Profitable Recovery

Profitable Recovery

Devin Rutkowski converted sweat equity into a collection of rental homes in one of Sarasota's most attractive neighborhoods.

By Sean Roth

Real Estate Editor

Devin Rutkowski loves Laurel Park. The small neighborhood in the bottom half of downtown Sarasota has recovered nicely from urban decay in the mid-'90s - some would say because of Rutkowski's activism.

Today, Rutkowski, through his Laurel Park Ventures Inc., owns and operates more than 65 rental units in about 26 buildings in Laurel Park and Gillespie Park. On a smaller scale, Rutkowski is also a homebuilder - building between two and four neo-traditional custom homes a year.

While Rutkowski now leaves daily community activism to others, he worries that Laurel Park's biggest challenges could be ahead because of government inaction and residents who are opposed to change.

Rutkowski started out at St. Petersburg Community Junior College, where he planned to become an architect.

"I met a Ringling student, and we planned to get married," Rutkowski says. "The plan was I would put her through school and then she would pay to put me through school. Well, four weeks before the marriage, she said she didn't want to get married."

And Rutkowski realized that he really didn't want to be an architect. He says that less than 10% of registered architects were designing buildings, the rest worked full-time filling governmental requirements - basically pushing paper.

Instead, he became a licensed contractor.

In 1986, Rutkowski started providing freelance AutoCAD, a software system for computerized architectural design and drafting services.

"I ended up doing freelance CAD work for six years," he says. "Selling my services to architects and builders. My salary went from $9 an hour to $15 to $30. I was mainly designing malls. But I started to notice that my window of opportunity was quickly closing. Now there are high schoolers that can do what I did."

So Rutkowski pushed another service.

"I started offering renovation discounts," he says. "I would say, 'Hey I'll design it for free if you hire me renovate it.' "

But renovation just wasn't the business model for him, primarily because of the tight budgets and profit margins.

Then luck shined on Rutkowski in the unlikeliest of ways: his Jeep Cherokee Laredo was stolen.

With an insurance check for $10,000, Rutkowski bought his first property in Laurel Park: an older house on Laurel Street with a rental cottage and a large garage.

"It looked like hell," he says. "It had clearly been owned by an absentee owner. But we cleaned it up."

It took a 3-2 vote of the city commission, but he gained permission to operate his CAD business from the garage.

Not that Laurel Park was a dream neighborhood. It was run down with all the problems of an urban community.

"There was white flight," Rutkowski says. "In response the city slapped a multifamily zoning on it, which turned the cottages into cash cows for investors. It was majority rental and minority owner-occupied. They were really milking these things. If you tell a guy he can split up a home into small units and make $1,000 to $1,200 a month, he's going to do it. There were also investors who thought if they held onto their property long enough someone would build a big building there, and they would make a huge profit."

In 1990, Rutkowski joined the neighborhood association. A year later he was the president. After contacting the city commission, Rutkowski convinced the commissioners to agree there would never be large buildings built in the community.

"After that some investors sold their problem properties," Rutkowski says. "Some of the others (problem owners) we would harass. We would call the city or the cops."

In 1993, the city contributed $300,000 for a neighborhood park.

While Rutkowski focused on activism, his renovation business was failing. He eventually shut it down. "I simply put more time into community activism," Rutkowski says. "(Activism) was taking over all of my time. The remodeling was really labor intensive and not necessarily profitable."

His wife made money at her preschool center so the immediate paycheck wasn't necessarily needed, he said. The Rutkowskies also had equity in their home.

"I would find out when a home came on the market," Rutkowski says. "I would call all the friends I knew and try to get them to buy. They would say, 'Isn't there crime in that neighborhood?' and I would say 'Don't you know there is crime on Longboat Key?' They never would (buy); although now they are kind of kicking themselves."

So Rutkowski used the equity of his first home to buy another investment home. He used that equity to buy another property and so forth.

"I just felt I just had to do it," he says. "Failure was not an option. It was a lot of hard work."

The city also spent about $300,000 putting in a streetscape along Osprey Avenue.

Then the neighborhood turned around. People starting buying homes to renovate. Property values have risen steadily since then - doubling and even tripling. Now, the original home that Rutkowski purchased for $71,000 is worth about $525,000. That's a 639% increase in value over 14 years or an average of 45% a year.

But for all the improvements, Rutkowski is still not satisfied.

He says that Laurel Park's success has actually stirred up pockets of resistance to change - both from residents and from city officials. As an example, he points to the downtown master plan that completely circles the neighborhood - omitting it.

"I protested," says Rutkowski. "I said, 'Hey guys, Why isn't Laurel Park in this plan?' They told me, 'Oh, you guys have made it.' "

Rutkowski argues that if the community were included it would be zoned as "downtown neighborhood" rather than its current residential zoning. That would allow some light mixed-use uses as long as the majority of the structure is designated for residential use.

"I have a guy who wants to produce Web sites," Rutkowski says. "Now he can't work out of his home, because it's not in the plan. The city won't even have a discussion on it. It is not even open for debate."

Rutkowski further argues that the zoning change caps Laurel Park buildings at two stories while the commercial zoning that surrounds it can go up to five stories. In response, the city commission ordered that any building within 100 feet of Laurel Park is capped at three stories.

Rutkowski who recently purchased property in Gillespie Park says there are also problems from a business perspective.

"I don't know why they are permitting mixed use in Gillespie Park, where there is no market for it, when the market exists in Laurel Park," he says. "I own land up there (Gillespie), but I can't make the numbers work. I could sell it in Laurel Park tomorrow. The city has frozen us in time. The rest of the city will develop in new urbanism but not us. Redevelopment is going to occur, it just isn't going to be new urbanism redevelopment. We could be the show place for new urbanism in the city. Instead, we will have offices that look like mega houses with no urbanism elements. They (city officials) have gone back and lowered the density and the height in Laurel Park. Most recently, the city indicated that even multifamily is no longer desirable ... in a neighborhood that has a great tradition of quality multifamily development."

Those limitations, Rutkowski contends, keep the neighborhood only average.

"This could be a really spectacular neighborhood," he says. "This could be like Thornton Park in Orlando or Hyde Park in Tampa. My fear is that 10 years from now there will only be multimillion dollar homes with big walls around them in Laurel Park.

"Is this as good as it can get? That's sad. It could be so much better, without ruining the neighborhood. Just like one of the motivational speakers used to say, 'How high does a tree grow? As high as it can.' "

Going forward, Rutkowski says he is focused on building new homes and searching for areas to develop mixed-use projects in the master plan areas outside of Laurel Park