Moses Kagan on Real Estate

Why writers should own apartment buildings

with 2 comments


At first glance, the title above seems pretty crazy, right? After all, writers are creative types. They spend their days conjuring stories from thin air to delight the public. Why should people like that be involved in the nitty-gritty of owning and managing apartments?

Like many things in life, it comes down to money. Writers, especially screenwriters, have lumpy incomes. They can sell two scripts in a year and pocket $500k, then have several years with no income. Or, like many TV writers, they can kill it for 20 weeks or so and then end up on unemployment until they find out if the show’s been picked up for next season.

Owning apartment buildings, particularly 5+ unit buildings, has at least three advantages for writers with income patterns like that:

  1. The cashflow from a building provides some income during fallow periods. Don’t know if the show will be picked up? It’s not that dire when you know you’ve got $50k coming in this year from your real estate (and this is totally possible with $500k to use for a downpayment).
  2. You don’t have to take hack jobs. This is a follow-on effect from #1. Because you know you have passive income coming in, you don’t have to take jobs just to survive. Does this mean you’ll only have to work on things you absolutely love? Probably not, at least not initially. But you’re not going to end up writing dialog for pornos to make your rent payment.
  3. People with lumpy income can more easily qualify for “commercial” loans than for smaller, residential ones. Why is this? Because for loans on larger buildings, banks tend to focus on the asset more than on the borrower. And having a bunch of cash in the bank can make up for having an income that fluctuates wildly.

I get so angry when I see writers who have recently “made it” buy a house in the Hills and lease a fancy car. They’re guaranteeing that they’ll live a precarious financial life, at least until they really hit it big.

Instead, they should delay gratification for a year or two and take down a building. Then, no matter what happens to them professionally, they’ll know for certain that they’ll be ok. And that counts for a lot when you’re trying to lead a life devoted, at least in part, to art.


Written by mjkagan

06/19/2012 at 4:10 am

Posted in Buying, Success, What to buy

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