What is the most important feature you look for in a property

Larry Feldman: We want to buy a platinum location. We can change anything about the building, physically. We’ve even, in our history, reclad entire buildings, end to end; re-windowed them; we’ve gutted them. We’ve done all kinds of things to buildings, but the one thing we cannot change is location. So, that’s item one – we buy platinum locations.

One of the biggest single mistakes that novice investors make and, I would say, even a lot of sophisticated real estate investors make is they look at what is the initial going-in cap rate, which is a fancy word for saying, “What is the initial yield?” They focus on that over all other attributes of the property. That is actually about seven, or eight down on our list of importances.

When friends of mine say, “Oh, you’re in the real estate business, Larry. What do you look at when you buy real estate? What’s the most important thing?” I say, “Well …” and they say, “Do you know anything about my neighborhood and buying a house in my neighborhood?” I laugh, because I know nothing about their house values, or their neighborhood.

But I said, “I do have one piece of advice for you. I want you to find the absolute best location you can find in your neighborhood. By far, the best school district, the best, most desirable location. Now, go find the worst house on the block; the one that’s the most rundown; the one nobody wants. That’s the one I want you to buy.” That’s sort of our philosophy with buying office buildings.