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T HINK B IG

property from a bank for $1.4 million—the property was that good.
So Sol now owned a building he always coveted, and had pocketed
$400,000. The seemingly exorbitant price in reality was an incredi-
ble bargain. By overpaying, he made sure the property stayed off
the market. There’s an excellent lesson here for the small investor. If
your instinct tells you a piece of real estate has your name on it, and
is significantly undervalued, go for it and forget the price tag!

There will always be a demand for a prime location, and people will
always pay a premium price to get a prime location. You have to
avoid the trap of looking only at the average selling prices in your
local real estate marketplace, and be willing to “overpay” if overpay-
ment is warranted. In other words, the so-called “average market
price” of property is computed based on limited general information
relating to an entire neighborhood, not the value of a specific prop-
erty which may have a desirable size and a better location. You may
have to pay 50 percent to 100 percent more to get a good property in
a great location, but it’s worth it if that will allow you to attract su-
perior tenants or buyers, and if you can improve the site to get max-
imum value out of it.
Trump World Tower was a perfect example of overpaying for a
prime location. When Trump found it, the property contained an
outdated two-story office building owned by an engineering frater-
nity. The amount of money they wanted for the site was outrageous.
But Donald Trump paid it, because he knew other buildings on the
block had unused air rights that could be purchased at reasonable
prices and then he could build something extraordinary.
Trump is always willing to pay a premium for a prime location,
but he also knows that “there’s no right price for the wrong prop-
erty.” He will not buy something just because it’s cheap, if he can’t
see a way to add significant value. The reality is that in small or

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