Buy On The Line, or Swiss Cheese?

On today’s show we are going to talk about one of my favourite real estate development strategies.

I call that strategy Buy on The Line, Move The Line. So what is that line? On one side of the line is a hot gentrified neighborhood. On the other side of the line is an economically depressed area.

Often, these lines get developed and moved. Over the course of time, a few properties get left behind. The net result is a form of Swiss Cheese. The question is whether the holes in the Swiss Cheese represent an opportunity or not?

In my experience, filling the holes in Swiss Cheese is more difficult than moving the line. The reasoning is simple. When you are surrounded by more expensive properties, those derelict properties take on the aura of being in a more expensive area.

The land value goes up because the properties have been improved all around them.

The reason the buy on the line strategy works so well is because when you are on the wrong side of the line, you are considered to be in a bad area. Bad areas are worth less. But you know that you’re going to improve the entire area and in so doing, you’re going to change the market perception of that location.

If you only do one or two properties, it won’t be enough to convince the market that the line has moved. But when you improve maybe 5-6 properties, or an entire block, the marketplace takes notice and says “Oh, the line has moved”.

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Host: Victor Menasce

email: [email protected]