Today I had to kill some time while the cleaning crew was at the house, so I went down to the local Public House, called the Sideyard. It was named that because the owners of the deli to which it is attached built it as an addition to their structure and created it literally out of the sideyard of the property. I remember seeing it under construction and thinking it was a really unfortunate place to put an eatery. But their vision, which was executed with minimal cost and maximum design configuration (simple, but very trending) proved my concerns very wrong, indeed. From the first time I went to the Sideyard, it felt comfortable and inviting and not al all like the converted garbage can repository that it had been. If I were an aficionado of artisanal beers I would particularly like the place. As it is, my lack of interest in alcohol of any sort puts the onus on the food and the ambiance to sway me into patronage. Again, I have to say that I have been pleasantly surprised. The small crew that works the place, and especially the driving force, the son of the deli owners, has set a friendly neighborhood tone. As for the food, its perhaps a notch above pub food, but still pretty basic…and good. The deli owners made a bold play and have been rewarded with a successful business that everyone in this area of 3,500 residents very much appreciates.
Boldness is often mistaken for rashness or impulsiveness, but they really aren’t the same thing at all. I like to use the example of house buying and selling when I think of the issue of boldness. If we think of a $1 million house (something that used to be a significant threshold of wealth, but is now approaching the average cost of a home in America), I think we can agree that buying is a riskier proposition than selling. The risk in buying a $1 million house is far greater than the risk of selling that house. When you buy it, many things can exist or happen to undercut its value. You have imperfect information about the house going in and must make a certain leap of faith based on relatively superficial impressions. By contrast, selling that house gives you the advantage of knowing more about it than anyone else and while there might be some market fluctuation or even some flukish demand for the property of which you are unaware, generally speaking, your risk in selling is a minor opportunity cost risk probably having more to do with how you reinvest the proceeds than anything else.
That may not be obvious, but its fair to say that risk in real estate has some component of market action, but its risk is much more about the value of the underlying asset. When you do not own something and are not fully familiar with its fullest nature in all respects, you are taking far more than pure market pricing risk. You are taking valuation risk, which is much greater than mispricing risk. Real estate is more prone to illiquidity risk than most other assets. Granted, there are some asset classes like art that can be even more illiquid due to their high level of pricing subjectivity and rather ephemeral nature and lack of practical usefulness, but very few assets classes are as plentiful as real estate and thus buyers have many options and very little urgency of ownership in most circumstances. The availability of rental options makes buying an inherently less urgent event.
I have often said that I am a far better buyer of property than I am a seller. I believe that while some of that is a cover-up for my natural impulsiveness, I think there is more truth than not to the notion that I am quick to see the complexity of inherent value. In a home, that equation is so multifaceted that it most often translates into a sense or feeling about a property rather than a clearly identifiable list of reasons why it is so valuable. One’s home is a central tenet of existence and is thus less objective than many investment decisions. But even if your mind is capable of and even highly competent at processing all those subjective criteria, it is not necessarily easy to generalize or extrapolate how others will view that calculus when it comes time to sell the asset. On several occasions, with this house on this hilltop, with several of the condos I owned in NYC and with vacation homes in both the Hamptons and Park City, Utah, I have run into people who told me that they looked at buying my home and were very intrigued and liked it, but had regrettably not pulled the trigger. In my view, these people were being penny-wise and pound-foolish, or more often, just too cautious to act decisively. Sometimes that hesitancy is a strength, but in something like home-buying, I would argue that boldness is the key to success. It may be that some people are boldly stupid, but I have found that if your instincts are good (which I believe mine have tended to be), boldness can and has won the day. I have never lost money on any of the 17 real estate purchases I made and I have never regretted any of the purchases. Kim and I always say that we were very lucky to have bought this hilltop, but I will add that boldness did more to give us that luck than anything else.
On the flip side of that, I have never been a good seller of homes. To me, selling is less about instincts and valuation and more about confidence and patience. I am, by nature, and impatient person, but I am a very confident person. But the confidence is not personal, it is about the market, and I must admit to being far less confident about the whims of the market. I think I got that way when I was trying to sell the most expensive house I ever owned, an 11,000 s.f. Ski house in park City. It was a magnificent house and ultimately I made good money on the sale after owning it for 5 years, but it was so big and so unique that it took a long time to sell. I needed to sell it and I hated getting stuck in the illiquidity trap. Since then, I have been a lousy seller who jumps at any reasonable offer I get. I find myself imagining that there may never be another bidder. As irrational as that may seem, it feels real in the moment.
I tend to think of this process as one where my boldness and self-confidence in selecting homes that are not only good for us, but generally of excellent value, has served me very well. Others with less boldness and confidence hesitate and often lose out on the opportunity…several times to my very benefit. So my best advice to the potential home buyer is to consider carefully, but move quickly and boldly. On sale, do not worry too much. It is always better to be patients and equally confident in the value of what you own, but to sell too quickly only has a likely small financial cost at the margin. I prefer to be bold going in and coming out.