25 Dec Real Estate
The Real Logic of Real Estate
Houses, Homes, Condominium, Row House, Duplex, Bungalow or whatever you may call it
Over time they get old and out of fashion
If you have purchased the place, you have to stay whatever be the upkeep, maintenance or conditions
But if you are on rent, it is fairly easy to move to the nearby modern structure that the city is talking about.
Exiting is Power and the Ability to Exit is More Power.
Liquidity is another word for Exit Power.
When you are invested in long bonds and if one is expecting interest rates to go up, wouldn’t you want to exit to a higher interest bearing Bond. It is exactly like living on rent and having the ability to exit from the current old apartment into the newly constructed plush apartment.
However, in the case of Bonds if interest rates are expected to come down, then the longer the Bond the better will be the returns. While in a cyclical interest rates this is possible and one should monitor interest rates, for real estate it means that your apartment will become better than it was when it was constructed.
Usually this does not happen. So the only way in which the future becomes better for a residential apartment is if the location in which the apartment is located becomes important all of a sudden. For example an airport coming up nearby or a business hub coming up in the vicinity can have this effect. However, this isn’t high probability.
In the past areas next to business centres become dearer as economic activity increased.
However, these things are quite outdated now. This is because
1) Offices shifted our to newer locations. Nariman Point lost its sheen and BKC became the new hub. Colaba lost its value and Kurla gained value
2) With the power of remote working that one has come to realise after the pandemic lockdown, geography is clearly now history.
Therefore always have the tendency to be mobile. Don’t drop anchor in any apartment, area or even city. Be invested in short bond papers. You never know when opportunity will beckon you to exit your current situation and grab it. Moreover you may need to grab Mr Opportunity in an altogether different city.
The question you need to ask yourself is, “Are you ready? Are you flexible?
Brought to you with the help of UTI Mutual Fund