The Edge Becomes the Center Read online

  So we came up with the idea: the bank takes a long time before they take the property away. It can take them up to five, six years, and we know how to push them as much as possible. So we go to the owner, buy from him the deed, which means ownership—it’s our property, even if it has a mortgage it’s our property—and then we rent it out and we get the rent until the bank finally takes it away.

  It’s not 100 percent—I mean, it’s legal but sometimes in the mortgage there’s a clause that says if you sell the deed you have to notify the bank and if you don’t notify the bank they can take the property. But even if you didn’t notify them, the bank has to go through the whole process of getting the property and that takes some time.

  And the banks don’t care. They actually like when people take care of the building. Because it will actually cost them $100,000 a year—people breaking in, pipes busted. As long as everything is good, everything running, they just leave it alone until they’re taking it.

  People that have small mortgages they’re going to want a lot more for their deed, to give over ownership. But if they have a $500,000 mortgage and the house is worth $100,000, they’re broke, they don’t have money, they have no job, they don’t have nothing, and they can’t even pay the mortgage. A person that sells a deed with a big mortgage usually wants to get $5,000. They don’t care. They’d didn’t pay the mortgage for, like, two years—the property’s shit. So we would give them $5,000, $10,000, and they give us the deed. They know the bank is going to take it so they don’t care. They move out and we can do whatever we want.

  We started out with this, buying over one hundred deeds, all over the place, and we collected the rent. So when the market went up a little bit, about 10 percent of the mortgages were almost at market value so we’d pay them off and keep the building. If it’s a big mortgage, I don’t have any choice, I just sit until the bank takes it away. I’m just sitting, collecting rent. And that’s it.

  I used to love it. But the bad part was, come Monday, I used to go to the buildings in my car, and knock on every single door. This was like five years ago. And they didn’t give me payment. One out of ten, one out of twenty, maybe. And they were yelling at me, “You fucking Jew! Leave me alone!”

  I got used to it. And I understand it. Not all Jewish people are nice people. Every tree has a bad apple. Some of them are really nasty and can trick their tenants. But some of the tenants put up such a fight that you have to trick them. I used to do that—but I don’t do that any more. I did that once four years ago. I told someone, “I’m going to give you twenty grand to move—just move out first, and then I’ll give you the money.” And then I screwed them. It was only a tenant who didn’t deserve the money. They wanted $150,000 and it didn’t make sense. They’re using drugs in the house, and doing all kinds of nasty things, prostitution and stuff. I had no choice, I had to trick them. I gave him something but not the money I told him. And he couldn’t come back to me because he wasn’t even legally supposed to live there.

  Some Jewish people they’re going to come in and they’re going to try to rip off the black tenants—and the tenants know it, there’s word of mouth. So it’s like, “Oh a Jewish guy again?” There’s a lot of Jewish guys moving around. Like a lot, a lot, a lot of investors who are either Hasidic Jews or a little bit less, but they’re Jewish. They’re holding Bed-Stuy like this—he squeezes at the air in front of him, strangling it. So sometimes it’s like—he taps his chest—“Hello, this was our neighborhood. What are you doing here?”

  Eventually I was burned out, so I couldn’t do it anymore. It was just way too much insult. I got a different guy, a bishop guy, he actually knew the community so I had him go around with me. When I started getting busier I let him go alone but, eh, no results. Because you have to really work.

  So this is actually how we got a big portion of our properties, from grinding, grinding, grinding. Really hard. Every single dollar we earned with sweat. It wasn’t easy.

  We did it alone. When we started I could have gotten a deed for a grand. They were like, “Take it, I don’t want it, take it for free, just make sure you maintain it.” It was nothing. And I got ’em and got ’em and got ’em. All of a sudden people—my friends or people that used to give me deeds—they started to say, “Hey, what’s this guy doing?” They started looking into it and they wanted fifty grand for nothing. It became more expensive.

  And some other Jewish people started. We have Jewish heads, so sometimes those things catch. The black people, even the white, sometimes they don’t make the connection. We’re always jumping, not all, but some of us have jumpy heads. So we’re trying to get an edge.

  Now buying the deeds is a new thing with lawyers getting into it. Lawyers take over the deed and they start fighting the bank. And the loan wasn’t done right and they’re hoping after a while the bank’s just going to say, “You know what? Fine, leave me alone, just give me something small and you save the property.”

  We started in East New York but we sold everything we had. We didn’t want to be there. First of all, I’m really not a racist. I love black people, most of my contractors are black. But East New York is mostly, people who are—you know the “47 percent” that Romney got kicked for? This is the real truth—the 47 percent is a real thing. I don’t know why he got kicked for that. This is hitting it on the nail. This is what happens in East New York. Most of them are either Section 8, other government programs. So most of it is programs, and even the person that pays with cash is too much headaches. They’re not paying, they’re yelling at you for every simple thing.

  When I rent a house here in Bushwick, I come in to collect rent, the first thing they say is, “Can I offer you a glass of water?” Or, “Sit down on the couch.” When I used to go collect in East New York, they didn’t answer the door or when they answered they started yelling, or the dogs were coming out. It was just a whole mess. It wasn’t worth it. Because the profit was very low. Fifty or 40 percent of them, we had in court. And when the court process finishes in five or six months they just leave. They go from one house to the other house and they just try to suck up everything.

  I couldn’t even sleep. They used to call me at twelve o’clock at night for cockroaches on the floor. It was really, really low class. Very low class. So we sold everything over there and we came out all the way to Park Slope. Then we started backing up, backing up, slowly, all the way to Bushwick. This is one of the houses we’re finishing now.

  We pull up in front of a three-story brick building. Having shed the deed-buying business, Ephraim’s now involved with acquisitions and development. And he prefers to hold and rent buildings as opposed to renovating and flipping them. mTkalla calls back to continue the conversation about his floors. Just as they start haggling over numbers, mTkalla gets a call on his other line so Ephraim hangs up and continues:

  It’s mixed in Bushwick. But the black people that are here, if they didn’t get bought out it means that they’re upper class. I can’t explain it to you without sounding like a racist. But there’s a big difference between black and black. Like Martin is upper class. He’s a classy black guy. He’s not from the ’hood. He’s not going to—he’s a normal guy. You can talk to them. You can have a conversation with them. But the people over there in East New York, it’s like everyone is trying to rip you off, everyone is trying to get away with something.

  Another call comes in and a voice asks if Ephraim if he can spare two minutes. Ephraim balks—Two minutes? Okay—drawing out the last word as if to say you can’t actually mean 120 seconds, can you? The rest of the exchange takes about half that time and Ephraim continues:

  I have a serious ill-condition: I rarely can sit and look at the sky. I’m always jumping; I always want to do things. I’m out in the morning and when Saturday comes and I can’t touch my phone and I can’t do work, sometimes I get very jumpy. I have so many things going into my head. When I’m talking to you I have things running into my head! I have to! Because there’s so many t
hings I have to do. It’s like I have maybe a million gigs, but my head’s full all the time so I have to delete, delete, delete just to make new memory.

  We had one property on 64 Hancock and we bought it almost three years ago. It’s a beautiful, nice brownstone. Today you could sell it probably for $2 million, or $2.5. But when we bought it, it was probably $800–$900,000. And the mortgage was probably only like a million, 1.1. But it was SRO tenants and that’s a whole—I don’t know if you even know the shit we go through with those tenants. They fight, they fight, they fight and then the bank took it away like a week ago. And that was the only one that we lost. I never lost any property, I never lost in the real estate market. This is the first loss I’ve had.

  SROs are unreasonable. The problem is the people that make $5,000 a week pay $400 in rent. It just does not make sense to me at all. I mean if you make $500 a week: okay, fine, I understand. If you make two, three grand a month and have two, three kids, I understand. But if someone that makes that much money can just live off of you without …

  And if you have a building that’s rent stabilized, it’s messed up: I have a building down on Dean Street, it’s almost a $3 million building and my tenants live over there like animals. Sometimes they rent it out to someone else and we can’t do shit because you’re allowed to have a roommate. That’s the part that bothers me the most. They pay $250 in rent when I could get $2,500 or $3,000 for that apartment. I offered them $100,000 to leave and they said no, they want $500,000. And when you go to court with one of them, or you start messing with any of them—oh, god forbid. They start new lawsuits. If I buy a building today and it’s rent stabilized, I could all of a sudden find myself in a lawsuit for a million dollars. Why? Because the old landlord overcharged the tenant, let’s say, $100 or $200 dollars a month. Now he comes back and sues me for all the rent the owner used to take. That’s why we don’t usually buy buildings with tenants because if you do you have to go talk to them. They actually bring down the value of the property almost 60 or 70 percent.

  If there are rules, I understand. Someone doesn’t make money, or they’ve lived over there for five generations and he wants to stay—that’s okay. No problem, that makes sense to me. But if you make so much money—I had someone who was an airline pilot! He was making $200,000 a year, and he wasn’t even living there. And I tried to explain it to a judge. It took me a year.

  Ephraim stops the car in the middle of a residential block to roll down his window and light a cigarette. The street is lined with brownstones, most of which are in various stages of destruction and recreation, rented Dumpsters stuffed with shards of demolition and pallets of new Sheetrock passing by. Smoke shoots out of Ephraim’s nostrils. There is a young Hasidic man standing across the street. He and Ephraim make eye contact: Ephraim waves casually, if not reluctantly, prompting the young man to cross the street with inordinate enthusiasm in his step. He stands just outside the car, slouched over with his hand resting on Ephraim’s car door. A long silence follows then finally:

  Ephraim: Everything okay? You haven’t gotten me anything yet.

  Young Man: I’m still stretching—it’s early.

  Ephraim: Bring me something. You have my number, right?

  Young Man: Yeah. (Pause.) You don’t have anything for me?

  Ephraim: No. What do you need?

  Young Man: Multi-families.

  Ephraim: Ay—you do multi-families? I thought you were selling multi-families.

  Young Man: No, I’m buying also.

  Ephraim: No. No, I don’t have anything. For now.

  Young Man: You don’t have anything, huh?

  Ephraim: No.

  More silence while Ephraim makes a point of his disinterest, playing with his phone. Then:

  Ephraim: If I have something, I have your number.

  Young Man: Okay.

  Ephraim tosses what’s left of his cigarette and moves his hand toward the button to roll up the window. The glass emerges from the door with an electric hum and the young man takes his hand away. Apparently everyone’s buying.

  They’re like the new kids coming in.

  He laughs.

  He breaks for a few more phone calls—many are carried out in Hebrew, though the profession-specific words seem to be stuck in English: brownstone, skim coating, Prospect Park. There are a couple of minutes of silence in which Ephraim first seems as though he’s contemplating his next call but soon I realize he’s just fiddling with his phone. I ask him what the first thing is that he considers when deciding whether or not to buy any given building.

  We’re small, a couple properties here, a couple properties there. We don’t do mega, mega, mega buildings. So we look into places that haven’t caught on—we just did a place on Nostrand Avenue. People are not even there yet. We put in $600,000 and everyone was laughing at us. “It’s crazy, you’re over there. A building for yuppies, white people? It’s not going to work.” The building was full of tenants—$1,300, $1,400 tenants. We paid every tenant the average of twelve, thirteen thousand dollars to leave. I actually went to meet them—lawyers are not going to help you. And we got them out of the building and now we have tenants paying $2,700, $2,800, and they’re all white. So this is what we do.

  My saying is—again I’m not racist—every black person has a price. The average price for a black person here in Bed-Stuy is $30,000 dollars. Up over there in East New York, it’s $10,000 dollars. Everyone wants them to leave, not because we don’t like them, it’s just they’re messing up—they bring everything down. Not all of them.

  Most of them don’t believe you at first. Oh, you Jewish people you’re a bunch of thieves you’re never going to give me my money. But once you start actually having a base of people who know you, who you actually gave the money, it’s better. Sometimes it’s really tricky because you’ll have one person willing to leave for $2,000 and another wants $20,000. And the second this guy finds out that guy is getting twenty he says, “Hell no, I’m not leaving. I want twenty, too.”

  They don’t know—here he lowers his voice—that even if they get the money and they left, they could always come back. They don’t know that part. And it’s so scary sometimes because they could come up in the middle of construction and say, “It’s my property, I didn’t understand what I was signing, and I want to come back.”

  But they don’t know that—their brain doesn’t work that way. But some blacks have an attorney and everything. So I try to make them happy, even if they’re going to go for $7,000 or $8,000, I’d rather give them an extra grand so they’re happy and they’re not going to think about it too much.

  Again, I don’t want to be a racist, but when I have a building—I can’t even say it because it’s not going to sound right.

  He lowers his voice again:

  If there’s a black tenant in the house—in every building we have, I put in white tenants. They want to know if black people are going to be living there. So sometimes we have ten apartments and everything is white, and then all the sudden one tenant comes in with one black roommate, and they don’t like it. They see black people and get all riled up, they call me: “We’re not paying that much money to have black people live in the building.” If it’s white tenants only, it’s clean. I know it’s a little bit racist but it’s not. They’re the ones that are paying and I have to give them what they want. Or I’m not going to get the tenants and the money is not going to be what it is.

  The scary part about doing this is if they start realizing, if the black guys start to realize how much the property will sell for. This is a new thing now, the past year. A million, two million dollars—it’s crazy, crazy numbers. None of them realize yet—some of them do—the amount of money you can get. The scary part is they’re going to realize they can get the same exact house in East New York for $400,000, $500,000 and they can get paid $1.5 million for their home in Bed-Stuy, they’re going to start dumping houses on the market and the market’s going to be flooded and it’s going to cool do
wn. It’s already cooling down.

  While Ephraim has shown that he does not let tenants disrupt his business model, sometimes there are other considerations—things more important than the drive to maximize a building’s capitalization:

  It’s so hard to get empty buildings. When you have an empty building it’s like gold. So we never flip buildings. One building we sold because in the Jewish religion there’s a weird thing where you don’t cut down a fruit tree. Some people really don’t give a shit about fruit trees. But most of the Hasidic Jewish people will not cut down a fruit tree. There’s one house in Borough Park where they cut down a fruit tree and there was nine fires over there in the last two years. Sometimes weird stuff happens. So we had a building, and the only way it’s working for us is if the fruit tree comes down. We spent $50,000 doing the plans and then found out there’s a fruit tree. We didn’t know about it. So we had to sell the building. It’s the only way I’m going to sell a building. A building is not really a selling thing. Buildings are for keeping.

  In Ephraim’s world of landownership and land development, buildings, ironically, do not always have a price tag but the people who live in them do.

  I live in Borough Park. I have three kids and one on the way. I don’t even have a house there. I rent. It’s weird. It’s just so comfortable to have a landlord. Something’s wrong, come fix it. No one understands it. My wife doesn’t understand it. Every once in a while she wants to see the properties I’m building, and she’s like, “I wish I could live here, I wish I could live here.”

  I’m always thinking about buying but it’s so expensive. You pay for a simple house, 1.1, 1.2, and for me it’s so hard because I’d rather take that money and get a building and get $10,000 rent a month. It’s not greedy. I’m a simple man; my car’s not—it’s a normal car. For the money I make, I could have a Porsche, a Lamborghini, driving around all day and I’m not even going to feel it. But I don’t want people to look. I was going to try to get the Audi, I don’t know if you know the Audi S? Nice big aluminum. I like speed, I like feeling the rush, I want to go fast, but I couldn’t buy it because then people are going to look at it, and the attention—we’re very simple. Everything we do is simple.