Making Money With Unique Properties
By Steve Gillman - 2005-2013
Real estate in general is a classic "inefficient market,"
which means information is not uniformly available to everyone
at all times, as it is (for the most part) with stocks and other
efficient markets. In part this is because for all of the similarities
that pieces of land or homes or commercial buildings might have
on paper, there are no two that are really the same. One block
over might be worth an extra few dollars per square foot. In
other words, putting a price on a house or a farm or a strip
mall is always a bit of art as much as science.
This is especially true with unique properties that cannot
easily be compared even in the most basic ways. For example,
I once lived near a house that was shaped like a flying saucer.
Do you think a buyer will just count the bedrooms and bathrooms
to compare this possible home with others in the same neighborhood?
Some homes have insanely steep driveways. Others are built underground.
If the unique features they have are in demand, these homes can
sell for a premium. If not, they will sell for less. In almost
every case, however, they take more time to sell because of their
This inefficient market means that it is especially difficult
to put a price on these properties. I suspect that with some
of them even trained appraisers would be 50% apart on their estimate
of value. That's a problem on the one hand, both for appraisers
and for owners who cannot have any real faith in the guesses
the professionals will make. But where there is a problem there
is almost always an opportunity as well.
High potential risk can also mean high potential reward. And
for an investor who gains experience dealing with these oddball
investments, the risk goes down, making potential profits even
higher. In other words the investor who can most accurately predict
what these properties will sell for (or most accurately guess),
has the least risk and the most potential to make a profit. Not
many sellers or buyers will have experience in pricing flying-saucer-shaped
homes or underground hideouts. This means that you, as an investor
who studies the possibilities and is willing to make low offers,
have a good chance to buy at a good price and sell for much more.
A True Story About a Unique Property
The billionaire Richard Branson, founder of Virgin Records,
Virgin Airways and dozens of other businesses, was in the Virgin
Islands with his wife, looking at small islands for sale. As
he told the story, they had no intention of buying one, but their
trip was paid for by the real estate company as long as they
were looking. It was a way to get a vacation at a time when they
were short on cash.
One particular island caught their imaginations, however.
It was lush and green, with a lake, and a nice beach. Branson
decided that he did want an island after all. He asked about
the price, and was told it was three million pounds. He offered
150,000 pounds. The agent repeated the asking price, and Branson
said he would pay 200,000 pounds, and no more.
According to Branson, the vacation was over at that point,
and their things were put outside of the hotel room. Offering
93% less than the asking price apparently offended the agent.
However, the story didn't end here.
Later, back in England, Branson looked up the owner of the
property who, interestingly, had never been to the island he
owned. He was anxious to sell, so Branson offered 175,000 pounds
-- halfway between his previous two offers. The offer was rejected.
But several months later, after no better offers came through,
the owner agreed to accept 180,000 pounds, and Branson found
a way to borrow the money. He bought the island for just 6% of
the asking price.
This is the kind of reward you can get for shopping in inefficient
markets. I imagine that even at 300,000 pounds the island would
have been a great deal, and anyone who offered that during those
three months of back-and-forth between Branson and the owner
would have gotten it for that. You might look like a fool for
asking for a 90% discount. But maybe looking like a fool is a
risk worth taking for deal like that. You never know until you
With unique properties, nobody is really certain what the
value is. This is why if you're are willing to take the risks,
and lower the risks by knowing more than the other players, you
can make a lot of money with them.
Of course the other side of the process here, if making money
is your goal, is the selling of the property you have bought.
You have to have a plan for that. You also need the ability to
be patient, since these types of real estate might take as much
as several years to sell.
One way to make this work with unique homes is to live in
the home while you are preparing it for sale and waiting for
the right buyer. If you live in a house for two years you also
get to pocket all of the profit tax-free when you sell. meanwhile
you save the cost of holding onto an empty house while paying
bills on another residence.
We had a house once that had a little house-like structure
in the back yard, with two small rooms that would make a perfect
artist's studio. It also had 220-volt power and a mechanics pit
in the garage, and a cement-block root cellar. We sold it for
a small profit when we moved, but perhaps we could have done
better marketing the home to artists, mechanics, or survivalists.
Think about who might value the unique features of a property
before you buy it, and try to have a plan for marketing to that
group of potential buyers.
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