Real  Estate   Record





AND BUILDERS^ GUIDE.





Vol. XVIII.





NEW YOKK, SATURDAY, DECEMBER 23, 1876.





No. 458





Published Weekly by

^^t §leal Estate %uoxti %%BQtmixan,

TERMS.
OjVE year, in advance....$10.00.
Communications should be addressed to

C.  MY.   SAVEET,

Nos. 345 AND 347 Broadway.





THE   CONDITIONS   OF  REAL   ESTATE
INVESTMENT.

To the late AVilUam B. Astor has been attribu¬
ted the remark that "it requires the highest order
of corn-age to invest in and carry real estate, as
periods of depression are certain to occm- in its
history when it is utterly unsalable—can scarcely
be given aAvay—when the revenue derived from
it barely suffices to pay its current expenses;
but, notwithstanding, in the course of twenty
years the permanent increase in its value more
than compensates for these tempoi-ary draw¬
backs." This pithy sentence epitomizes the whole
subject of land investment and lays bare as with
a master's hand the deepest intricacies of this vex¬
atious and baffling problem.

It behooves us to ponder Avell this deliberately
uttered conAdction of one of the most sagacious
and successful managers of estates that our city
has ever produced In the Ught of its compact
wisdom we can readUy discern the quaUties whicli
should distingiush the successful real estate in¬
vestor, namely—courage, capital and endurance.
Courage guided by clear foresight and restrained
by sound judgment; capital in ready money suf¬
ficient for the investment, and in reserve to pro¬
tect the investment when made; endurance, or
grit to stand undismayed the shock of panics and
re-vulsions.

In the nature of the case, real estate is such a
stoUd and immobUe commodity, that we wonder
it is ever deemed a fit subject of quick specula¬
tion, and is not always regarded in its true char¬
acter as a fixed and rarely negotiable investment.
Its system of titles is intricate and obscure; a puzzle
and a mystery to the ordinary lay mind, necessitat¬
ing invariably the employment of a sort of legal
mid-wife to insure its safe deUvery;- Conveyances
In them simplest forms are clothed Avith such an
array of solemn ceremonial and costly prelimina¬
ries as to utterly beAvilder the untutored investor.
The hypothecation of these titles for the purpose
of loans is made so tedious, uncertain, and withal
so frightfuUy expensiA''e, that one experience usu¬
ally suffices for the prudent man of business.
Methods of negotiation for its ultimate disposal
or sale are so tortuous, unreliable, and difflcult of
successful consummation, that an active and brisk
market in real estate is the exception and not the
rule. These inseparable conditions unmistakably
chai-acterize and detei-mine real estate as a per¬
manent investment. In this Ught we now propose
to regard it, and to deduce from our study and re¬
flection, the conditions which we regard as funda¬
mental and cardinal in its successful cultivation.
1. Loimiess of Cost.— A/VhocA^er invests in real
estate at high prices coui-ts disaster from the be¬
ginning. The comer-stone on which successful
i-eal estate investors must stand, is that of actual
lOAvaess oi cost.   We draw a distinction, here be¬





tAveen actual and relative lovmess. Relative low-
ness is thus defined: When Fifth avenue lots
were seUiiig at $60,000 and $80,000 a-piece a deduc¬
tion of tAventy-fiA'^e per cent, would then have
been deemed a temptmg mducement, and have
constituted relative lowness of price; but it can¬
not be denied, in the light of subsequent events,
that even such an ample reduction would have
faUedto render the investment pecuniarily suc¬
cessful. YYe therefore propose to draw a deep
line of demarcation between relative loAvness,
which depends upon ephemeral conditions of the
market, or upon the fleeting basis of personal opin¬
ion, and actual loAvness which is founded in the
immutable natm-e of tilings.

In the case of improved property, this actual
loAvness wiU consist in such a purchase price that
the rents likely to be derived therefrom for a
period of some ten or tAventy years, aUowing for
all the vicissitudes of business, vrill constitute a
fair income or return upon the money invested.

In the case of vacant property, this actual low¬
ness means such a price as wiU admit of carry¬
ing the property until ready for improvement,
and to which may be added a moderate annual
increment of profit—along Avith the usual charges
for taxes and assessments, and stiU result iu no
greater aggregate of value than a prudent
buUder would be wUling to pay in the Ught of his
business experience, or as would enable the
OAvner, after improving the property, to derive
from it an adequate and remunerative income.
In determining the line between this actual and
relative lowness of value, shrewd and subtle
judgment and extensive knowledge are reqmred,
and in its determination nothing short of the
amplest experience and most careful refiection
AvUl serve.

2. Freedom from Mortgage Debt.—^We do not here
propose to enter into any disquisition on the
natm-e of mortgage debts, or upon the perils and
disadvantages of the credit system ; these sub¬
jects are now being too AdAddly and painfully
exemplified in events of daily occun-ence in the
real estate market. "Live within ycm-means,"
"Pay as you go," "Owe no man anything" and
other kindred maxims are being enforced, Avith
emphasis, just now, upon the minds of aU classes
of business men. We simply Avish to consider
this topic in connection with successful land
investment. We are prepared to lay dovm as
another fundamental principle, that, tb be a
som-ce of satisfaction and comfort, as well as
profitable income, real estate should be abso¬
lutely free from mortgage debt; or, if incmn-
bered at all, it should be for so small a percent¬
age of its real value, that under aU conditions
and circumstances the mortgage could be re¬
placed, without difficulty or embarrassment.
The investor of margins, over and above exces¬
sive mortgage loans, is taking a bond of fate,
and invoking the maUgn influence of an interest
account, Avhich AviU eat like a canker.

In the case of vacant, unproductive property,
it is altogether unaccountable by what sort of
delusion or haUucination men can be induced to
give out their mortgages, usuaUy bearing the
highest rate' of interest, with any expectation
that the increnient in value can possibly keep





pace Avith the accruing interest of the mortgage.
If men would pause for a moment's reflection,
before entering into these pecuUar contracts, they
would comprehend that it is a rare and excep¬
tional investment which can be made to pay as
much as seven per cent., annual interest.

When improved property is heaAoly mortgaged,
it usuaUy results in the owner becoming the mere
agent or manager for the mortgagee and for the
city corporation, having Uttle or nothing out of
the rental income left in his hands, after paying
the cost of necessary repairs, interest on his
mortgage and the claims of the city, in the way
of taxes and assessments. To enjoy its highest
advantages, and to derive its fuUest benefits, it
is necessary to hold real estate, whether improved
or unimproved, absolutely free and clear from
mortgage indebtedness.

3. Freedom from Arrears of Taxes and Assess¬
ments.—It is sufficient commentary upon the neg¬
ligent habits mvestors are apt to contract to say,
that the last legislature was called upon to enact
a special statute, having a limited effect in miti¬
gating the burdens which have faUen upon de¬
linquent investors in the accumulation of unpaid
taxes and assessments. That so large a number
should have f oimd themselves in arrears, and so
pressed in this particidar as to require the inter¬
position of the strong arm of the law for the'r
reUef, is a sad criticism upon the unfitness of many
who essay the task of real estate investment.
The law referred to, arbitrarily postpones the
coUection of certain taxes and assessments be¬
yond the term Avithin which, othervtdse, payment
might be compeUed; and also reducing the rate
of interest on these arrears from twelve and
fourteen per cent, to seven and eight per cent.,
provided advantage is taken of the leniency and
grace which the statute extends. A superficial in¬
sight into the books of the various coUectors of taxes
and assessments, would furnish sufficient elucida¬
tion of this topic, and enforce the principle as one
of paramount importance, that for satisfactory
and successful investment^ real estate must be
kept clear of taxes and assessments. Besides the
heavy burden, which several years aggregate of.
these charges anM)unt to, they ordinarily carry a
default penalty of twelve and fourteen per cent.,
per annum, thus sweUing the total of arrears with
a rapidity and volume which are scarcely real¬
ized, or conceived of, by the delinquents. There
are but few properties in the city which would
not be heavily incumbered by the failure to pay
these charges, say for a period of five years.

4. Permanence of Holding.—^In our present "view
of the subject, avc must dismiss from our minds aU
idea of quick turns in real estate. If those per¬
sons, who enter upon real estate ventures, as they
seek Wall street for a flyer or a flip in stocks,
would pause to contemplate the possibUity of
haAang to wait a number of [years for a re¬
turn of their capital, and extrication from the
speculation, we doubt not they would be deterred
from embarking. It is altogether foreign and
inimical to the true nature of real estate invest¬
ment, that it should be contemplated as of short
duration; ordinarily the very fact of a sale hav¬
ing been recently effected in real estate, will
I avert shrewd and wary buyers from seeking to