usually $750 to $850 for three-bedroom bungalows and colonials that aren’t in historic neighborhoods.
Benjigates arranges the deal so monthly payments are always $500 or less for periods of either 12 or 18 months. The buyer gets the title at the end of the period. Benjigates does not provide loans, run credit checks or verify income.
There’s also a $750 closing fee and a $250 educational fee. The educational fee covers one of three short classes on personal credit repair, home maintenance or real estate business basics that buyers must take as part of the deal. Benjigates set up a nonprofit called Caring Hands of Benjamin to administer the courses.
The deal structure reflects Detroit’s distorted residential market, they said. About 40 percent of the homes Benjigates buys are occupied, Hudson said. Most occupants are renters or owners who didn’t leave. About 20 percent are squatters. Former owners typically had property tax debt from $5,000 to $12,000, and many had mortgage debt of $30,000 to $110,000, he said.
Buyers are responsible for property tax payments, including those levied in the period between the auction sale and when the new buyer signs a Benjigates contract — taxes Benjigates technically is responsible to pay.
Benjigates says in this market it can’t pay the taxes and offer prices feasible to low-income buyers, and that’s why it set its contracts to periods of 12 or 18 months: The county’s tax foreclosure process takes three years; after Benjigates’ buyers finish their contracts, they have up to two years to catch up on the taxes.
Extending the contract period or raising the monthly amount squeezes people for money they don’t have and lowers a buyer’s chances of fulfilling the contract, Benjigates said.
The homes are sold as-is, although Benjigates helps buyers find affordable contractors for needed repairs.
If the buyer can’t pay repair costs all at once, a monthly payment plan is set up.
Benjigates also gives buyers an information packet on how to defend property titles because although the county auction process clears titles of old liens, lawyers try to collect old debts anyway, and it pays for home insurance for the duration of the contract.
Hayes, 35, earned his real estate license while working as a machinist after getting trained at Focus: Hope. Making just $10 an hour with a wife and two children at home, he began working for a real estate agent, taking pictures of homes on weekends. He opened an agency in 2001 and began working with Hudson on real estate ventures in 2006.
Hudson, 38, has owned a clothing store, a mortgage business and an event promotion business. He started out of high school mowing lawns. In winters, he picked up washers and dryers dumped in alleys and turned them in for scrap. He saved $7,000 and bought his first property at auction in 1998.
Hayes and Hudson later met Broadway, 53, who has a background in property management. He also was a pastor for 23 years and a parochial school English teacher for three. He came aboard and helped structure the business model for Benjigates, which launched in 2008 with $20,000.
Benjigates receives funding from private sources, mainly two individual investors who charge high interest rates because it’s a high-risk line of business, Hayes said.
Last year, the company had $1.1 million in revenue, and the company is profitable, Hayes said.
When asked if Benjigates tries to reach a certain dollar amount for each property, Hudson laughed and said, “Throw it against the wall.”
The business has faced two lawsuits.
A lawsuit filed in February by Detroit-based lawyer Steven Budaj says Benjigates charged his client monthly fees that effectively amounted to a 70 percent interest rate, well in excess of the state’s 11 percent limit on land contract deals. Budaj is seeking class-action status.
Hayes said the source of this lawsuit is a former customer who, after fulfilling the contract, was upset about the property tax bill and contacted the lawyer for her postal worker union.
Benjigates had monthly finance fees of between $125 and $175 in a previous version of its contract that it is since has dropped, Hayes said. Benjigates does not provide loans and it’s up to the court to decide whether the old fees amounted to interest, he said, and the contract makes it clear that the buyer is responsible for paying taxes. Budaj did not respond to a subsequent call for further comment.
A second lawsuit, filed by Detroit anti-foreclosure attorney Vanessa Fluker in April, attempts to retrieve a property from Benjigates, arguing the county mistakenly sent the property to auction even though, according to the suit, the disabled, elderly woman who owned it was current on her taxes and had been granted hardship exemptions.
Fluker said the woman’s family offered to pay the $1,600 that Benjigates paid for the home, plus a little extra for the trouble.
“This is egregious … tossing out some senior citizen,” Fluker said.
Benjigates takes the position that if there was a mix-up with the county, it’s on the former owner to take it up with the county. Hayes said the woman has several adult children who live with her, and Benjigates offered to lease the home to the family for $750 a month, but the family declined.
“We bought this house in October (and) we have not gotten a dime, nor do we have possession of our property,” Hayes said.
Path to ownership
Situations at acquired Benjigates properties run the spectrum, the partners said. Some occupants owned their home free-and-clear for decades but couldn’t keep up with the taxes. In some places, the landlord kept collecting rent after the county took the title. In others, lenders might take ownership of the property but not pay the taxes.
The home of George Parsons, a 57-year-old retiree in Brightmoor, went to auction when the landlord didn’t pay taxes. Parsons became a homeowner in May after making $500 payments to Benjigates for 18 months. He’s considering buying another home for his children.
“They’re giving people a chance to own a home in a short period of time,” Parsons said of Benjigates. “It’s not like they’re making that much more.”
Janice Lewis bought 17 homes from Benjigates — the first two on contract, the rest with cash — to get into the rental business, which has been successful enough to allow her to leave a nursing job.
The first Benjigates home cost Lewis $3,000 in 2011. She bought a second one for $8,000 and moved her family into it, walking away from a $157,000 mortgage that cost her $1,200 a month. She later bought the house at a sheriff’s sale for $13,000 and now rents it out.
Revolving doors — and revolvers
It doesn’t always go so well. When Hayes and his partners show up to one of their new purchases, there can be welcoming arms from neighbors, disgruntled former occupants or drug dealers.
“I’m surprised we haven’t found a dead body or a million dollars yet,” Hayes said.
In one incident two years ago, Don Boggs, a buyer of one of Benjigates’ homes, was hit in the face with a Molotov cocktail thrown by a woman who had been an occupant before Benjigates bought the property. Boggs sustained burns over 40 percent of his body and was permanently scarred. His home was destroyed. The offender was convicted of assault with intent to murder. Benjigates gave Boggs a new house.
What kind of intimidation have the Benjamin Brothers experienced?
“It’s all the way to the wall, brother,” Hayes said.
“Guns drawn. They think we’re on their block,” Hudson said.
Webb said Benjigates deserves credit for going into some of the worst areas of the city and would like to see the business get attention, and help, from the city because “they’re making it as easy a road as possible to homeownership.”
“They’re promoting homeownership and getting properties on the tax rolls, which is good for the city,” said Webb, who funnels clients to Benjigates when they can’t secure mortgages.
Other buyers naively look for returns of $20,000 to $30,000, Webb said. “In 2005, that was doable. Now, you’re lucky if the house is worth $20,000.”
This leads to a revolving-door effect in the homes, he said, with people getting forced out when the owner refuses to work with the occupants.
Szymanski at the county treasurer’s office said he’s heard Benjigates is “very reasonable.” He did not care for the way Benjigates bakes tax avoidance into its business model and said the company does risk losing properties back to the county. But a deal possibly could be worked out if it means keeping homes from becoming vacant, he said.
Phillips, from the nonprofit United Community Housing Coalition, said he gives Benjigates credit for lasting in the business more than a few years. “They’re not gouging, but they’re also recognizing a reality.”
But he also said more funding for nonprofits would keep more people in their homes for even less money.
The profit margins on some deals, and the viability for some buyers to be able to adhere to the terms of their contract, are hard to predict
For some deals, the company offers a “term-option contract,” a hybrid between a lease option deal and a land contract that does in fact give it the best of both worlds — fast evictions and no responsibility for maintenance.
Without the ability to evict, Benjigates’ formula starts to unravel, Hayes said. By the time a foreclosure on a land contract is approved, the occupant already is behind by several months. Then the occupant has another six months, in the state of Michigan, to make good on the payments.
With the market showing some signs of health, Benjigates is looking for outside investors so it can get into more traditional funding.
The company’s work could play as important a role in the comeback of Detroit’s neighborhoods as the actions of business leaders downtown, Hayes said, adding that he wishes they would “extend their hand and meet us in Midtown.”