The other day, after Tom Brady and HIS PACK OF SUPERHUMAN FOLLOWERS ANNIHILATED THE LOS ANGELES RAMS, I found myself sucked into a internet rabbit hole reading all I could about my new favorite person. What have you done for me lately, Warren Buffett?
It turns out Tom and wife Giselle Bundchen own themselves a crapload of real estate. They have a property in the wealthy Boston-area suburb Brookline. He also owned property in New York and Los Angeles, although both of these have now been sold.
Taylor Swift, another of Nelson’s favorites, is also a big real estate tycoon. She owns approximately $80 million worth of real estate in total, spanning 8 different properties in 4 states. She owns two houses in Nashville, a couple more in Los Angeles, three condos in New York City, and a vacation house in Rhode Island.
This all got me thinking. Why exactly do so many celebrities buy real estate? And why so much of it? Why not just put your cash in the stock market instead?
I’m not sure I know entirely why, but I have some theories. Let’s lake a looky-loo.
Say you’re Taylor Swift and you’re going out to LA to record your newest record, tentatively titled Catchy Nonsense. Sorry, I’m being told Lady Gaga has already trademarked that title.
You have the paparazzi following your every move and 14,000 fans who will scream their head off if they catch even a fleeting glance. You also have that boyfriend who you’re trying to keep secret for some reason. This is all very important to you because it’s the only real stress you have in your life.
So she (and every other celebrity) does the logical thing and spends money to make the problem go away. If you have your own place in a city where you spend a few weeks every year, then you don’t have to worry about finding a place to live, dealing with a new hotel every time, and so on. You just show up and everything is as you left it.
Even if it costs $500,000 a year to maintain these Beverly Hills mansions, it’s probably still worth it to Taylor. After all, she is swimming in cash.
But wait. If it’s just for privacy concerns why have two places? And wouldn’t having a house in a city make it all the easier for fans to find you? Which brings us to the second reason celebrities buy real estate.
Celebrities! They’re just like us!
If you ask them the average celebrity would tell you they’re not speculating in real estate. They’re investing, stupid. And then their security would usher you away.
But we all know it isn’t investing in real estate when the place just sits empty most of the time. At least get some revenue by renting it out on AirBnb. Taylor Swift should totally do that. She’d get a huge premium for it. “Sleep in the same bed Taylor Swift does!”
And then when she actually shows up take that bed and BURN IT. BURN IT AND SEND IT TO HELL. Like she’s going to touch the same bed us plebs have.
Real estate generally keeps up with inflation, but there are certain costs of owning it. I’d reckon most celebrities buy real estate as a store of value versus trying to make money. They can sell the place for a little more than they bought it for and enjoy it in the meantime. The property tax, insurance, and maintenance expenses just kinda get forgotten about.
Real estate is easy to understand
A lot of celebrities are, well, pretty dumb. They get suckered into moron investments from their posse and lose millions in the process. They’re constant targets for crooked financial advisors. It’s little wonder why they don’t trust people with their money.
Does this sound like the kind of person who is going to buy and hold a portfolio of index funds? Probably not.
But real estate, they can wrap their heads around that. Houses go up in value! It’s basically guaranteed!
Taylor Swift probably has a big chunk of her net worth invested in the market, btw. Her father worked as a broker with Merrill Lynch for years. You know when the family moved to Nashville to help her get into country music? Ol’ Scott Swift just transferred to the Nashville office. Not really a big sacrifice there, is it?
Let’s wrap this up
So it turns out there are quite a few reasons why celebrities buy real estate, even if that might not be the ideal investment philosophy. Like a lot of real estate “investors,” celebs would probably be better off buying a collection of REITs.
But at the same time I’d argue making money is likely a secondary goal. They want a place to go when they’re in a certain city. And I’m sure they don’t mind the attention they get from owning beautiful houses. No magazine is coming over for a tour of their stock portfolio, that’s for sure.