6 ms·

Where are you getting 90% failure rate for those with access to enough wealth to easily sweep up $1m land + development costs for several buildings? I can buy

Where are you getting 90% failure rate for those with access to enough wealth to easily sweep up $1m land + development costs for several buildings? I can buy that for average folk, as they often do not have the expertise (nor the wealth to access the expertise) necessary to make better decisions for their business. For those substantially wealthier, it doesn't really make sense but maybe you're privy to more sources here that I would love to dive into.

deleted 3y ago
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dvt 3y ago
Maybe 90% is a bit dramatic, but the spirit of my post is that, even with $1m, you won't be printing money any time soon.
- ethanbond 3y ago
  Yes you can and yes it is as simple and nearly foolproof as buying land. It takes a lot of stupidity and/or misfortune to lose money on real estate in a stable economy.
_dain_ 3y ago
Even when you own the land it's hard to get anything built. Planning permission, legal disputes, nimbys, nimbys, nimbys. Developers take on a lot of risk when they do this; they might end up owning a very pretty parcel of land that is a pile of shit in business terms, because they effectively aren't allowed to do anything profitable with it. Therefore, in the cases where it does work out, the profit is high. It has to be, to justify the whole thing. That's what "risk-adjusted rate of return" means. Btw this is why it's always "big developers" in the first place; they have to be big, because they have to spread out this risk over a large number of ventures, and have easier access to credit. Planning restrictions drives consolidation in the construction/real estate industry because it raises the level of risk above what smaller companies can endure. That's why it's so maddening to hear nimbys say they're opposed to profiteering big developers, and that loosening of planning regulations would be some kind of handout to them. Precisely the opposite is the case. They're unwitting agents of regulatory capture. Jeremy Clarkson's farm show is an accidental documentary about this. See here: https://twitter.com/NuclearBeacon/status/1630617164536332303 https://twitter.com/NuclearBeacon/status/1630617164536332303
- waboremo 3y ago
  I'm still not seeing any sources to the high failure rates.
- dmje 3y ago
  I think to be clear - firstly it's a hot topic in Cornwall not because of nimby-ism but because the developments are all pitched at hyper wealthy individuals, whether retirement individuals with £500k to spunk on a 1-bed per my example or people from outside the region who are buying holiday homes at similarly inflated values. I don't think anyone locally would say "don't build", instead it's "please build for locals" (where "local" = normal locally employed person). Secondly, my point is kind of more general. I think if anyone with reasonable intelligence were given £1m they could make fairly reasonable profits in fairly short time, possibly from land or maybe from other investments. Of course there are risky investment strategies that could easily see them losing the lot but in general I think you'd be hard pushed to not find some level of success given this initial starting point.
  - johngladtj 3y ago
    Do you think that rich people pop out of thin air whenever a new luxury home is built? They don't. They move out of their existing homes into the new luxury homes... And the existing homes they just left now become affordable.
  - ZephyrBlu 3y ago
    > but in general I think you'd be hard pushed to not find some level of success given this initial starting point What does this even mean? "some level of success" as in sticking it in the stock market and collecting ~7-10%, or more than that? If you think that anyone with capital can generate above-market returns, that is a very odd perspective. Capital is relatively abundant. If you can reliably generate above-market returns with $1M+ you should try to raise capital.
  - _dain_ 3y ago
    >the developments are all pitched at hyper wealthy individuals, whether retirement individuals with £500k to spunk on a 1-bed per my example or people from outside the region who are buying holiday homes at similarly inflated values. I don't think anyone locally would say "don't build", instead it's "please build for locals" (where "local" = normal locally employed person). They really do say "don't build". Or rather, their actions (revealed preference) say "don't build", regardless of what comes out of their mouths. Housing developments that would be affordable to normal people get blocked all the time. There are too many people with veto power, and someone can almost always find an excuse to say "no". So what does get built is biased towards the luxury end, by necessity. Developers have to make up in margin what they lose in volume. There's no way around this. Think about it: if you make it illegal to build holiday homes, that doesn't get rid of the demand for holiday homes, does it? Those same wealthy people will be competing over a smaller stock of possible housing, i.e. the very same housing that local people want to live in. So the prices will still go up! What you're proposing cannot possibly work, unless you want to make it literally illegal for outsiders to move in. When you artificially restrict supply, you get a shortage. It's not rocket science.

deleted 3y ago

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dvt 3y ago

Maybe 90% is a bit dramatic, but the spirit of my post is that, even with $1m, you won't be printing money any time soon.

ethanbond 3y ago
Yes you can and yes it is as simple and nearly foolproof as buying land. It takes a lot of stupidity and/or misfortune to lose money on real estate in a stable economy.

_dain_ 3y ago

Even when you own the land it's hard to get anything built. Planning permission, legal disputes, nimbys, nimbys, nimbys. Developers take on a lot of risk when they do this; they might end up owning a very pretty parcel of land that is a pile of shit in business terms, because they effectively aren't allowed to do anything profitable with it. Therefore, in the cases where it does work out, the profit is high. It has to be, to justify the whole thing. That's what "risk-adjusted rate of return" means. Btw this is why it's always "big developers" in the first place; they have to be big, because they have to spread out this risk over a large number of ventures, and have easier access to credit. Planning restrictions drives consolidation in the construction/real estate industry because it raises the level of risk above what smaller companies can endure. That's why it's so maddening to hear nimbys say they're opposed to profiteering big developers, and that loosening of planning regulations would be some kind of handout to them. Precisely the opposite is the case. They're unwitting agents of regulatory capture. Jeremy Clarkson's farm show is an accidental documentary about this. See here: https://twitter.com/NuclearBeacon/status/1630617164536332303 https://twitter.com/NuclearBeacon/status/1630617164536332303

waboremo 3y ago
I'm still not seeing any sources to the high failure rates.
dmje 3y ago
I think to be clear - firstly it's a hot topic in Cornwall not because of nimby-ism but because the developments are all pitched at hyper wealthy individuals, whether retirement individuals with £500k to spunk on a 1-bed per my example or people from outside the region who are buying holiday homes at similarly inflated values. I don't think anyone locally would say "don't build", instead it's "please build for locals" (where "local" = normal locally employed person). Secondly, my point is kind of more general. I think if anyone with reasonable intelligence were given £1m they could make fairly reasonable profits in fairly short time, possibly from land or maybe from other investments. Of course there are risky investment strategies that could easily see them losing the lot but in general I think you'd be hard pushed to not find some level of success given this initial starting point.
- johngladtj 3y ago
  Do you think that rich people pop out of thin air whenever a new luxury home is built? They don't. They move out of their existing homes into the new luxury homes... And the existing homes they just left now become affordable.
- ZephyrBlu 3y ago
  > but in general I think you'd be hard pushed to not find some level of success given this initial starting point What does this even mean? "some level of success" as in sticking it in the stock market and collecting ~7-10%, or more than that? If you think that anyone with capital can generate above-market returns, that is a very odd perspective. Capital is relatively abundant. If you can reliably generate above-market returns with $1M+ you should try to raise capital.
- _dain_ 3y ago
  >the developments are all pitched at hyper wealthy individuals, whether retirement individuals with £500k to spunk on a 1-bed per my example or people from outside the region who are buying holiday homes at similarly inflated values. I don't think anyone locally would say "don't build", instead it's "please build for locals" (where "local" = normal locally employed person). They really do say "don't build". Or rather, their actions (revealed preference) say "don't build", regardless of what comes out of their mouths. Housing developments that would be affordable to normal people get blocked all the time. There are too many people with veto power, and someone can almost always find an excuse to say "no". So what does get built is biased towards the luxury end, by necessity. Developers have to make up in margin what they lose in volume. There's no way around this. Think about it: if you make it illegal to build holiday homes, that doesn't get rid of the demand for holiday homes, does it? Those same wealthy people will be competing over a smaller stock of possible housing, i.e. the very same housing that local people want to live in. So the prices will still go up! What you're proposing cannot possibly work, unless you want to make it literally illegal for outsiders to move in. When you artificially restrict supply, you get a shortage. It's not rocket science.