This newsletter is my process of writing a self-help book, tentatively titled How To Make Money: Financial Advice For Poets.
Thomas Mann’s greatest book was a novella about a famous writer with writer’s block. The writer books a suite in the Grand Hotel on the Lido Island and at dinner he sees a beautiful young boy.
The book Mann was trying to write was inspired by Goethe, who, while on vacation at age 73, fell in love with a 17 year old girl. Goethe returned two years later and asked if she would marry him. She declined.
What the great German writers didn’t know is that it takes a long time to build a passive real estate cash flow that you can retire on. The better the property cash flows the harder it is to take a loan. Either the house needs a lot of work, or is so inexpensive the bank can’t be bothered.
Good cash flow on a $50,000 house is $500 a month. The house is not supposed to go up in value. You can take a loan against the house and buy another one, or you can wait 8 years to get your money back, at which point it’s all gravy.
With $50,000 and an 80% mortgage you can buy a more expensive property that costs $250,000. If the house goes up in value 20% you have your money back. If the house goes up 40% you’ve doubled your money, and you still own the house. If you live in the house you’re saving on rent. If you’re renting the house the rents also go up with appreciation. If your savvy you’ll take a loan against the house when the value goes up and buy more property with it. But eventually you’ll have to cash flow, every loan comes due.
I mentioned this in an earlier letter, but Binky Urban once complained about writers teaching classes when they would make more money if they just wrote more. She seemed to think writing was just a matter of exchanging time. When Thomas Mann wrote Death In Venice he hadn’t written in many years. Most of writing is not writing.
Many people make more money on the house they live in than their job. But it doesn’t occur to them to get a 2nd home, or to quit and do real estate full time. It’s hard to do real estate full time when you’re waiting for your property to appreciate. Real estate lacks meaning and purpose. Sometimes you just have to hold for months because of an error on your credit report. Equifax hires operators in the former Soviet Block. They understand exactly what you are saying. Everything, you can be assured, will be taken care of. A note will be placed on your file that there is a dispute. Long after the resolution the note will still be there and there is nothing you can do about that.
Aschenbach looked out to the Adriatic’s peaceful water. The boy was there, having just lost a fight. Aschenbach thought the boy was beckoning him. He tried to rise from his chair, then collapsed. Meursault, the hero of Camus’s The Stranger, was blinded by the sun dancing off the Arab’s knife, also near the water.
At Meursault’s trial the prosecutor focused on Meursault’s relationship with his mother. He was sentenced to death.
Even a rapidly appreciating real estate market moves fairly slowly if you’re paying attention. The real profit comes from doing something else. Making a couple of good decisions early and then forgetting about them and living your life.
That’s why when a book tries to be about loneliness it’s always about love. Every story is a love story. Loneliness is an ending, not a plot. Death In Venice is about a man dying alone, but the entire narrative is told through interactions. You can’t write about loneliness because loneliness is, by definition, the absence of story.
If you want to make money in real estate focus on your relationships. The relationships won’t help your cash flow but without them there’s no point in building wealth. To make money in real estate think about it as little as possible. Purchase the house, if you can, where you want to live. If the banker turns down your request for a loan, go to a different banker. Every banker is different and it doesn’t mean anything until you’ve been turned down 10 times.
It's just like writing. You can’t learn anything from the people who reject your stories. They’ll never tell you the truth.