The Barbell Theory in Real Estate:
Early in my career, I listened to someone speak about how he spots emerging areas, big or small. He called it the "Barbell Theory".
It's simple yet powerful.
Imagine a barbell, each end of the bar well holds all the weight & density.
For real estate, imagine that each end of the barbell is a well-established area, with traffic traveling to and from.
Ask yourself, what connects those two areas?
What major thoroughfare(s) connect the traffic traveling to and from?
If the area between each end of the barbell has had no capital invested in it, you might be primed for an area that offers a huge upside if developed.
The key to any emerging area is there has to be demand and people need to "show up".
It also has to be visible.
The beautiful thing about an area that is starved of capital investment, yet sits in between a "barbell" is that the traffic you're looking for is already coming through each day, they just don't have a reason to stop.
That's where the investor/developer comes in to play.
At a city-level you could think of one end of the barbell as downtown.
The other end could be a well-established neighborhood.
People are traveling to and from each end of the barbell every day.
Now, focus on what's inbetween.
On a state level, take Texas, think of one end being DFW and the other end being Austin.
What connects them? I-35. The traffic is massive.
This would lead me to think there are some cities along that drive that are ripe for development.
To no surprise, Waco is starting to explode, which is right in the middle of Austin and DFW, along I-35.
If you're looking to invest in an emerging area, think about the Barbell Theory.
It works.
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Here is the Barbell theory in practice. This is an example from my infill assemblage thread yesterday.
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