Hold: Lessons learned from driving Mr. Henry

Mr. Henry was the brother of the my aunt’s mother, and I called him great uncle Henry although we were not related. I didn’t get to know him unltil he was in his 80‘s and no longer able to come to our family holiday events without assistance. I enjoyed his company and would drive him from his apartment in Washington DC out to the suburbs to be with family for the holidays. He was an entrepreneur and lived a very colorful life which he would retell to me as I drove him. He was a WWII bombardier, and after the war the owner of 11 nightclubs in Washington DC aptly named Mr. Henry’s. He also flipped dozens of Capital Hill townhomes in 1960’s Washington before anyone ever heard the word “flipping.” As we drove to our event he would point out the window to elegant brick townhomes along the route saying, “I bought, fixed and sold that home in 1964, it just sold again for 1 million dollars”, and so on as we left the neighborhood.

The one thing Mr. Henry didn’t do - is hold. He lived in a small apartment shared with two roommates who helped with his care. He may have been rich, (I never asked), but it certainly didn’t appear that way. He didn’t own his own house, and didn’t live lavishly. By his own storytelling, it seems he would have wanted to if he could.

The value of real estate is not only in its short term profit, but its ability to increase with inflation. If we all live as long as great uncle Henry, we will find that the quick bread made today will look like crumbs in the wake of increasing prices. Holding is the best strategy to beat inflation.  If a rising tide raises all boats, then real estate is the boat. If Mr. Henry had held on to just 1 of those properties, today’s $5000-6000 monthly rent would be higher than the profit of the home's sale back in 1960. The annual rents from one house would provide 60-72K in revenue. The sale of that same $1 million house would have more profit than 200 of the 1960's flips. Holding on to 4 to 5 of those homes, and harvesting one every 5 years, would be all that is required to live a luxurious retirement for over 2 decades.

Great uncle Henry died over 5 years ago, and I still think of him everytime I drive into Capital Hill. I remember his laughter and his delight at telling me about his life.  I can't help but hope that one day I will be old enough to drive with my grand nephews and nieces down elegant tree-lined streets and say, "See that 15 million dollar house, I bought it for five hundred thousand dollars and still own it today."