Why do you love Real Estate?

Believe it or not, a lot of people have a hard time answering this question.

I personally love real estate because it has played an integral part throughout my life. It allowed my immigrant family have a stable lifestyle, and allowed me to have a stable childhood. It's not only one of life's necessities after food, it's also a tangible asset that you can touch and feel, and also an asset that you can easily talk about with other people since all people deal with real estate in some point of their life. Also, real estate can be sexy, esp. luxury real estate.

So why do you love real estate?

25 Comments
 
Best Response
  1. Tangibility; we aren't trading paper. We have a job that allows us to shape our communities and create environments our children will grow up in.
  2. Inflation hedge. Unlike bonds, our assets rise (and fall) with inflation.
  3. Leverage; where else can you get a 50%-60% LTV on a business?
  4. It integrates every job into one (development). No day is the same. Lights out aptitude in finance, construction, design, law, and marketing are rewarded.
  5. Entreprenial spirit of the industry; at the right firm, you have capital behind you of you can come up with a thesis go find an opportunity and put the materials together.
 

1) In tough times capital flies to quality = safe, real assets. Real estate provides this and bond like yields whereas gold does not cash flow. Gold also does not allow you to depreciate your investment, or leverage your asset.

2) many industries allow variety in daily workflow. I was attempting to highlight the wonder of being able to play architect, construction guy, financier, and salesman (not a fan of playing lawyer/combing through docs). Building stuff is cool, especially when you’re the QB if the team on a high profile deal that everyone in town knows about. I just realized that at tech firms or many of the fields you listed, much of the work is behind the scenes whereas in RE people take notice the second you announce a deal.

 
  1. It's a bond that pays in perpetuity. Unless there is an apocalyptic event, if you own the land/building outright (aren't beholden to a lender) then it will always be there for you unless you decide to sell. With most physical assets like gold, you don't get any coupon payment, so all of your value creation is predicated on the liquidity/being able to sell the asset itself. With stocks, bonds and other financial instruments, you can get a stream of cash flow and the upside/downside on the back end, but at the end of the day it is paper. Real estate is unique in that you have a physical asset that is generating cash flow (coupon), does not wholly depreciate (talking strictly the land), and can also be sold to capture capital appreciation. Obvious down side is high barrier to entry (cost) relative to other assets and illiquidity (can take a long time to sell or wait for the right time to sell). EDIT: the point about not being beholden to a lender is geared towards private investment later down the line whereas the other points are more geared toward commercial/institutional CRE as a job, just wanted to clarify.

  2. Real estate is inherently diversified. The beauty of being a landlord is that one can (generally) adapt to tenant demand. So if a certain economic sector is collapsing, many times a landlord can pivot / reposition the property to account for this. Industrial is a great example. Many manufacturing firms have gone by the wayside, and big box industrial has seen a massive shift in manufacturing spaces being converted to warehouse/distribution facilities to accommodate the likes of Amazon, car importers, etc. Even the mall players have begun to do this on a smaller, slower scale with conversion from high street consumer retail to experiential / lifestyle tenants.

  3. When you buy/own real estate, you are (read: should be) able to educate yourself on the entire market you're buying into. The best investors in real estate invariably have deep insight into the markets in which their assets physically sit. All of the product types require you to have a good handle on things like demographics, shipping routes, commute times, consumer spending patterns, trendy areas, business rhythms, tenancy trends, etc. if you want your assets to perform well and be strategically superior. I'm a firm believer that this leads to asymmetrical information which you can parlay into other investments in a given physical area or economic niche.

  4. It's fun/you get to work on a lot of different aspects. Posters mentioned this above, but it's cool that when you own a piece of real estate, you get to have a hand in virtually every facet of that asset, from leasing, to zoning/development, to decorating, landscaping, networking with your 3rd party providers/brokers/property management, etc. You get to meet a lot of different people and you are constantly learning things at least on a tangential basis, sometimes in much greater detail. This can make it stressful, but you learn to manage it.

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