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Some People Just Have the Midas Touch, Invest Myth
By eric | November 27, 2007
It is easy to think that people who are successful investing in real estate have some sort of Midas Touch. But there is no such thing. They are just people who see opportunities and know how to make them real and profitable.
Take any ten-acre piece of land. Let’s say this parcel is flanked by significant retail presence on all sides and most of the big retail chains are represented in adjacent centers. There’s also a large microchip manufacturer nearby that employs 1,000 people.
Ask a tract home builder and he’ll see forty single-family homes on that ten acres. Ask a custom builder, and he’ll see ten luxury estates. Ask a retail commercial developer and she‘ll see a new shopping center anchored by two large retailers, with specialty stores and restaurants as fill-in. Ask a multifamily developer and she‘ll see a 150-unit apartment community with clubhouse, pool, and workout facility. Another commercial developer who specializes in office space may see a three-story office building. In other words, everyone sees the property differently, and each vision will deliver a different level of payout—some better than others.
The important part of recognizing opportunities is common sense. People who seem to have the Midas Touch use their common sense when looking at property and opportunities. In the example here, common sense tells me that building custom homes would be a tough sell on a ten-acre parcel flanked by heavily trafficked retail. Single-family tract homes may be just as challenging. Additional retail may be viable if the developer can lure high-quality anchor tenants to the location. But they may already be operating in other nearby centers. By far in this example, either multi-unit housing or office space are the most viable options. Why? Because of the nearby employment base, the absence of apartments in the area, the proximity to retail, and the lack of office rentals. The developer in this instance who builds offices or apartments will have the best chance of success and will appear to have the Midas Touch. There’s no magic, just common sense.
How do you know you’re relying on your common sense? It’s easy. If everyone you talk with is having difficulty seeing your vision for a property it can be either one of two things: A revolutionary idea that will prove everyone wrong. Or a bad idea that everyone recognizes as a bad idea, except you. In 99 percent of the cases, the latter proves to be true. Remember, if you have to hard-sell your vision for a property to everyone you share it with, it is likely your project when completed will be a hard sell, too! And that will cost you money.
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Topics: Commercial, Investment, Land, Property |
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