Always better to property-develop a decrepit asset?

From OpenArt

Suppose you owned a decrepit property, borderline uninhabitable, requiring substantial cash and effort to fix before it could be put on the market for sale or rent?

If you are someone with few skills in the building sector, is it better to sell off the property as-is to a professional developer; or would it make better financial sense to run a fix-up project yourself and then put it on the market in perfect order?

It always surprises me that a common opinion is that the smart move is the latter: that you would lose money by selling the derelict property as-is and then investing the resulting cash in your own choice of asset-class.

I asked Gemini: "What are the pros and cons of property development as an investment strategy? As compared with, say, investment in equities? If property development offered consistently better returns than equity investment, wouldn't capital move to that sector until returns equalised?"

Gemini:  "You're right. In a perfectly efficient market, with all investors having access to the same information and acting rationally, capital would constantly flow in and out of asset classes to equalize risk-adjusted returns. However, the real world isn't perfectly efficient. Here are some reasons why property development might not always offer the best returns despite its potential for higher gains:

• Higher Risks: Property development involves significant risks like project delays, cost overruns, and market downturns that can wipe out profits. Investors demand a higher return to compensate for these risks.
• Barriers to Entry: Unlike stocks, which anyone can buy, property development requires significant capital, expertise, and connections to navigate the complexities of the real estate market.
• Transaction Costs: Buying and selling properties involve high transaction costs, including realtor fees, taxes, and renovations, which eat into returns.
• Illiquidity: Real estate is illiquid, meaning it can take months to sell a property. This can be a disadvantage if you need quick access to your capital.

So, while property development has the potential for high returns, it also comes with substantial drawbacks that equity investments generally don't have. This keeps some investors away, preventing a complete shift of capital towards property development.

This seems like a good answer to me; also, the right framework to think about the issue. One tends to remember the successful property development projects which - with the risk-premium - paid off well, while forgetting those builders whose projects went bust. And then there's the hours and days of unpaid labour time with the amateur fix-ups...

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Note

Suppose your decrepit asset is worth £X.

Scenario 1: (sell the asset as-is for £X).

Developer spends £X to acquire the property, £Y1 to fix it up, and sells it on the market for £Z.

Developer's net revenue: £(Z - X - Y1).

Your net revenue: £X, ready for onward investment - now.

Scenario 2: (you fix-up the asset yourself).

You borrow £Y2 to fix up the asset and spend it. You sell the developed property for £Z.

Your net revenue: £(Z - Y2 - X) - available at the end of the project.

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If the developer is efficient, his rate of return = (Z - X - Y1)/(X + Y1) will be equivalent to the return any other efficient company makes, and therefore equivalent to standard equity returns.

If your costs (Y2) are greater than his (Y1) then your rate of return will be less than his. You would be better off simply investing £X in a well-judged stock market portfolio.

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In real life there are many caveats: market conditions, local monopolies etc. But in the end, professional competence normally wins out over amateurism when making profits. 

Quo modo Deus exstat?

Michelangelo -The Creation  of Adam (Wikipedia)

Major is the family dog, recently taken to sheep-worrying/killing. The father will have to put it down. Owen, the godless younger brother, petitions his religious-curious older sister.

“'If you prayed for Major not to get shot would he not get shot?' said Owen in a demanding voice.

The thought of praying had never crossed my mind.

'You prayed you wouldn't have to thread the sewing machine any more and you didn't.'

I saw with dismay the unavoidable collision coming, of religion and life.

He got up and stood in front of me and said tensely, 'Pray. How do you do it? Start now!'

'You can't pray,' I said, 'about a thing like that.'

'Why not?'

Why not? Because, I could have said to him, we do not pray for things to happen or not happen, but for the strength and grace to bear what does. A fine way out, that smells abominably of defeat. But I did not think of it. I simply thought, and knew, that praying was not going to stop my father going out and getting his gun and calling, 'Major! Here, Major -' Praying would not alter that.”

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‘Age of Faith’, in ‘Lives of Girls and Women’, Alice Munro (p. 145).

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Aged ten, I ask my father if he believes in God. “No I don't,” he says, “There is no way heaven could be big enough for all the people it would need to contain.”

A parish meeting in Andover, a Q&A. Hesitantly, a parishioner asks the priest, “Father, where is heaven?” The priest, equally hesitant, talks about quantum theory and the strange spaces within the atom. I cringe with embarrassment.

Rod Liddle writes in his Sunday Times column about asking a CofE bishop whether he believes in God. “Blessed if I know, Rod,” comes the reply, confirming Liddle’s sardonic take on England's institutional religion.

A liberal states their deepest attachment and loyalty: to democracy and the rule of law. But in what sense do those things actually exist? I ask. They don't understand the question.

Buddhists believe that the self is an illusion.

Freighted, that term ‘illusion’.

It appears that Buddhists believe the self is a process, an epiphenomenon of more basic physical and mental state transitions. Is that what ‘illusion' means?

It's natural to think naively that existence is a simple, obvious notion. Stones exist, your body exists. If something exists, you can poke or paint it. But most ‘things’ we deal with in life are not like this: contracts, democracy, numbers, freedom, oppression, patriotism, any -ism. Welcome to the social construction of reality and the ubiquity of reification.

Catholicism is more a framework than a set of definite precepts. It's not reducible to biblical literalism. Orthodoxy will tell you that the true nature of God is mysterious. Most Catholics opt for some manner of ontological realism but I'm more deontological…

The Conscious Mind (David J. Chalmers)

 

Amazon link

Question

David Chalmers's argument for panpsychism from the alleged irreducibility of experiential consciousness to physics, rather reminds me of St Anselm's Ontological Argument. It seems that, because Chalmers can conceive of a universe in which experiential consciousness does not supervene on the facts and laws of physics, and because at present no-one has any kind of plausible causal explanation, then we are necessarily forced into a kind of dualism, and strict materialism is refuted.

Would this be a fair characterisation of David Chalmers's position?

Gemini

Your characterization of David Chalmers's argument for panpsychism aligns with some key aspects of his position. Here's a breakdown of the similarities you identified:

• Irreducibility of Consciousness: Chalmers argues that consciousness, the "what it's like" of experience, cannot be fully explained by physical properties or processes alone. This parallels the ontological argument's claim that God's existence is irreducible to any other concept.
• Conceivability Argument: Both arguments hinge on the idea that we can conceive of an alternate reality where the key phenomenon exists independently. Chalmers imagines a universe with physically identical systems (‘philosophical zombies’) lacking consciousness, similar to Anselm's conception of a maximally great being that necessarily exists.

However, it's important to note that Chalmers's argument doesn't necessarily lead to a dualist position (mind and matter as separate substances). He proposes panpsychism (consciousness inherent in all things) as a solution to the mind-body problem.

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Comment

The book, like many semi-popular philosophy texts, is a dry reading experience in the parts where he's developing and defending his own philosophical position. Rather like attempting Proust.

When he's purely didactic, however, he's excellent: a justly-praised virtuoso essay at the end on the ways quantum theory could be interpreted (his imagination again fails him on the MWI); his compelling framing of what's wrong with Searle's Chinese Room thought experiment - a model of conceptual clarity.

But on the central question, how to understand how Standard Model matter can give rise to qualia like the subjective experiences of the colour 'red', or agonising pain, he's inclined to reject any kind of physicalist explanation on principle.

People talk about the 'God of the Gaps; Chalmers is proposing a 'Philosophy of the Gaps'. Recall that he wrote this book in the mid-1990s when GOFAI was running out of steam while Artificial Neural Net research (the precursor to LLMs) was limited to toy problems. 

With bio-realistic neural architectures computationally now in reach, I am optimistic that qualia can become a practical research topic.

Beautiful world, where are you?

 

I've just re-read this after three years; I'm as impressed as I ever was. I stand by my review here of October 11th 2021.

The Felix character rejects Catholicism crassly: Jesus in the sky spying on people - hard to believe, huh? This is in character.

The Alice character thinks Catholicism (the character Simon is a practising Catholic, although hardly orthodox) is a delusion, but then again, she argues, absent nihilism, what isn't? If we are playing with ideas, I would have liked the complexities of ontology to have made an appearance, as argued here.

After immersing myself in Dublin-adjacent existential angst I'm now considering buying some of her other books: she has 'Intermezzo' coming out in September 24. 

Fathers and Sons

Sigmund Freud

Sigmund Freud said that no man could be truly free until the death of his own father (or something like that).

The bond between father and son is that curious thing, a dialectic of respect and rebellion.

In the early years, a father is a towering figure: some kind of ‘superhero’ whose authority verges on the absolute. But as the son matures, so too does the urge to forge his own path, to leave the constraining shadow of his dad.

A son might admire his father's achievements, (the corner office, the shiny car!) yet feel eternally stuck in the framework of his father's expectations. The father, sensing this growing coolness, might try to morph into a benevolent peer… (but older and wiser? Those old memories of hierarchy subvert his efforts).

A strange twist of fate: after a father's passing the son often sees him in an entirely new light. That competitive, judgemental pressure is no more, replaced by a nuanced appreciation of the man himself. 

Grandfathers, by contrast, hold a special place for grandsons - benevolent support without the presence and pressure of their immediate authority figure.

Daughters, on the other hand, tend to view their fathers through a different lens. They see them as complementary role models, sources of strength and guidance rather than rivals in a lifelong competition. Their affection for their fathers can be unconditional. How pleasant to have daughters!

An irony for the son who grows up to become the father of boys of his own; he finds - to his rueful horror - that he gravitates helplessly into that imprisoning role of his own father… The shade of his father nods slowly, in sympathy and understanding.