Why is real estate sexy?

I've often heard the term 'real estate is sexy' being thrown around. I can understand how many modern buildings are visually appealing (glass towers, nifty architectural designs, etc), but what's so sexy about a derelict single family house, an old multi-family building, an industrial warehouse, or even a barren parcel of land?? The only buildings I really stop at to stare are the modern ones. The aftermath of a renovation could be nice, but I can't imagine it being fun to go through the process of doing so. In addition, if you were to own an apartment for example, you have to chase rent and deal with all sorts of tenant problems that seem like a big headache.

Can someone explain to me why real estate is sexy? For you guys in the industry, does the mere sight of any building turn you on? If so, has this fascination with buildings always occurred? Help a non-real estate guy try and see through your lens. I appreciate any responses.

 

I remember i rented a house out to a couple of prostitute - I was too lazy to find other people. I then learned that most prostitutes are also on crack and therefore are not very responsible - they would not pay rent and would damage the property.

The house was in very shitty condition so I kicked the sluts out, renovated the house and rented it to a nice family with a fu*king hot daughter. If they are short and need another form of payment - I have it figured out.

So if you want to relate real estate to sexy then there you go man. -sexy prostitutes and hot daughters

good luck with whatever you need this for

-
 

I can tell you that RE wasn't "sexy" back in 2009, believe me.

People are gravitating to it now because debt is cheap and everyone is going out the risk curve for yield. Many will get flushed out eventually. Only the best operators survive the long-term cycles. Many developer's got wiped out in the 80's fallout as well. Many shops are investing now with a very thin margin of safety.

Survivorship bias too. The winners get coverage and press, the losers go away quietly.

Please don't quote Patrick Bateman.
 

DB Cooper, What margin of safety would you recommend for small single family RE portfolio to survive a downturn? For Example: Combined Property Value: 1,000,000.00 Location: Mid-west (Texas, Oklahoma) Property Class: Residential in great school districts LTV: 70% @ 5% = 3757 PMI payment CAP Rate: 8%
The bank requires 6months PTI ~($22,500) to get a loan and I have heard some recommend 12 months PTI ~(45,000). Either way it does not seem like a lot. Just wondering what the "best operators" are doing to ensure success in the long run?

Any comments would be greatly appreciated!!!

 

I would say that as long as you are making ends meet, and can handle vacancys for a year (worst case scenario if these homes are in desirable places) then 6 months seems realistic to me. The main thing is to have cash flow from these investments that cover real estate tax/utilities/Misc. exp/loan payments, and a little more for when bigger capital expenditures arise, not to mention paying yourself if this is your main source of income. I would advise calculating how much all of these things will be so you have a ball park number. Just my two cents, but Im not an expert.

 

The key is management. The property could be top tier, however if it has shitty management and tenant selection, the investment is fucked.

Follow the shit your fellow monkeys say @shitWSOsays Life is hard, it's even harder when you're stupid - John Wayne
 

RE is sexy because of the trophy assets. The term isn't really applied to rundown properties in bad areas. However, if you are buying a nice office or multifamily project with top of the line finishes, I think thats considered "sexy". Properties can also be renovated very well nowadays. I have seen some very bad properties and they look incredible now.

Array
 
TeddyTheBear:

RE is sexy because of the trophy assets. The term isn't really applied to rundown properties in bad areas. However, if you are buying a nice office or multifamily project with top of the line finishes, I think thats considered "sexy". Properties can also be renovated very well nowadays. I have seen some very bad properties and they look incredible now.

Well said, "teddythebear.

"He that hath a beard is more than a youth, and he that hath no beard is less than a man." ― William Shakespeare, Much Ado About Nothing
 

There are a lot of "what people think I do memes about this topic". Generally, the best area to be in is REPE.

"He that hath a beard is more than a youth, and he that hath no beard is less than a man." ― William Shakespeare, Much Ado About Nothing
 

It's sexy because its tangible.. You can see your work right on the street.. I think that's cool

Personally I am really into gentrification... Happens to be a passion.. So working on deals that puts $$ into walkable urban neighborhoods and improves them is very sexy to me..

For alot of developers it's ego... Real estate can be high profile if you want it to be.. You'll meet developers that act like Donald trump in all big american cities

 

Let me provide an answer from your typical WSO real estate guy.

pickle:
what's so sexy about a derelict single family house,
nothing. single-family is for plebeians.
an old multi-family building,
nothing. the apartment industry is a bunch of rednecks compared to, say, the hotel business.
an industrial warehouse,
who told you industrial was sexy?
or even a barren parcel of land??
yes, land is boring. land isn't sexy per se. it's the development opportunity. the renderings are sexy, and the returns are sexy.
aftermath of a renovation could be nice, but I can't imagine it being fun to go through the process of doing so. In addition, if you were to own an apartment for example, you have to chase rent and deal with all sorts of tenant problems that seem like a big headache.
Dude, the renovation process = Asset Management/property management and residential tenant issues = property management. Nobody on WSO wants to manage anything! You want to work on the deal team. Also, any of the above can be made sexy if it's a deal involving over $1 billion. Or if there's a hedge fund involved. Or middle-eastern money. Or several expensively-dressed Harvard grads.
 
prospie:

Let me provide an answer from your typical WSO real estate guy.

pickle:

what's so sexy about a derelict single family house,

nothing. single-family is for plebeians.

an old multi-family building,

nothing. the apartment industry is a bunch of rednecks compared to, say, the hotel business.

an industrial warehouse,

who told you industrial was sexy?

or even a barren parcel of land??

yes, land is boring. land isn't sexy per se. it's the development opportunity. the renderings are sexy, and the returns are sexy.

aftermath of a renovation could be nice, but I can't imagine it being fun to go through the process of doing so. In addition, if you were to own an apartment for example, you have to chase rent and deal with all sorts of tenant problems that seem like a big headache.

Dude, the renovation process = Asset Management/property management and residential tenant issues = property management. Nobody on WSO wants to manage anything! You want to work on the deal team. Also, any of the above can be made sexy if it's a deal involving over $1 billion. Or if there's a hedge fund involved. Or middle-eastern money. Or several expensively-dressed Harvard grads.

The real money isn't made on the deal. Its made on the asset. I can make a bunch of money working on the deal and the money ends there. I can own the asset and make money for now until the day I die.

Follow the shit your fellow monkeys say @shitWSOsays Life is hard, it's even harder when you're stupid - John Wayne
 
heister:
The real money isn't made on the deal. Its made on the asset. I can make a bunch of money working on the deal and the money ends there. I can own the asset and make money for now until the day I die.
definitely. i do own income-producing real estate and would like to hold on forever. i was kind of parodying myself and others as far as what's sexy and what's not.
 

Bateman wishes that he was Trump:

//www.youtube.com/embed/MjJa_LIFMHU

"He that hath a beard is more than a youth, and he that hath no beard is less than a man." ― William Shakespeare, Much Ado About Nothing
 
Best Response
pickle:

I've often heard the term 'real estate is sexy' being thrown around. I can understand how many modern buildings are visually appealing (glass towers, nifty architectural designs, etc), but what's so sexy about a derelict single family house, an old multi-family building, an industrial warehouse, or even a barren parcel of land?? The only buildings I really stop at to stare are the modern ones. The aftermath of a renovation could be nice, but I can't imagine it being fun to go through the process of doing so. In addition, if you were to own an apartment for example, you have to chase rent and deal with all sorts of tenant problems that seem like a big headache.

Can someone explain to me why real estate is sexy? For you guys in the industry, does the mere sight of any building turn you on? If so, has this fascination with buildings always occurred? Help a non-real estate guy try and see through your lens. I appreciate any responses.

The better question is why is real estate not sexy? Northstar Realty Finance just spun off their Asset Management arm, the stock popped 20% today. Blackstone has its Hilton IPO tomorrow, they have a $8.5B on paper profit at the $20 stock price it was offered at. Things are happening everywhere with real estate. I would say real estate can be more sexy than equities because you can visually SEE the value in property and have more control over it than if you were a .0001% owner of Company XYZ. Couple that with deferring tax until the day you die through a 1031 exchange, and using depreciation and interest expense to shield your income from Uncle Sam, what's there not to like?

 

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