Housing market situation

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Re: Housing market situation

Post by admin » Mon Apr 08, 2019 6:39 pm

eeuunikkeiexpat wrote:
Mon Apr 08, 2019 5:26 pm
And there are always black swans that could cause massive death like the Black Death/Dark Age times where the survivors made themselves at home in many a dead nobleman's estate :alien: Land and wealth redistribution via mother (or supra) nature vs. human commies and socialists.
In that case, you have way bigger problems than what is in your stupid little investment portfolio. :lol:
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Re: Housing market situation

Post by admin » Mon Apr 08, 2019 8:10 pm

at46 wrote:
Mon Apr 08, 2019 4:39 pm
tiagoabner wrote:
Mon Apr 08, 2019 3:45 pm
While it may have higher expected returns, there's the important fact that it's not a liquid asset. This is something that should always be accounted for.
That's the point - it's harder to make it flow into someone else's pocket 😂
We handle a lot of inheritance. Of all the assets that I have seen survive the messy back and forth of probate, real estate is the one that tends to make it to the next generation, mostly intact. Stock portfolios, life insurance policies, etc, etc, all can simply evaporate in the middle of legal fees, family fighting, simply no one knowing they exist, etc. Real estate seems to be pretty sticky, and hard to loose.
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Re: Housing market situation

Post by admin » Mon Apr 08, 2019 8:11 pm

As for black swans taking a dump on you; well, that is why they are black swans. Highly improbable events; but, you might still loose money to one. Buy a goose gun, and diversify. You can't see all the black swans coming, but if you spread your investments around it gets much harder for any particular swan to take a dump on all of them at once. Think it was warren buffet said, "diversification is the only free lunch".

However, I can guarantee you, with about a 100% certainty, if you don't make an investment and just stuff your mattress full of cash, you will loose money.

So, buy more than one property, in multiple locations if it makes you feel better.
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Re: Housing market situation

Post by paladin » Mon Apr 08, 2019 10:14 pm

admin wrote:
Mon Apr 08, 2019 8:11 pm
As for black swans taking a dump on you; well, that is why they are black swans. Highly improbable events; but, you might still loose money to one. Buy a goose gun, and diversify. You can't see all the black swans coming, but if you spread your investments around it gets much harder for any particular swan to take a dump on all of them at once. Think it was warren buffet said, "diversification is the only free lunch".

However, I can guarantee you, with about a 100% certainty, if you don't make an investment and just stuff your mattress full of cash, you will loose money.

So, buy more than one property, in multiple locations if it makes you feel better.
I second that ! If I’m to be honest, I reckon that over my adult life, if I add up tne profits and the losses I’ve made on stocks, I probably have broken even. On the other hand, if I do the same calculations on my investments in properties, I’ve never ever lost, and have made substantial gains.

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Re: Housing market situation

Post by admin » Tue Apr 09, 2019 2:28 pm

yea i would say biggest returns vs. risks in my life:

1. working for myself

2. real estate investments

3. stock market investments

and way, way down the list so far that it has been put on another list altogether (the 'never do that again' list) the lowest return, highest risk activity: working for someone else.

i was lucky. i realized working for someone else sucked by 16 years-old, and completely quit trying by the time I was 18.

as an old partner use to say, "the point of working for someone else is to get them ahead, not you".

I think it was Richard Branson in an interview, when asked what he would do if he had to start over, pointed out that working for someone else waa the highest risk activity you could engage in. The boss is the last guy fired or layed off, just before the owner. everyone else is expendiable.

so in the grand scheme of things, real estate is about as good as it gets for secure investments, and really is just another form of selfemploment.
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Re: Housing market situation

Post by 41southchile » Tue Apr 09, 2019 4:23 pm

Yeah agree with all above, one thing that I did want to mention or ask in this thread , is does anyone think 35 to 40 UF per square metre is expensive to build ? Because to me it seems outrageous for Chile? Those are nearly similar prices to what we pay in NZ for building, and the carpenters and tradies such as electricians , painters and plasterers, plumbers are probably on three times as much as here.

I wonder how much someone with a fancy diploma is screwing over the new rich who sèem to associate price with quality ? when often there appears to be very little relation from what I have seen . A house for 18 UF per sqm has just as many issues as one with 35 most of the time .
At 35 UFThats 927000clp per metre or $1395 usd or $129USD per square foot.
Ignorance more frequently begets confidence than does knowledge: it is those who know little, not those who know much, who so positively assert that this or that problem will never be solved by science. - Darwin

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Re: Housing market situation

Post by admin » Tue Apr 09, 2019 5:27 pm

ow hell, that is super cheap, if you don't know which end of a hammer is for driving nails vs. hitting your thumb. :lol: :lol:

when i first arrived in chile, i went to a dinner party in temuco with some people that my wife went to school with but had just moved to southern chile. when i told them i wanted to plant a garden, they thought that was a wonderful idea. when told them i like working in a gsrden, and was not planning to hire someone to manage it they were horrified. these were professionals, but by no means "rich". probably best classified as "new rich" or "new middle class" chilenos.


FYI, I never got around to planting that garden. perhaps they were right. i should have just hired someone.
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Re: Housing market situation

Post by admin » Tue Apr 09, 2019 6:12 pm

41southchile wrote:
Tue Apr 09, 2019 4:23 pm
Yeah agree with all above, one thing that I did want to mention or ask in this thread , is does anyone think 35 to 40 UF per square metre is expensive to build ? Because to me it seems outrageous for Chile? Those are nearly similar prices to what we pay in NZ for building, and the carpenters and tradies such as electricians , painters and plasterers, plumbers are probably on three times as much as here.

I wonder how much someone with a fancy diploma is screwing over the new rich who sèem to associate price with quality ? when often there appears to be very little relation from what I have seen . A house for 18 UF per sqm has just as many issues as one with 35 most of the time .
At 35 UFThats 927000clp per metre or $1395 usd or $129USD per square foot.
Here is the thing. For x amount per square meter / foot, in the United States or whatever country, there are minimum building standards.

I use this book, as it is a nice abbreviated easy to understand compilation of much more complex building codes: https://www.amazon.com/Residential-Ligh ... 0876290128

No matter what you pay in those countries, you are at least getting that (mas or menos); or, something close to that for your money as you simply can not pass the building inspection stages (even if the rest of the house sucks) without following those guidelines.

In Chile, not so much.

Show that to any "architect" or "engineer" in Chile, and their heads would explode with the overwhelming logic and standardization of the codes it contains.

I once asked an "architect" in Chile, that had handed me a set of drawings, for the "detail sheet" for the drawings. Which are super standardized (like there is a standardized catalog of those details they just copy and paste in the rest of the world in to the plans using autocad or whatever), unless there is something very special for that building the architect needs to draw out. I just got a blank stair back. They had no frigen clue what I was talking about, and I immediately changed the subject.
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Re: Housing market situation

Post by admin » Tue Apr 09, 2019 6:22 pm

One thing I love about that book, is it has the building standard boiled down to what you need to build, and little asides that explain the most common building faults and lawsuits that result if you do it wrong. Bathrooms are a prime example of things you can do really wrong. So, like it says when doing 'so and so', watch out for 'bla, bla, bla, as this is a big problem later that results in 80% more lawsuits or complaints from customers'. I don't have the problem building for myself, but it alerts me to something I am doing now that I should pay particular attention to because it might be a problem later if I do it wrong.
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Re: Housing market situation

Post by admin » Tue Apr 09, 2019 6:30 pm

FYI, it also has some great sections about "eco" building to go beyond say U.S., canadian, or other international standards, for saving materials or enhancing insulation, etc. All in a very quick reference.

If you look around, you can probably even find a Spanish version.
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Re: Housing market situation

Post by admin » Wed Apr 10, 2019 7:41 pm

So, I was thinking about risks in investment, when I came across this article about stock market risk / declines, and how people's psychology is the problem more than the declines. I think this true of a lot of things, and stock market is simply a good example.

https://www.bloomberg.com/opinion/artic ... nd=premium

Once I managed to train myself to not freak out about stock market declines or crashes, but instead look at them as opportunities, I started making real money investing in the stock market.

In fact, I found two things that were hurting my stock investments. One was fear of volatility, and my own tendency to get bored with a stock and sell.

So, the freaking out about market volatility I solved with setting up my own rule. I learned to force myself to apply the 'don't worry, be happy' and start buying approach. If the market declines 10%, I start shopping for deals. Something probably got thrown out with the bath water and is down even more than 10%, or at least I start making my wish list if they go down more. If the market goes down 15-20% I start nibbling. If It goes down past 20% I double down. 30% double down again. Just keep on doubling down, all the way down. Basically it is like counting cards in black jack. I might not be able to make up all my losses for the stocks I am holding, but if I keep buying I can find some bargains and sure take the sting out of the rest of my portfolio, eventually.

Under no circumstances will I sell just because the market is going down, because I have another rule that says "if I am not happy holding it for 5-10 years, don't buy it, even if I bought it expecting a short-term gain". I always like a long and short-term investment thesis to go with any particular investment. How can I make money quickly; and, if I get that wrong, how to make money on it in the long-term?

My other problem, that lost me a lot of money early on, until I realized what the problem was, was selling otherwise perfectly good stocks that were soooo dull. For instance, in a moment weakness, I once bought Disney. It was like watching paint dry, and I sold it at a small loss after a few months. It was a perfectly fine stock, for grandma to buy for her grandkids.

I realized I did that a lot to my portfolio. What everyone was saying were "safe" investments, were not safe for me. I need something with some action. I want my investments to entertain me, not just sit there and earn 2%. I seen a hedgefund manager once say, "I don't invest in anything unless I see a 25% upside". I realized, that is what I need to do. Too much of the bla, bla, that is written about stock investments is written by brokers and hedge fund managers just trying to not get fired, protect their end of the year bonus, or keep grandma coming back with her retirement fund. I don't have that problem, and I don't want to have the problem. Ever since, I been able to consistently nail 9 out of 10 of my stock picks, and make a steady 20-30% a year on my portfolio. Probably more importantly, I am enthusiastic about hanging on to most of my stocks sufficiently long to let them make money.

Looking back, I realized I had done that repeatedly to more than a few businesses I have owned. I would have a perfectly good business. Making money. Very little for me to do. So, I sold them or closed them. They put me to sleep. For instance, I once had a copier rental business. I bought used industrial copiers from Xerox being traded in from companies every year, and then bought an extended service warranty, and placed them in small businesses like call centers, mailbox etc type places, in the midwest United States that could not afford to own one outright. The copiers would have say 100,000 copies on the dial, but were rated for over a million copies. I rented it out on a per copy basis, splitting the fee with the owners of the establishment. All I had to do was go collect the money once a week. Really, about as risk free as it gets in business. I totally hated it. Sold it six months later, and moved on to something more fun.

So, in real estate, I have found the same thing. Strangely, any time I get itching to sell a particular property, the best thing I can do, is go visit the property. I look around, see the potential, enjoy a walk with my dogs, admire how the trees have grown, spook a rabbit or two, and 30 mins later I realize why I bought it in the first place, and sort of fall in love with it again. Same thing as the stocks. It needs to entertain me a bit, if I am going to hang on to it. If I can not fall in love with it again, then I will sell it.

Point is, it is all about risk management. In particular, what is "your risk tolerance", and not what everyone else considers "risk". Trading stocks teaches you that at an accelerated pace, but if you apply say good risk management to a lot of things, life gets easier; or, at least, a little less stressful. Most the risk in life, is in your head. Not out in the World.
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Re: Housing market situation

Post by Baltimore » Thu Apr 11, 2019 12:13 am

Wise words... here is my favorite quote by Warren Buffet:

"Don't ask the barber whether you need a haircut" ...Have you ever heard someone that works on real estate saying that a particular purchase is a bad decision? I haven't, at least not in public.

The way I interpret the results from that NBER paper is that, on average, good investments in real estate can beat portfolios of stocks and bonds, particularly against big turns in the economy (a war!). But that doesn't mean that any investment in real estate is going to turn out well.

For example, this plot was made with data from collected by Robert Schiller, 2013 Nobel Memorial Prize in Economic Sciences.
RealHousingPrices_1890_2010_log-650x464.png
That plot does not mean that people have not made money on real estate, it only says that on average, home prices in real terms have not grown as much as people believe so (most people think about returns in nominal terms). Of course, that plot is for the US and the situation in Chile might be very different.

Real estate investments can be fantastic if you have the skills and are lucky to find the good deals. Plus you can use tons of leverage at very low rates if needed, something that is much difficult to do with stocks. However, thanks to that leverage, you can also shoot yourself in the foot by overpaying for something. There is no need for a bubble for things to go bad, you just need 1) an overpriced property, 2) an excited young family of professionals, and 3) access to credit for someone to make a bad investment decision.

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