Active ROI Requires 50%

A discussion on investment return expectations and lessons learned from real estate investments, highlighting the importance of different ROI thresholds for active vs passive investments.

Core Investment Rules

• Active investments must generate >50% returns to be worthwhile
• Passive investments can be acceptable at 7% returns
• Key criteria for good investments:
  • Must be passive
  • Should have tax advantages
  • Needs to beat the market

Real Estate Investment Lessons

• Active real estate ownership challenges:

  • Requires ~10 hours per week of work
  • High stress levels
  • Vulnerable to contractor pricing discrimination
  • Operating properties is like running a small business

• Investment outcomes:

  • Passive real estate investments performed well (28% annual return on Brooklyn building)
  • Actively managed properties performed poorly
    • 2 properties were bad investments
    • 1 property broke even
    • Time and effort weren't worth the returns

Key Takeaways

• Don't let hubris drive investment decisions
• Fully owned/operated real estate requires significant time investment
• Being a passive investor vs active operator yields better results
• Consider the time cost when evaluating investment opportunities
• Focus on passive, tax-advantaged investments that beat market returns