Having practically doubled in value during the past six years and going, real estate is over half way towards notching up its best decade ever. Market capitalism, the engine that moves real estate, seems to be doing its job well. But is it? Once upon a time that job was generally agreed to be to make people better off. Nowadays, this is not so clear. A number of real estate consumers backed, somehow, by an increasing number of analysts think that real estate ought to be doing something else: making people happy.

The view that real estate should be about more than just money has been widely held in Europe for decades. And now the idea of “wellness” behind real capital assets has sprouted in North America too, catering especially to the prosperous baby-boomers. Much of this draws on the upstart science of happiness, which mixes psychology with economics. Its adherents cite copious survey data, which typically shows some unsurprising results: the rich report being happier than the poor. However, a paradox emerges that requires an explanation: affluent countries, taken as a whole, have not gotten much happier as real estate has appreciated and as people have grown richer.

The science of happiness offers two explanations for the paradox. Capitalism, it notes, is adept at turning luxuries into necessities, thus bringing to the masses what the elites have always enjoyed. But the flip side is that people come to take for granted things they once coveted from afar. Homes they never thought they could possess become essentials they cannot do without. In a way, consumers are stuck on a treadmill: as they achieve a higher standard of living, they become inured to its pleasures.

Add to all this the fact that many of the things people most prize – such as an exclusive home address – are luxuries by necessity. An exclusive mansion, for instance, ceases to be so if it is provided to everyone. These “positional goods”, as they are called (a reference to the hierarchical ‘position’ within society), are in fixed supply: you can enjoy them only if others do not. The amount of money and effort required to grab them depends on how much your rivals are putting in.

All this somehow casts a doubt on the long-held dogmas of Economics. The science of Economics, especially as it applies to Capitalism, assumes that people know their own interests and are best left to mind their own business. How much they work and what they buy is their own affair. But the new science of happiness is much less willing to defer to people’s choices. In 1930 John Maynard Keynes imagined that richer societies would become more leisured, where people would have more time to enjoy the finer things in life. Yet most people still work hard to afford things they think will make them happy. They also aspire to a higher place in society and purchase status goods such as expensive homes, and in so doing they work even harder and have less leisurely time at their disposal.

On the other hand, if economic growth through consumerism does not make people happy, stagnation will hardly do the trick. Ossified societies guard positional goods even more jealously. A flourishing economy creates opportunity, which in turn spurs happiness to a certain degree. It is hard to say that most people were unhappy during the heydays of the real estate boom.

To find the real estate market or, for that matter, the entire capitalistic system at fault because they do not deliver joy as well as growth is to place too heavy a burden on them. For many to do well is not enough: they want to do better than their peers, and this competition sets anxiety very deep.

Real estate can make people well off and the consequence of it is that one can choose to be as unhappy as he wishes. To ask anymore of it would be asking too much.

Luigi Frascati

Many people think finding the good deal is the hard part. They spent many hours looking and searching for the right deal. They crunch the numbers over and over again. They make numerous calls, and walk through many attics and basements, Florida notwithstanding. They get their hopes up, and then dashed within the same twenty-four hours. They check the neighborhood, and research, check, and then double check market values. They write up offers, many with low, almost ridiculous prices. After many hours spent, sacrifices made, offers countered and exhibiting much persistence, they have an offer accepted. Now the hard work begins.

While it may seem that finding a profitable deal is the hard part, it will mean nothing if you don’t know how to manage your real estate investment. Especially in today’s depressed real estate market, finding the profitable deals is the easy part. Managing real estate correctly will make or break the investment. On the surface, it seems pretty simple. Rent the property to a good tenant, collect the rent, and pay the bills. Sometimes it is that simple. When you have a decent tenant who pays the rent and keeps the property clean, it makes life so much better. But as many real estate investors know, all tenants are not created equal.

One of the first steps to managing real estate is to choose the right tenant. Many investors learn how to manage their investment the hard way. Some tenants are decent, upright, honest people. Other tenants do things that border on being criminal. Managing real estate is more than just managing property, it is also managing people. Although it may sometimes seem difficult finding that right tenant, it is many times much more difficult getting rid of that tenant. There are a lot of good books to read that give terrific advice and suggestions on how to manage your real estate investment.

To some people managing people and real estate comes naturally. Other people will continue to learn from each property. And to those that choose not to manage their investment, they can always hire a property manager. When you hire a property manager, you will need to work this cost into your budget. They will end up saving you time, and may end up saving you money. You won’t know the true answer to this until after some time has passed. After a while you will learn by necessity how to manage your investment. Just when you think you have seen and done it all, something will happen that will leave you dumbfounded.

If you have a property where years later you have no very interesting stories to tell about your tenants, consider yourself lucky. If you could own a property and did not have to deal with tenants, your investment would be so much easier and carefree. When you are giving serious thought on how to manage your real estate investment, remember that your time is valuable, your property is valuable, and the tenant that you decide to rent your property to should also hold a high respect and regard for your time and property.