Real Estate: Avalon Bay Communities
Avalon Bay Properties owns apartment complexes in many major cities. It is known for charging assessments for minor damages, and for walls being relatively thin. I myself have lived in an Avalon Bay property in Seattle. The way to tell if real estate is working for you is to ask what the makeup of the clientele is. If the clientele is like a college crowd that smokes some of the time, then you would expect one type of income stream. If the clientele is of a changing and emerging demographic, then you would expect a different set of analyses, for example the Latin American population is emerging in the United States as a political and economic force and that was cited to me as one reason to buy in a neighborhood that wasn’t really gentrifying but was heavy in these social dynamics. At the end of the day though, cash cows are that way for a reason and reflect a property that is marked down in value because the income stream is so toxic, no matter what the analysis tells you. One can say that investing in real estate isn’t really about the analysis, much like in the board game Monopoly, it is more in the positioning of yourself relative to other players in the market which are coworkers earning salaries jobs who have the income to buy property. When they land on your property, they are starting to rent from you and you discount the entire annuity into the present to reflect what you gain from your property filling up.
In other words, you don’t buy real estate that is junk, no matter what the analysis looks like, because you would never be able to hang onto the property long enough to make money in what is known as slumlording. You buy real estate that is valuable so people you may know may one day rent from you, or at least people you know of, or your social network is not so spanning widely enough for you to buy property of that type.
This goes for the intelligent investor of value stocks too, you never buy junk stocks, no matter how cheap, because someone you know would never so to speak rent that stock from you like a tenant on a property, so you have no analytical edge whatsoever except what you argue from being smarter than other people. Just like some people say no one is bipartisan, no one is smarter than two people working together, both follow from Hobbes if you think about it. What does it mean to be a tenant to a stock? It means your friends get invested into the interests of stocks or businesses you own and begin to cheer for your portfolio.
Now at the end of the day what anyone wants to do from this is make money, but money is not made through analysis but delivery so we can say investment whether in real estate or stocks, is about owning what you know, and that is hard enough. Managing what you own is really in the realm of portfolio theory and that is a different topic. But if you own what you know, you will make money. It’s not about analyzing, making a smart decision, analyzing and repeating. That’s what it looks like to people who are essentially mercenaries to the process as they are providing this service to think for people who don’t want to think as these people are too busy understanding what they truly know and importantly what they truly own.
The meek shall inherit the earth. Canada, we stand on guard for there.