Why I’m no longer a seller

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Back when we started, Jon and I needed to sell renovated buildings.

The reason was pretty simple: We needed the dough.

When you’re in the money management business, you generally don’t see much in the way of money yourself until you make your partners money. They don’t take it on faith; they want cold hard cash in their bank accounts.

So, for us to unlock our own profits, we needed to sell the buildings and pay out the investors.

Now, things are a bit different. We aren’t as hard up for cash anymore. This means we’re more content to hold real estate.

This fits with my long-term view of the market anyway: I think we’re in the middle of a generation-long trend away from suburban living and towards denser, urban living.

Owning newly-renovated apartment buildings in improving neighborhoods in Los Angeles is exactly where you want to be if you believe in that trend: They’re not making any more land in LA and it’s really hard to build, so rents should continue to grow faster than inflation.

Since we no longer need to sell, our strong bias is against doing so. Instead, our aim is to refinance, return (tax-free!) cash to our investors, and then ride what should be a very good stream of cash-on-cash returns.

(Of course, if someone wants to make us a ridiculous offer, we’ll listen.)

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