Real Estate
I am investing in three p2p real estate platform, EstateGuru in EUR and LandlordInvest, Kuflink in GBP; I am also looking for a silver lining in this Brexit joke, a.k.a. to buy an apartment in London now that prices are soft, so I keep more than an eye on the RE market and here are some considerations.
In Switzerland and Denmark you can have a negative rate mortgage; sadly is not (yet) an interest rate only mortgage, where you live in your property AND get paid every month for it...but I think today this scenario is more probable than seeing rates at 6% in Europe. Only time will tell but few years ago I would have called crazy anyone who would have told me negative rate mortgages would be a reality. Fascinating.
Property search websites in UK sometimes display the price history of a house/apartment. Few days ago I found this apartment that is priced 10 times more than its selling price in 1999. 10x in twenty years sounds like a hedge fund guru return, innit? Real Estate investing is really the way to go to get rich!
Well, not so fast. The compounded annual return that you need to multiply your initial investment by ten in twenty years is 12.2%. Printing a +12% return every year for twenty consecutive years is definitely an incredible accomplishment that only few money managers can do but...
The owner of the apartment incurred in some costs during those twenty years like maintenance, fees and taxes, so this is just a gross return and not the net return. The apartment is in an area that twenty years ago had a high criminal rate, definitely not the place you would have lived with your family. And London, like many big cities in the world, had a big real estate boom in that period, which was hard to predict in 1999 and is not guaranteed to repeat in the next 20 years.
If we want to look at the real estate space, EstateGuru and LandlordInvest offer returns above 10% (so far) with a higher degree of diversification; even a 60/40 stock/bond portfolio returned more than 7% per year quite consistently in the past. Moral of the story is that you can achieve similar, for someone spectacular, long term results with simple asset allocation, without suffering the huge concentration risk you have when you buy a single property. Or ask a homeowner in Detroit, or in Liverpool.
I love reading biographies. I am a little less in love with the fact that today every person who had 15 minutes of fame writes one. Like football players when they are 25.
I recently read Arnold Schwartzenegger one and, boy, he had quite a life! The first investment he made with his gains from bodybuilding competitions was in real estate. The good lesson from his experience is that before making any purchase he learned about the market: he read all the material he could find and asked all the experts he could reach. One of the most common investing errors I see (yes doctors, I am looking at you) is that people that master one field think they can master EVERY field, they spent years learning their craft and somehow they think they can leverage that experience into other fields...or maybe just into investing because I never saw a doctor trying to build a bridge or an engineer doing an open heart surgery.
The big mistake Arnold makes is not recognising the luck he had to be in the right place at the right time. He studied the Los Angeles market in deep but, despite the right effort, he would have made no money if that specific area was not in a bull market (he admits that Reganomics were a boost though). What are the chances that the area you live in will experience a real estate bull market? Why he did not look at Iowa, or Kansas, or Austria before deciding to buy a building 3km from his apartment?
Beware the Robert Kiyosaki of this world: in ten years someone will write a bestseller on how smart and easy was to buy a condo in Buenos Aires and print easy money, the issue is you do not hear the stories of people who tried the same in other cities and went broke.
What I am reading now
If we want to look at the real estate space, EstateGuru and LandlordInvest offer returns above 10% (so far) with a higher degree of diversification; even a 60/40 stock/bond portfolio returned more than 7% per year quite consistently in the past. Moral of the story is that you can achieve similar, for someone spectacular, long term results with simple asset allocation, without suffering the huge concentration risk you have when you buy a single property. Or ask a homeowner in Detroit, or in Liverpool.
I love reading biographies. I am a little less in love with the fact that today every person who had 15 minutes of fame writes one. Like football players when they are 25.
I recently read Arnold Schwartzenegger one and, boy, he had quite a life! The first investment he made with his gains from bodybuilding competitions was in real estate. The good lesson from his experience is that before making any purchase he learned about the market: he read all the material he could find and asked all the experts he could reach. One of the most common investing errors I see (yes doctors, I am looking at you) is that people that master one field think they can master EVERY field, they spent years learning their craft and somehow they think they can leverage that experience into other fields...or maybe just into investing because I never saw a doctor trying to build a bridge or an engineer doing an open heart surgery.
The big mistake Arnold makes is not recognising the luck he had to be in the right place at the right time. He studied the Los Angeles market in deep but, despite the right effort, he would have made no money if that specific area was not in a bull market (he admits that Reganomics were a boost though). What are the chances that the area you live in will experience a real estate bull market? Why he did not look at Iowa, or Kansas, or Austria before deciding to buy a building 3km from his apartment?
Beware the Robert Kiyosaki of this world: in ten years someone will write a bestseller on how smart and easy was to buy a condo in Buenos Aires and print easy money, the issue is you do not hear the stories of people who tried the same in other cities and went broke.
What I am reading now
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