When in Florida I visited my friend Rachel. She had a pretty cool father who I ended up talking with one morning before going out into the sun. When he found out what I did, he started telling me this really inspiring stories about real estate deals that had been done by people he had met. For some reason two of these stories stuck with me as I found them very inspirational. So, first story now, second one tomorrow?
First one is about a commercial building with a good location close to a main road. The background was that the people who had owned and ran the property before had all ended up with financial problems after because the businesses in the building never lasted. The place now looked sort of dodgy and still didn’t fetch any good businesses, even though it was in a good location.
Eventually the property ended up on the market again after yet another failure and that’s when the investor Rachels father knew came into the picture. As the sellers really wanted out the price would eventually drop to levels way below half the average sq.f. market price.
To find out why nobody wanted to buy the place this investor started doing some investigations. It didn’t take long for him to find out pretty much all businesses that had tried to run something in the building had failed and it had a bad reputation. The investor was the kind of man we want to be. Instead of walking away, he got triggered. He asked himself why all business had failed and eventually came to the conclusion that it was a pretty substantial lack of parking space on the property. As there was no more space available on or around the lot most people figured that was it and moved on. But not this investor.
This investor used the lack of parking and the properties poor reputation to get the price down even more and ended up buying the it for a quarter of its market value. What he did then is so simple and clever that I will admire him forever. Any guess?
The investor then took down 20% of the building to free space for parking. The ration of business space and parking was then the same as the best places in the neighbourhood and the property was soon back on its feet with businesses running perfectly as tenants.
The result was a 25% smaller place. Since he bought it with a 75% discount that meant he still made a good 50% profit within no time. Clever guy!