You Can Never Pay Too Little, For a Bad Piece of Real Estate

I didn't come up with this one, but I really wish I did, simply because it's one of the best pieces of advice you'll ever get. A real estate guru by the name of Pat Chiacchia was the one that said this first and it's one of real estate's golden truths (after "location, location, location", of course).

What it means is, a bad site is a bad site, no matter how cheap you can get it.

But what makes a bad site? Well, a lot of things…visibility, access, contamination, physical trade barriers…you name it. The list is long and unless you do your homework and pay attention to details, you could easily be stuck with one.

This is why we suggest that you create a market development plan first. It will not only help you understand your customer and where they live & shop, but also the fair market values of sites in the area.

Secondly, you will hear us often suggest that you should "live" the sites that you're interested in leasing. That way you can uncover the location's strengths and weaknesses before you commit to the site and hopefully avoid making a mistake.

It’s a fact that in the US, people are making more people all of the time (our population is growing) and they all eventually need a place to live, work, shop and spend whatever free time they may have. But in real estate, a rising tide does not lift all boats equally. Some areas decline while others improve. Predicting these trends are the things that great fortunes are made from.

Of special note: If you find a site that's environmentally contaminated (i.e., petroleum, asbestos, lead, heavy metals, etc) run from it; unless you have unlimited resources, of course. Cleaning up contaminated properties can suck the life and resources right out of you.

If the site is an “at risk” location - former gas stations, dry cleaners, factorys and a whole host of other uses - you should have the owner order a Phase 1 & 2 Environmental Assessment Report from a reputable environmental assessment firm on the building and property before you commit to them.

If it comes back and identifies areas that are contaminated, always have the owner do the cleanup BEFORE you take possession and have them provide you with written proof of the work that was preformed.

For the average restaurateur or retailer, there are lots of things that can make a site "bad", but no price is low enough to ever make it better.

Do your homework.

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