SELF HELP 32

How To Be Inspired

This newsletter is my process of writing a self-help book, tentatively titled How To Make Money: Financial Advice For Poets.

Today’s letter is based on an interview with a real estate investor in Chicago. Like all the investors and entrepreneurs I’ve been interviewing Ali doesn’t have any full time employees. Each of these investors seems, in a way, to live off the grid. When talking to them I always get the impression that they wouldn’t be very good at running a company. They’ve figured out how to make a good living, sometimes a great living, but their upside is capped by their fierce independence.

These single digit millionaires always say something that is relevant to artists and people who are not interested in investing at all. Which is not what I expected when I started doing these interviews but is probably the main reason I keep doing them.

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If you buy a property you want to live in, and it costs the same you were willing to pay in rent, there is very little in the way of potential downside.

If you purchase a property to use as a vacation rental, but it would cover costs if you had to convert to long term rentals, that's pretty good. And if you could imagine living in the place happily yourself then you have 3 possible outs which is, in real estate parlance, "a steal."

Ali, a real estate investor in Chicago, told me the best investments weren't based on cashflow, or cap rate, or putting yourself in the path of progress.

“Invest,” she said, “in inspiration.”

I've always followed inspiration, but as a writer and filmmaker. Ali didn’t even think of herself as a creative, the same way I didn’t think of myself as an investor, yet we thought about inspiration in the same way.

I always thought making art was more important than making money but I don’t think so anymore, or rather I have a broader definition of what I consider art. I see inspiration as the ultimate gift and treat it as something precious that may never come again. I'll do anything to put myself in inspiration’s path, which sometimes feels like sitting at a bus stop waiting for a bus that may or may not be in service.

I was once deeply ridiculously in love with someone. It was a terrible relationship but the passion more than made up for it. The first time I broke up with her (which was after the first time she broke up with me and before the second time I broke up with her and the second and third and final time she broke up with me) was because of Hurricane Katrina.

I wanted to go to New Orleans to write for Salon. She said I should just leave then (she was married, they were polyamorous, our time together was limited by calendars and schedules generally beyond my control). For the duration of our relationship I hadn’t thought of anything except her; now for the first time I was thinking of something else. She didn't want me to go travel with Maxine Waters and Jesse Jackson and think, and write, about other things. In response I broke up with her immediately. And she said, "Get out."

That's what I'll do for inspiration. Even passion is less important. Would I make the same decision today? Probably not. There was something about her skin, and the way she would look at me sometimes like I was the center of an imploding universe. But like every other explosion it was a look that could not last forever.

Non-the-less, this is a self-help column, and has nothing to do with intentionally making bad decisions.

So Ali explained why she bought the building near Wicker Park. It was because there was a loft unit in the front with a basement underneath that the entire building used for storage. The loft had been a tavern and the previous owner had it re-zoned as residential, "Which is a little bit crazy when you think about it," she said. I had no idea what she meant.

When she visited the building she imagined herself living in the loft apartment (she’d recently left her husband, who was a deadbeat and a therapist, and was living temporarily with her parents). The resident in the loft (all the other apartments were small 2-bedrooms) had been there 10 years and still had a year left on his lease and she had no intention of evicting anyone, but somehow it didn’t matter. She would eventually move into the loft, take the basement for herself, since there was a stairway directly down from the loft. It would no longer be storage for the rest of the building. It would be her guest room, or a screening room, she wasn't sure. But she loved the area. And the windows and high ceilings.

The pluses included a great neighborhood with easy tenants. Ali did not worry about evicting people. She considered herself fair. She used the courts appropriately and hired strong people to accompany her when necessary. That was something her former husband would never do.

“He wasn’t a strong person,” she said. “As you’d imagine.”

I had to admit “therapist” didn’t conjure the same kind of muscular image as, say, “roofer.” But now we’re dealing in stereotypes.

The tenants that lived in this area were the kind with credit scores. Evictions were unlikely. She thought she could raises the rents without doing anything and the tenants wouldn't even move because it would still be a good deal. She would rent the parking spots. The repairs were minor, and she could sell the building in a year for a reasonable profit, though not an absurd profit, not like the profit she was used to making in various places further from the city, when she took over distressed properties from landlords who had tricked themselves into thinking they could solve certain problems they didn’t have it in them to solve.

It was a good deal, but not a great deal. It was below market, she thought, while admitting she didn’t really know what the market was. “After all, a building is worth only what someone will pay for it, if your intention is to sell.” With less expensive properties a building buys and sells for a multiple of the rents. Nicer areas are less straightforward, more risky. Especially in a tenant friendly city like Chicago. But she was OK with not selling it, which was what made it such a good deal.

The downside was she didn’t have the money. The building was almost three times as expensive as anything she’d previously bought. It took her 5 years to acquire one million in debt. With the stroke of a pen that would more than double. (She considered debt a good thing, but also a scary thing, like an enormous dog with a very loud bark.) The building would barely cash flow, if at all. She needed to convince the bank to take equity in her other property for a down payment.

That building turned out to be the best investment she ever made. The building made her happy. She convinced herself that there was a link between her happiness and making money, though in a strictly logical sense there wasn’t.

"In a way," I said, "Everyone's an artist."

"What do you mean?" she asked. And I shrugged because if I were to answer I would have to say that I had not thought she was an artist. Anyway, the important thing is to be a good person; there are no bonus points for being an artist. In fact, the best artists tend to be horrible people. Horrible people frequently undone by the scolds jealous of their wicked lifestyle and the freedom of their thoughts. The scolds always come along eventually, if not sooner, in their pointy hats and pointy shoes, taking over the literary magazines and art foundations and demanding that you refer to them as poets. But fuck all of those people. I'd rather talk to a landlord, to tell you the truth.

I don't know that Ali had made her point about inspiration. The building increased in value more than expected, but she didn’t sell. She could not stop thinking about ways to improve the space. The building was like a canvas. New windows, new appliances, red fridges (red fridges?).

"There's a cost," she said, "To tying up your money. And it is much more than you think." As a former accountant she knew this as well as anyone. She knew the difference between cashflow and net worth (net worth is more important, if you’re able to cover your nut). But she couldn't bring herself to sell the building. And the building kept increasing in value. And so for fairly random, non-sensical reasons, she came to believe that the most important rule of investing was inspiration.

And it makes some sense. After all, you have to do so much paperwork if you want to buy a large commercial property. The loan officer wants to go through your laundry hamper and have sex with your spouse (I'm kidding about the laundry hamper). There is a lot of tedious stuff to do, so it’s very easy for most people to just not do it if they’re not inspired. Often there are spreadsheets, sometimes linked spreadsheets, and you might have to form a corporation, do you even know how to do that? There are tax implications.

Absent inspiration we have nothing but logic and necessity forcing us to finish our tasks, and that’s often not enough.

Something that I have always said, because I live according to pithy phrases, is that in everything I do I am in a race against my own enthusiasm. When I lose my enthusiasm it's not like getting a slow leak in my front tire, it's like having all four tires slashed and my house set on fire while I sleep.

Maybe that's an exaggeration.

Maybe it isn't.

One thing that is beyond any shadow of doubt is that every race is a race against time.

It was interesting and unexpected to learn that Ali thought so too.

stephen

twitter: @s___elliott

p.s. My movie, After Adderall, is screening at Cinema Village in New York this Saturday at 3pm as part of the New People’s Cinema Club. This is probably the last time this movie will play on a big screen. Please come to the screening. I’ll be there to talk about the movie. Also I’m naked in this film, which I realize might not be the best reason to come. Check out the trailer though!

Get tickets here.

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