 Real estate is priced to perfection, not leaving a lot of opportunity for investors according to Warren Buffett. And then also at the end of this video, I'm gonna show a worksheet where you can calculate how negative cash flows isn't good for you. For time, and it's a field that in general we understand we don't bring that much special to the game, but we understand it, we've made money in it. And actually, at the time that the NASDAQ about hit its high, REITs were quite cheap in my view, and I have a less than 1% of my net worth outside of Berkshire, but basically I had that portion all in REITs, they're all small ones at that time, and but they were selling at discounts, at that time they were selling at discounts to the values of properties, and those values of properties were much more conservatively figured than today. Today you have very fancy prices on real estate, and on top of that you have the REITs often selling at a premium though, so I regard REITs as quite unattractive now, certainly compared to five or six years ago. But that's a group of security. So that's where an individual you regard them as unattractive? Yeah. And for a corporation that much more so. Yeah, right, right. So I'm in California, I just took the average home price and the average rent payment and I stuck them in a worksheet. So as you can see, in my state, California, 728,000 is a home, and I searched mortgage rates, and I got 7% as a reasonable rate right now since they've gone up, so I punched that in, 0.07, and I calculated a 30 year fixed at 7%, and it's almost $5,000, and the average rent is 1,800. So as you can see, it's a negative cash flow of three grand in California. Times 12, it's 36,500. So given that if people are willing to do that, they're assuming that properties are gonna go up 5% year after year as long as they own it. I make my own worksheets because it helps with stock analysis, but you can do this also for real estate. This implies that the appreciation and any tax benefits have to be greater than 5%. So I go on further and I map it out. So here I have 10 years of cash flows, so we have the price, and I assumed that they are correct, assuming that they are correct that properties will at least grow 5%. You grow the number by five, I show it up here, you multiply the starting number by 5% and you do that every year. And then if you look, I have it, you have an accumulated loss from the cash flows. So you're gonna have to lose, if you do this deal, if you buy right now the average price and you lose money every month, you're gonna lose for 10 years $400,000. But your assumption is you're gonna get it back as the home price appreciates. If the home does appreciate from 700 grand to 1.2 million, that's a price change of $480,000. So as you can see, someone who thinks prices are gonna go up, even if they're right, they have to lose $400,000 to make $480,000 in the future. They're gonna make, assuming they're correct, $78,000. But then when you calculate it backwards, $78,000 in the future at 10%, I used 10% as a discount rate is only $30,000 today. So if you buy an average home in California and you lose a lot of money every month as a rental, you're gonna lose $30,000. Oh, I'm sorry, you're gonna make $30,000 in the future. Now here's the catch. If you look at the 36,000 that you have to lose, just that one, just that negative cash flow and you grow it out at the same discount rate at 10%, in the future it would be $94,000. I'm gonna say that again. You can invest the negative cash flow instead of buying an average home. You can invest this negative cash flow from owning a negative cash flow rental property. You can invest that for 10 years at 10% and that would be $94,000. And that would be more than losing money for 10 years on a rental property. So I'm glad I did this exercise. I hope you can see how sometimes it's worth it, I'm sure if the property was not losing money, this would be a better deal. If it was making money, of course it would be a better deal, but mapping it out instead of just praying and hoping that it works out might be a better strategy than just buying blindly, which I know people that do this buying blindly, I hope it works out for them, but I'm not that optimistic. Let me know if you like this or if there's another exercise you'd like to do and we'll go from there. Cheers.