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?

 

Define distinguishing between bad-locations and good locations, in metro. cities in particular. I disagree with your point that it is difficult because there is enough data and word of mouth to distinguish whether a location is good or not. (Specifically in metro cities)

Whatever it takes.
 

This is why I'm pissed that Baylor U keeps building on the S side. Too much fuckin space- too few students (although they have a constant growth rate- it's not that significant). My little condo will be hard to sell or even rent out in the future if they don't stop building their massive complexes with built in massage parlors

“Bestow pardon for many things; seek pardon for none.”
 

I do want to make a clarification. I was actually an acquisitions analyst last summer and found real estate difficult from a dev. (Making sure project doesn't fall through)/broker side (Closing deals).

However, from a technical side such as from an acquisitions/dev. analyst, real estate isn't complex at all.

Whatever it takes.
 
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.
 

I'm gonna play devil's advocate briefly so I can clarify my thoughts

1) Inflation hedge-> The way you described it, isn't that the same with equities/gold/oil etc. where assets rise in excess of inflation. The stock market and real estate market are separate, but each have factors that may affect each other.

2) All fields have an entrepreneurial spirit; pharma to push out new drugs, tech for new tech, finance for new fintech & algos., etc. In my opinion, real estate is not innovative at all, mostly in the tech side.

All the strategies seem all the same.

-In terms of leverage real estate is def. safer than most asset classes though.

Whatever it takes.
 

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.

 

My family has a REIT. We work only with commercial real estate, and I can tell that the work is not as massive as on IBD, because the business is very simple. The work is more intense only when we are developing new buildings.

Here in Brazil, we have some tax advantage, hence, we pay only 9,75% taxes over the Gross Income and dividends aren't taxed here, so I don't pay taxes at all.

Don't know if things are this way in America, whatsoever...

 
  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.

"Who am I? I'm the guy that does his job. You must be the other guy."
 

1) Trading on private info, goes hand-in-hand with ability to consistently earn abnormal returns w/ the right connections in RE. Analysts who work 100 hours/wk analyzing publicly traded instruments are very well-educated suckers.

2) cpgame said it, leverage.

3) RE ppl are generally more fun to work/hang-out w/ than IB folks. Tucker Max's bifurcation between "Beer & Girls" types and "Coke & Hookers" types seems to apply.

4) Actually being an investor in acquisitions/developments, rather than a banker doing M&A advising.

5) Just find it intrinsically interesting and enjoyable.

I come from down in the valley, where mister when you're young, they bring you up to do like your daddy done
 

I like making chicken soup out of chicken shit. If I'm with the right client we can really create value where others may not.

Also, if the market turns hard like it did during the financial crisis, solid multi-tenant deals got my clients through that mess all while making decent cash flow. Yes, equity took a big hit, but if you underwrite with some basic income property fundamentals with good financing you'll make it through that tough patch. Now they're sitting fat.

 

The best thing about real estate is that it gives satisfaction for helping others in finding a better house for them especially for those who are not aware of the location/country/surroundings etc.It's a complete helping profession and also agents are self-employed.

 

I love real estate because its more challenging, each day something new waiting for you and you have to solve mysteries :) grel has taught me the skills needed to win the real estate market.

 

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