Business Beats Real Estate

Andrew Wilkinson strongly advocates against real estate investment, particularly for personal use, believing that businesses offer superior returns and growth potential. He emphasizes the importance of maintaining liquidity and avoiding the operational headaches that come with property ownership.

Key Points:

• Strong Anti-Real Estate Stance:

  • Hates real estate so much he only does interest-only mortgages on his homes
  • Prefers to keep everything in businesses instead of building home equity
  • Believes real estate limits potential returns compared to business investments

• Business vs Real Estate Returns:

  • A business can grow from $1M to $100M in revenue through creativity
  • No apartment building can achieve such dramatic revenue growth
  • Real estate returns are limited compared to other investment vehicles

• Problems with Home Ownership:

  • People often put 50-90% of their net worth into a single house investment
  • Even if house value doubles in 15 years, an ETF could achieve similar results
  • Individual stocks could potentially perform much better

• Property Management Challenges:

  • Requires staff to manage multiple properties
  • Constant issues with maintenance, furniture, renovations
  • Creates another business to manage with its own P&L and HR needs

• Investment Philosophy:

  • Only recommends home buying for non-sophisticated investors
  • Advocates renting and putting capital into equities and businesses
  • Believes in maintaining flexibility and avoiding property-related constraints

• Current Personal Approach:

  • Uses interest-only mortgages to avoid building equity in properties
  • Focuses on business investments for wealth building
  • Acknowledges the operational burden of managing multiple properties