January 06, 2008

My real estate investing beliefs that get me in trouble How many times have you heard someone say: "Owning real estate is better than renting because, when you rent, you're throwing money away." It's such a common sentiment, it can actually be awkward if you try to offer a dissenting view point. The problem is, the conversation quickly gets heated in many cases, because the person with whom you disagree has usually made a significant financial investment in real estate, and they want to defend that investment. Because I'm relatively young, and haven't invested in real estate, I'm quickly labeled as naïve. Well, I have reasons for the way I feel, and here they are. There are 6 situations where I think a real estate investment makes sense, and none of them involve avoiding "throwing money away". There's some overlap, or, as we would say in consulting, this list is not M.E.C.E. (mutually exclusive and collectively exhaustive): The home you want to live in, has no equivalent that can be rented. For example, there aren't many $10M homes that can be rented. If that's where you want to live and you can afford it, buy it. If you want to live in the building right next to your office to have a walking commute, and that building only has condos for sale, it may make sense to own. Your investment portfolio can absorb the down payment without being overwhelmed. If the $40K down payment on an urban condo is a reasonable % of your portfolio, it can be a great form of diversification, as real estate and securities are somewhat uncorrelated (+0.24 r-squared between US REIT's and the S&P, according to Investopedia). You can get a lot of the benefits of exposure to real estate through financial engineering without actually owning a home (e.g. buying into a REIT), but home ownership preferred by many. You have a unique opportunity that looks HIGHLY likely to prosper. If you have a friend with a lengthy track record of success, who offers you the opportunity to join him in a project, perhaps that deserves a disproportionate allocation in your portfolio. The key is, anytime you're buying real estate, someone else is selling. What do you know that they don't? If your friend is letting you in on his project, is it because he needs capital, or because he sees this as riskier than previous projects? If someone needs to move in a hurry,...
How limits make me better I love taking on creative projects, but it's a little depressing when they don't turn out well. I've "produced" a number of songs on my Mac, and they make me chuckle, but I won't let anyone else hear them. Well, I think of Twitter, Vimeo, Flickr, and my two blogs (TypePad and Tumblr) as ongoing, public creative projects. I'm proud when I put up fun or insightful content, and I get down on myself when I haven't posted in a while. Here's where limits come in: I rarely fall behind on my Twitter or Tumblr posting, because, the way those sights have built their technology, the most you can possibly hope to do with a single post is still pretty simple. It's hard to imagine spending more than 90 seconds updating either. This is great, because I don't put mounting pressure on myself to do an increasingly better job with those projects. My TypePad blog (this site that you're reading), however, feels a bit daunting at times. I feel like posts here should be longer, contain original content, and frequent. Lately, I'm finding that I don't enjoy this form of expression as much as Twitter and Tumblr, because of the pressure that comes with it. My response will be the following: instead of posting roughly weekly, as I have been since October of 2004 (even though my archives are incomplete), I'll be posting closer to monthly, going forward. I recommend you subscribe to the site via RSS, through something like Google Reader or NetNewsWire, which are both excellent, free tools that prevent the problem of frequently checking sites, usually blogs, that may or may not have new content since your last visit. I'm looking for a way to integrate all of the above listed projects into a single site, so that you'll be able to see my pictures, videos, links and commentary all in a single place. I'd even settle for something like what Zach Klein did, where he has a single page that links to everything. AlexBain.com is supposed to serve that purpose, but it's sorely in need of an update. In the meantime, I'm going to have my Twitter posts streaming into my other blog, MaximumAlexBain.com, so that you can get 95% of what I'm doing all in one place. If you have this site bookmarked, I'd probably replace it with a bookmark to that site. I'll make...


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