Real Estate Investing Basics

Into Real Estate? Then Get Comfortable Operating in a “Grey Zone”

Expertise: Business Management, Real Estate Marketing, Real Estate Investing Basics
25 Articles Written
Real Estate

Let’s face it, real estate is a world of grey.

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We constantly operate in a grey, hazy zone.  It’s never set in stone, simple, or clear cut.  Given the amount of moving parts, politics, decisions, and unknowns we’re faced with on a daily basis, our world is one where you have to feel ‘on edge’ almost all of the time.

Several real estate developers reminded me of operating in this grey zone recently. They’ve been rather successful in their careers and reiterated that, if you’re uncomfortable working in the ‘hazy middle’, real estate just isn’t the place for you.

I couldn’t agree more. So I pried a little deeper to tease out this notion.  If you can relate to the following, you’re operating in a grey zone. But don’t worry, this is healthy in our real estate realm.

  • Do you have an empty lot of land that has dozens of development opportunities–where to start?
  • Are you looking at a property and–GASP–considering paying full retail value because you sense a greater potential?
  • Do you have to face an unknown permit or architectural review board?
  • Do you have a rental market that’s changing by the minute (if you live in Northern CA, 100% yes here)?
  • Are you honing in on the colors, materials, styles, and living/working/shopping preferences of your customers (your renters, buyers, etc.)?
  • Have you viewed an empty parcel and asked – how can I improve this?
  • Are you concerned with how quickly a property can absorb?
  • Do you want to acquire a large parcel of land and want to subdivide into an amazing project?

The points above are examples from my world. I kept this one short and sweet because I want to hear from you.

  • What are examples of how you operate in a grey zone?
  • Do you currently have renters you just aren’t thrilled with?
  • Are you inundated with high construction costs on a new project?
  • Is your market overly competitive?
  • Are you concerned about how best to tackle marketing?

So let’s hear it–what examples do you have that don’t quite have clear cut solutions?!

davidyuweb

Kyle is the creator of realestate-java.com, a blog dedicated to commercial real estate development. Kyle is also a real estate development associate with Blu Homes, Inc. His company focuses on building sustainable homes throughout the country.

    Mike Gibson
    Replied about 6 years ago
    Here’s what I’m currently struggling with: I tie up a property with an option for 60 days. However, one of the clauses in my option basically says that it is automatically renewed for 60 day periods unless I cancel it in writing, which means that I have the property perpetually tied up until either I buy it, or I release my option for a fee. My experience is that most people see the 60 days, and don’t realize that it’s for successive 60-day periods until I cancel it. The ‘gray area’ that I deal with is, do I assume that people have read the option and understand it before they sign it, knowing that they may or may not understand the ramifications of that clause. So, ultimately, what I’m dealing with is, am I taking advantage of people because of the wording of my option that benefits me.
    Kyle Zaylor
    Replied about 6 years ago
    Hi Mike–interesting one with the option agreement. If you take a stance that, by emphasizing the need to do their homework at the start, I don’t think you can go wrong.
    Mike Gibson
    Replied about 6 years ago
    Thanks, Kyle – That’s kind of along my line of thinking. Just like when a buyer sells a mortgage, or when they apply for a credit card, very few read and understand all the terms and ramifications of the different clauses, but they are willing to put their name on the line. Nothing is hidden…but their laziness could cost them at some point in the future.
    Mike Gibson
    Replied about 6 years ago
    I meant, ‘signs a mortgage’, not ‘sells a mortgage’.
    Kyle Zaylor
    Replied about 6 years ago
    True. You also want everyone to fully understand the terms too. So if you sense they don’t, it might take some extra coaching and explaining.
    Lisa DuFaux
    Replied about 6 years ago
    You touched on my gray area when you mentioned a competitive market. I am finding myself in the position of deciding whether to settle for a little less profit on my rehab deals as opposed to getting no deal at all. Almost every property I make offers on is in a multiple offer situation. I have gotten outbid so often that I have started to pay a little more than I would like. So far I am still making a profit, just not the $20k I would usually target…more like $15,000. Still, I think that’s better than not getting the deal but it does feel like it raises my risk somewhat.
    Kyle Zaylor
    Replied about 6 years ago
    Hi Lisa, Competition is such a hard one to understand–couldn’t agree more! On one hand it’s actually a great sign because it shows there’s opportunity when others are playing in the same sand box. On the other hand, as you mentioned, it reduces the pie quite a bit. Do you have any past projects or strategies that had the best of both worlds (low competition, high investment/return value)? I wonder if there’s a way to veer slightly in a different direction in your market when competition is so high.
    Lisa DuFaux
    Replied about 6 years ago
    Hi Kyle, Yes, I’m working on a low competition/high return deal right now. It’s one I got from sending a letter on an abandoned property – the first deal I’ve gotten from my direct mail! I am going to try to reduce the competition by focusing more in that area than the MLS.
    Kyle Zaylor
    Replied about 6 years ago
    Great to hear. Keep us posted!
    Lisa DuFaux
    Replied about 6 years ago
    Hi Kyle, Yes, I’m working on a low competition/high return deal right now. It’s one I got from sending a letter on an abandoned property – the first deal I’ve gotten from my direct mail! I am going to try to reduce the competition by focusing more in that area than the MLS.
    USA Investment Properties
    Replied about 6 years ago
    Finding the property that perfectly suits your lifestyle has no formula. Some people get their dream properties by chance and others land on the right buy only after a long time of patiently searching. Listed below are essential pointers on how to look for properties.