This newsletter is my process of writing a self-help book, tentatively titled How To Make Money: Financial Advice For Poets.
Mostly I hope these letters are inspiring for you. I really do. But my standard disclaimer still applies; I don’t know what I’m talking about.
If you put down $100k on a $500k house, and the house goes up in value 5%, you’ve made 25% of your investment back. Except a real estate broker will generally want 5% to list, so you’ve just broken even.
If you sell the property without a realtor, then you’ve turned your $100,000 into $125,000 ($500,000 x 5%=$25,000). But you no longer own the property. Now you have to find another property, which can take time. And the government will tax a third of your profit, so you’ve made $17,000.
If you buy a property for $100,000, and rent it for $1,000 a month, you should do pretty well. Let’s say the taxes and insurance come to $150 a month. And let’s say you average $100 per month in maintenance, things like a new refrigerator every 6 years, a new roof every 15. And every 3 years you lose your tenant, and that costs you $2,000 in lost rent and assorted expenses. Amortized that’s about $55 a month.
I’m using pretty standard numbers.
Anyway, you’re not using a property manager, you didn’t take a loan, and you’re averaging $650 (probably closer to $700) per month. Let’s say $8,000 a year.
That’s an 8% return on your money. Over the past 20 years you would have done better in the stock market. Except…
Except, your house likely goes up in value. And that increases your net worth.
And you can take a loan against your house. If you wait 18 months, and the house appraises well, you’ll get your entire $100,000 back. So for 18 months you were making 8% on your investment. But now you must service the loan on $100,000. Maybe that’s 5%. But you have all your money back. And you’re making $3,000 a year, forever, all profit.
Now do that 10 times.
Except, it’s better than that. Rents go up. So soon you’re making $4,000 a year, and then $5,000. It’s kind of a perpetual money machine. If your house really appreciates well 5 years down the line you can take another loan against it, and get more money out.
But back to the first loan. After 18 months you have $100,000 again. You buy another house. Etc. In this way, real estate will beat the stock market. Generally speaking. But it takes time.
Except, while taking time, it’s also moving faster, but you’re unlikely to notice the acceleration. You have two houses, and then four, and then eight. Without being particularly smart, or gifted. Just doing the basic stuff and not being terribly unlucky (which happens) you will get rich this way. 10 years down the line you’re a millionaire.
Except… You’re not a tech millionaire. You’re not crazy rich. You’re the millionaire next door. The less you spend, the more you can invest, the quicker you reach your goals, which somehow still manages to always stay 15% out of reach.
Your clothes are always wrinkled. People that do real estate full time, alone, tend to look homeless. Which is ironic. The more homes they acquire, the more homeless they appear. There’s just never a reason to dress up. There are not enough interactions to think much about appearance. Despite their vanity (the ones I’ve met all seem similarly sloppy and vain). It all goes the way of the dodo bird.
You are what you do. If you want to be a writer just write all the time, and show your writing to anyone who is willing to read it. Your odds of becoming a good writer eventually are very high if you do this.
But also remember what Socrates said about experts. And how he didn’t trust people to know a lot about more than one thing. And how the biggest mistake experts make is thinking because they know one thing well, they know many things well. And then they give advice outside of their expertise.
Which is kind of what this newsletter is. So never mind.
You will only ever make so much money practicing real estate alone. The real money is in starting your own company. But many companies fail. The thing about a company is you can’t really do it alone. At YCombinator, at least based on what I read in Chaos Monkeys, you were more likely to be accepted if you had an impressive team than if you had an impressive idea.
The problem with real estate is that life is only about relationships. But it sucks being poor.
What matters is having enough money. But enough for what?
Buying your first home and writing your first novel generally require the same thing: a job.
Creativity comes from interaction. You can build efficiencies, but creating art rarely happens without a muse.
This is how a great artist becomes. They work at something they have passion for. They show their work. Eventually they show some work and they get a different kind of response. They’ve found their path. They explore deep into the woods of that vertical dimension. But it wasn’t until they got the reaction that they knew.
Think of Jackson Pollock’s wife walking into the garage, in the movie, and seeing Ed Harris, playing Jackson Pollock, paint splattered across the canvas. And she says something like, “Oh, Jackson, you’ve really found it! You’ve broken right through!” Later he cheats on her and dies in a car accident with another woman in the car. His wife travels or something.
But the point is, that moment, the moment when Pollock’s wife recognizes his work, is his moment of becoming a great artist, and it wouldn’t have happened otherwise. Even if the movie is not portraying that moment accurately, that is literally how it works.
An outsider artist is an artist that finds their aesthetic without a muse. There are very few true outsider artists though. And they’re usually schizophrenic.
I could take it from my own life. I wrote compulsively when I was a teenager, notebook after notebook, all through high school. I didn’t study creative writing, but I would often ask my friends to read my poems, which became short stories, unfortunately.
It’s unfortunate, because I’m really a poet, but I left that path. Which is why I always make fun of poets. Or maybe they’re just easy targets and they have too much time on their hands. And what is a poet really but an unformed version of something else?
Really a poet is the root and the stump and branches are what the poet becomes. But you know what I mean.
The reason I didn’t become a poet is probably because I didn’t know any other poets and I never got a strong enough reaction to my poems (I was a teenager). And so the lines became paragraphs, etc.
One day I wrote a story that was very autobiographical. And it was more vulnerable than what I had written before. About the time my father caught me sleeping in his house and beat me and shaved my head.
I was teaching test prep at the time for Kaplan, and sleeping with the office manager, though I’m not really sure what we were doing. We probably weren’t doing anything. But I’m certain her bed was nicer than mine. I think I was living in a youth hostel.
I was embarrassed by the story and thought I probably wouldn’t want to write something like that again. But she loved it. It was a different kind of reaction than I had received before. I sent the story to Stanford and was awarded a Stegner Fellowship, and just like that I was a writer.
That story became the first chapter of my novel A Life Without Consequences. Which isn’t a perfect book but it has its moments.
My life as a writer was dramatically changed by a reaction to that one story. Without interaction you wouldn’t know which path to choose of all the dark trails bisecting and darting away from the work you’re drawn to do. It’s romantic to believe you’re drawn to create by an inner light, but without another person you could have all the light in the world and still be alone in your dark room, without even knowing it.
So that’s one thing about creativity. And about other people. And about what you wake up in the morning problem solving for.
Vaguely related, two people will pay much less, and live in a much nicer apartment, if they live together rather than apart.
The point is, you can make a million dollars, slowly, alone. And money can buy happiness, but probably not at that pace, and it’s transitory anyway. Or perhaps money can only buy a temporary reprieve, also known as pleasure. But you don’t want to have to worry too much about money (just enough, perhaps). Real estate and investing have little meaning outside of making money. They’re not spiritual activities.
It’s better to have fulfillment in the way you make your money. Loving your job is the ultimate Zen state. It’s just not attainable for everybody. Though it probably is, actually. What is the thing you wish you were paid to do? If you can answer that question, call bullshit; you’re probably lying to yourself. Then return to the question and ask it harder. And sit with the answer long enough to know it’s true.
I got way off topic here. As usual. But it seems that all of philosophy is dwarfed by the slogans taped on the wall of your local Alcoholics Anonymous meeting room. We know what makes us happy. But we want to be happier than that. We know the importance of community, spirituality, and service.
One of the many sayings from AA is that it’s a simple program for complicated people.
One of the main points of this newsletter is that you already know all of this stuff. Like in that side story in Flowers In The Attic, where the purple grass was under their feet the entire time? It’s so stupid, but basically true.
A simple newsletter for complicated people.
Another thing they say in AA is that the good news is, there’s help. The bad news is, we’re the help.
In other words, it’s all pretty simple, but we’re engineered to generally be unsatisfied with the solution. We’ll always want 15% more.
What do you do with that?
p.s. Was talking with someone last night about believing in humanity and loving people for what they can accomplish and the good inside of each of us, versus not believing in humanity, thinking people are essentially shit, but liking people anyway. Without having to believe any of the other stuff.
I thought that was pretty interesting. I was so happy to be around all these smart people. And then the band started playing and we danced. So that was good, and maybe vaguely relevant.
Please remember to like and leave comments. It makes me happy. And link on social media.