Is Real Estate Actually a Good Investment on Average?
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@Mario-Jakovina said in Is Real Estate Actually a Good Investment on Average?:
It has real value for him (that's why it is called real estate) - he can live in it.
I'm not sure that that is why it is called that. In the colonies, a "real" asset literally means that it was authorized by the crown. I have "real" estate, the paper that says I own it is called a real and it comes from the Real "royalty", the Spanish crown approved it. I'm not sure if that is the source of the word, but given that real estate was handled under a real meaning royal, I don't think it means real in the English sense as all assets have real value but not royal value.
That he CAN live in it is misleading. He can equally live in a rental. The only value to him comes from the investment value. That humans tend to be emotional about their homes causes bad financial decisions and is actually often said to an important reason to rent not buy, buying only has a good chance of being healthy for you and not crippling your life if you can be unemotional and remember that it is just an investment option and you have to be flexible with it to not get burned.
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@Mario-Jakovina said in Is Real Estate Actually a Good Investment on Average?:
I think these two points above are also big reason why lot of folks like to invest in ownership of home. (also some others, like to be certain you can stay at a certain place for long time...)
Those are big emotional reasons why people foolishly invest without evaluating logically, yes. Absolutely.
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@Mario-Jakovina said in Is Real Estate Actually a Good Investment on Average?:
Even Warren Buffet once said that he did not wanted to invest in IT companies because he did not understood that business.
That's hilarious because IT is just "business". To say he doesn't understand IT means the same as saying he doesn't understand business. IT involves tech, but IT itself is purely a business aspect and a part of every business. Whether his companies are IT themselves or just have IT as part of them, every investment involves IT and IT is a part of all aspects of business.
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@scottalanmiller said in Is Real Estate Actually a Good Investment on Average?:
@Dashrender said in Is Real Estate Actually a Good Investment on Average?:
How do rentals come into being?
....
I know that was a big part of the 2008 crash. .....
is that where most rentals have come from?This is what was being answered. Dash was thinking that rentals were a rare thing historically and came about potentially as recently as 2008. Not that they were invented then, but that the rental market arose after 2008.
I never - not for one millisecond thought that.
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I suppose renting literally goes back to kings and queens - cause they owned everything, the peasants had to pay the kingdom..
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@scottalanmiller said in Is Real Estate Actually a Good Investment on Average?:
It's not "almost a majority", it's not even half. Saying "last place is almost first place" is in any situation weird and misleading.
I know a girl who is almost pregnant!
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@scottalanmiller said in Is Real Estate Actually a Good Investment on Average?:
That he CAN live in it is misleading. He can equally live in a rental. The only value to him comes from the investment value. That humans tend to be emotional about their homes causes bad financial decisions and is actually often said to an important reason to rent not buy, buying only has a good chance of being healthy for you and not crippling your life if you can be unemotional and remember that it is just an investment option and you have to be flexible with it to not get burned.
The term "real value" in economic terms means tha you can actual use that asset in life - you can live in a house, or you can use gold as a metal...
If you compare it to financial assets - financial assets do not have "real value" - they only have financial value. If nobody wants to buy shares or bonds that you want to sell, you can't use it.
That is definition of economic term "real value" (it is not my personal term) -
@scottalanmiller said in Is Real Estate Actually a Good Investment on Average?:
The only value to him comes from the investment value. That humans tend to be emotional about their homes causes bad financial decisions and is actually often said to an important reason to rent not buy, buying only has a good chance of being healthy for you and not crippling your life if you can be unemotional and remember that it is just an investment option and you have to be flexible with it to not get burned.
First sentence is completely wrong.
I agree with second sentence. -
@scottalanmiller said in Is Real Estate Actually a Good Investment on Average?:
Those are big emotional reasons why people foolishly invest without evaluating logically, yes. Absolutely.
Of course. But people have right to pay/buy things they like to own, or things they feel safe to invest. They do not have to invest in something that proves to be most profitable in the long term.
People are not hired proffessionals when they decide about their private investments. It is OK that they spend money where they like to spend it.
(I am not saying that they should not learn to invest smarter) -
@Dashrender said in Is Real Estate Actually a Good Investment on Average?:
I suppose renting literally goes back to kings and queens - cause they owned everything, the peasants had to pay the kingdom..
Generally pretty good reasoning.
Basically, in feudal age, aristocracy lived from renting their land to peasants. In industrial age, different manufacturing businesses become more important as value (and source of income and profit) than pure ownership of land and things soon changed to capitalism (capitalism was economically more efficient than feudalism) -
@scottalanmiller said in Is Real Estate Actually a Good Investment on Average?:
@Mario-Jakovina said in Is Real Estate Actually a Good Investment on Average?:
Even Warren Buffet once said that he did not wanted to invest in IT companies because he did not understood that business.
That's hilarious because IT is just "business". To say he doesn't understand IT means the same as saying he doesn't understand business. IT involves tech, but IT itself is purely a business aspect and a part of every business. Whether his companies are IT themselves or just have IT as part of them, every investment involves IT and IT is a part of all aspects of business.
I thing most people will say that Microsoft or Google are IT companies.
And most will not say the same thing for Volkswagen, or Coca Cola.
I do not find that "hilarious", although I understand what you are talking about. -
@Mario-Jakovina said in Is Real Estate Actually a Good Investment on Average?:
I thing most people will say that Microsoft or Google are IT companies.
Yes, and most people aren't qualified to be business people. Anyone claiming to be a business person but not knowing the first thing about business is pretty ridiculous. Knowing what IT is is about as fundamental to being in business as it can get.
That average non-business people don't know business functions that basic is kind of sad, but not unexpected. The average person is pretty oblivious to the world around them. But the amount of excuse someone being in business has to not know this is absolutely zero.
Average people don't know about corporate taxes, sales taxes, tax filing requirements, accounting, bank loans and other uber basic business knowledge that we expect even entry level business people to know really well.
Ergo, he's saying he doesn't know anything about business. Which is true, actually. He's an investor, but a business man. However, it means he knows nothing about any of his businesses, including business itself. He just doesn't realize that he knows as little about all of them as he does about that.
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@scottalanmiller said in Is Real Estate Actually a Good Investment on Average?:
Ergo, he's saying he doesn't know anything about business.
That's quite the hot take on Warren Buffet
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@Carnival-Boy said in Is Real Estate Actually a Good Investment on Average?:
@scottalanmiller said in Is Real Estate Actually a Good Investment on Average?:
Ergo, he's saying he doesn't know anything about business.
That's quite the hot take on Warren Buffet
Not at all. He never, ever claims to be a businessman. It's just people who aren't familiar with business and investing often confuse the two. Just like how people actually think Bill Gates has worked in IT when he was a software developer. For people unfamiliar, they seem like one and the same. In reality, they share relatively little but work in similar arenas.
Buffet has never had to work in business, his entire life has been an investor. It's actually well known in business (and investing) that the two careers rarely overlap simply because the ability to develop skills in one almost exclusively comes at the expense of the other. And in America especially, investing is almost (but not fully) and "anti-business" activity. That's consistently a complaint about American style capitalism that profits from Wall St. aren't made by companies being profitable. So the skills of business often are useless or counterproductive to investing.
So in zero sense is it a hot take on Warren Buffet, it's just explaining that he's no more expected to be an authority on business than he is to be a basketball player.
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Similarly this is why venture capitalists often drive businesses into the ground and businesses looking to make money via investment or via business discuss these things when setting up their businesses. If the business' purpose is profits and operations, you want to avoid venture capital. If your goal is to make your money FROM the investors and not from being profitable, you use venture capitalists who typically play a game of investment hot potato.
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My mom was an investor and did really well. But she never ran a business in her life. She had no idea what went into it.
If you think about it, everyone with a retirement account is an investor. It's something everyone does (poorly) without even thinking about it. Buffet is someone who elevated that investment skill to an art. But at the end of the day, he's a guy buying a selling stocks at arm's length. He doesn't know what the businesses do nor does he involve himself in the business beyond having his portrait added to the lobby walls.
Assuming that investment and business are tied together would be akin to thinking that someone has to be a good chef just because they bought McDonald's stock. Or that someone is a phone engineer just because they bought Apple stock.
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Along those lines - I can understand why Buffett stays away from tech companies. Supposedly he understands enough of the business to know how he'll be squeezing money out of them... but he's admitted he doesn't understand how he'll squeeze it out of IT companies.
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@scottalanmiller said in Is Real Estate Actually a Good Investment on Average?:
Similarly this is why venture capitalists often drive businesses into the ground and businesses looking to make money via investment or via business discuss these things when setting up their businesses. If the business' purpose is profits and operations, you want to avoid venture capital. If your goal is to make your money FROM the investors and not from being profitable, you use venture capitalists who typically play a game of investment hot potato.
I'm lost how venture capitalists stay around then? Unless that it's just the VC company itself keeps finding new foolish money to invest and loose with them?
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@Dashrender said in Is Real Estate Actually a Good Investment on Average?:
Along those lines - I can understand why Buffett stays away from tech companies. Supposedly he understands enough of the business to know how he'll be squeezing money out of them... but he's admitted he doesn't understand how he'll squeeze it out of IT companies.
"supposedly" based on what? He claims he doesn't know IT, IT is business basics, so he's said he doesn't get "business." That's fine and not at all required for what he does. He needs zero knowledge of business to do investing of the type that he does. It would actually be a waste of his effort to do so and undermine his investing research time.
He obviously made up a bullshit excuse to not answer the question. Don't try to make it something it isn't. He lied, people lie, move on. It means nothing. Just don't try to take him saying something patently false as some kind of advice from a business guru because he's an investment guy who was just blowing off the question because he didn't want to answer it.
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@Dashrender said in Is Real Estate Actually a Good Investment on Average?:
@scottalanmiller said in Is Real Estate Actually a Good Investment on Average?:
Similarly this is why venture capitalists often drive businesses into the ground and businesses looking to make money via investment or via business discuss these things when setting up their businesses. If the business' purpose is profits and operations, you want to avoid venture capital. If your goal is to make your money FROM the investors and not from being profitable, you use venture capitalists who typically play a game of investment hot potato.
I'm lost how venture capitalists stay around then? Unless that it's just the VC company itself keeps finding new foolish money to invest and loose with them?
That's because you don't understand American capitalism. You are thinking only in terms of business profits, not investment profits. The two are very loosely connected and not at all connected in the short term. Capital investing has almost no need for profits, ever. That's not how it works. Over hundreds of years, yes, the two need some kind of tie or eventually things collapse. But during the investment lifetime of any given investor, it does not.
Since VCs make their money buying and selling stocks exclusively, and "never" from company profits, you should have no expectations of them being able to make profit (necessarily.)
