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Real Estate Investment Vision: Economic Conversion

Mike Farmer
3 min read

W.P. Fuller Deco by Omar Omar

We all know about changes. Change happens all the time. The city you’ve lived in for years looks nothing like it did 5, 10, 20 years ago. Ride around the city, now looking at it as an investor, and everywhere you’ll see once successfully operating buildings now sinking into disrepair, or the businesses operating out of the buildings are not doing the business they once did, or older residential areas that were once popular are now no longer popular.

One thing you can be assured of as an investor who is striving to gain vision, is that if you achieve vision, you’ll be way ahead of the game, because most people take what is and look no further.
Many investors invest because they like the current use of a property — it’s got cash flow, tenants, everything seems to be fine, so buy it and let it run its course — make a few improvements, increase rent, so on and so forth. But what COULD the property be with a little knowledge and a little imagination? Economic conversion is simply taking something that is one thing and making it something more useful and profitable.

All those properties around town struggling to exist because some investor back when bought it and has never considered another use for the property, what COULD they be? Since I started writing articles for Bigger Pockets one of the main themes has been getting to know your area — zoning, planning, trends, etc. So, now you’re informed — what next?

Well, if you want to be different and creative, you’ll concentrate on vision and economic conversion– see what others don’t see, imagine what others have missed because they’ve settled for present use. Because things do change so rapidly in most areas, a smart investor must be imaginative and look further, must anticipate the next stage, the next trend, the next demand or need. Then with your knowledge of the area, you’ll be able to see how an old house would make a great restaurant, or the old mom and pop hardware store could be an office complex, or the vacant lot on the edge of town could be a great location for a condo building, or the acreage by the railroad track on the west side would be perfect for flex warehouses.

So, you know the area and you’ve looked further, checked the building plans for the community and realized the flex warehouse is a good idea because of your knowledge of the need and the lack of building to meet the need — if you do it, you’ll be one of the first and there won’t be a glut. Vision means looking further than present needs or following the present trend, it means anticipating the short term future need and anticipating the next trend.

This takes not only vision and good information, it takes guts. You have to be brave enough to trust your vision, or smart enough to distrust it (partly joking). But, if you’ve done your groundwork and it looks like a winner, the next step is DOING IT. It should be a conversion that makes sense and is not so costly as to make it difficult to overcome. It has to be sold to lenders, so you need to be sure you can explain and give a rational presentation of your vision. You need to take enough time to make sure, but you need to act quickly if it is, indeed, a good idea, because word has a way of getting out once you start checking different local departments and asking pointed questions. If the conversion will take structural changes, you’ll need to be sure they are practical and not risky. But it all goes back to due diligence. If you’ve made your preparations and streamlined your operation, you ought to be able to tie up the property and perform your due diligence and make it happen quickly.

All this reemphasizes the importance of preparation. All the hard work you’ve done gathering information about your area, preparing yourself psychologically, putting together a system, building a team (either figuratively using other professionals or literally creating a small company), will now come together and allow you to act. What a beautiful feeling it is when practice, preparation and hardwork pay off in action and success. It’s indescribable.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.