Real Estate – It’s NOT about Property, It’s about People

With over 18 years of experience in commercial real estate, I have come to learn one thing which many investors (savvy or otherwise) overlook. Real estate (or real property) is not only about the asset, it is about people. We can not create it (higher power has done that for us). We can not destroy it (although lately it seems like BP has done a good job of trying). All we can do is improve upon it. 

The attraction to a particular piece of property is ALL subjective. This applies to commercial as well as residential property. A person chooses a place to live based on many factors; location (urban/suburban), proximity to transportation, physical aesthetics, budget and simply how a property makes them feel. The same is true with office and retail. An owner of a business will lease space based on many subjective parameters besides location and functionality (cache of surrounding neighborhood, interior design, etc.). We also shop at particular retails centers for similar reasons. 

As a consultant and broker, one of the primary skills I need to have is to know how to “read” a property. A read is the ability to get a feel for how a property is positioned in: 

• its surrounding location
• physical presence and build quality 
• functionality, and
• the emotions the property induces from its users

It is relatively easy to figure out that a Class A property, in a great location, will be desirable to most users. The trick is to figure out the not so obvious. 

Like many brokers I strive to obtain the crème-de-la-crème assets to sell. I have had my fair share. However, it should be pointed out that great assets are not always wrapped in a pretty package. Many successful investors know this and have become wealthy by being able to read a property and know its potential. For example, I am selling an apartment community located in Langley Park, Maryland. Its location is known as an older, blue-collar neighborhood, with a high population of immigrants. The property itself is post WWII construction with mostly flat roofs. From an aesthetic standpoint, it ranks pretty low on the list as compared to other apartments in the DC area. So, what makes this such a great property? What’s the read? 

Can You Read This?

On the surface, most would drive by this property and say to themselves, “why would I want to own that?” I’ll tell you why….first, look at its resident base. They are mostly immigrants. Most work in some sort of service industry. They are cleaning people, construction workers and caretakers. They work hard. They are paid in cash and have little debt. They work for the opportunity to help their family. Many send most of their earnings back to their native countries to help family members left behind. These residents want clean, affordable living with NO FRILLS. The more money they can save and send home, the better. 

Secondly, because these residents are paid in cash, so they pay rent in cash (or money order). This property has little to no “bad debt”…in other words, no bounced rental checks. Also, because many of these residents do not want to cause trouble (for obvious reasons), they pay on time. 

Location is another important read. Most of the residents do not have cars. The apartment community is located on a major thoroughfare with a bus stop directly in front of the property. Even with many surrounding competing communities, this property is preferred because it is a shorter walk to the bus stop in the rain. To a lot of us this would not have been a consideration. But, to the demographic the property serves, this is a huge advantage. Also, the property is in walking distance to over 400,000 square feet of neighborhood retail. Grocery shopping and convenience stores are just steps away. 

The last important read of this property is its ability to market itself. Word of mouth marketing is the most efficient type of marketing available. The property rarely has to advertise. It is commonplace for the residents to tell their friends and family of the availability of this clean affordable housing. The property stays nearly 100% occupied with no specials given.

The investor who has the ability to look deeper than the surface and reads the opportunity, is the one who reaps the benefits. I guess reading real estate is similar to reading people….don’t judge a book by its cover….dig deeper and you may just find the jewel you were looking for. Remember, real estate is not about property…it’s about people - and their needs for it.