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Hermann Hairet's avatar

Your article blows my mind.

I reread it every time after I have a discussion about real estate !

For example, yesterday at a work dinner, my manager asked me where I stand regarding buying a house, saying that it’s important to start early and think about it quickly...

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Ian's avatar

Just running these very numbers while staying in Honolulu. Real Estate is about as safe of an investment as anywhere in the world (USA rule of law, remote work trend, truly a paradise), but the prices well reflect that!

I would say it's about 3 million to get an average house in a nice location, and 1 million USD really gets you a pretty worn out house built in the 70s or before. A small lot with a tear down is 1 million in a nice neighborhood.

So why not rent and invest simultaneously in something that performs better? 3 million * 8% gives you a budget of $20K per month, and with that you are now looking at prime ocean front real estate, 5000 sq ft, pool, modern renovation, while paying none of the taxes, and on the hook for none of the upkeep.

The downside: you won't have the stability/peace of mind of ownership, and may get squeezed in a rental shortage,

However, it seems more often to me, you are able to get a deal from someone who is using the property as a store of value (huge embedded cap gains they don't want to realize) but isn't getting the occupancy use out of it. An empty 5 million + property has quite the carrying cost if sitting empty.

I, for one, will likely never invest in real estate again, and agree with Nick's analysis.

(Exception: if you truly love it, have the cash, and must own the property). Also, some markets have undeveloped rental offerings and owning can be a better deal.

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