I don’t understand why laypeople are so confused by how real estate investing works.
I build an office building and spend $100M. I “hemorrhaged cash” yet I own an asset that’s going to throw off cash flow for years.
It’s the same thing with WeWork on a smaller scale. They spend $5M to build our office space to own an asset that’s going to throw off cash flow for years.
Albeit a much higher yield for a much shorter term.
WeWork doesn’t own property the same way you don’t own your house. The bank does. You still have an asset though, and so do they.
Their asset is what’s known as a leasehold interest. Riskier and shorter duration than owning real estate, but still an asset making this cash hemorrhaging talk complete bosh.
The presumption being of course that they’re going to be making a lot of money out of these investments, which is what us “laypeople” as you put it express doubts about when we see half-empty WeWork spaces? Which results in an over the top multiple valuation which has nothing to do with comparable competitors and which the CEO attributes to WeWork’s great vibes (no joke).
I build an office building and spend $100M. I “hemorrhaged cash” yet I own an asset that’s going to throw off cash flow for years.
It’s the same thing with WeWork on a smaller scale. They spend $5M to build our office space to own an asset that’s going to throw off cash flow for years.
Albeit a much higher yield for a much shorter term.