We Analyzed Elon Musk's Real Estate Strategy, "Own No Home" And Here's What We Learned...

In May 2020, Elon made an extraordinary announcement on Twitter, saying that he would “own no home… and sell almost all physical possessions. Days later, five of his homes were seen listed on Zillow. Why did he do this?

We Analyzed Elon Musk's Real Estate Strategy, "Own No Home" And Here's What We Learned...


What hasn’t been said or written about the extraordinary Elon Musk?

He is a billionaire business magnate, Founder, CEO and Chief Engineer at
SpaceX, at the forefront of revolutionizing space technology. He was an early
investor, now CEO and Product Architect of Tesla Inc., manufacturing and
leading the way in sustainable energy sources with electric cars, solar and
integrated renewable energy applications for homes and businesses. He is Founder of The Boring Company, which creates fast-to-dig, low-cost transportation, utility and freight tunnels and he is Co-Founder of Neuralink, developing ultra-high bandwidth brain machine interfaces to connect humans with computers, and OpenAI, a research and deployment company with a mission to ensure that artificial intelligence benefits all of humanity.

Musk launched his first company, Zip2 in 1995 with his brother, Kimbal. It was an online city guide which was soon providing content for the New York Times and the Chicago Tribune. Elon and his brother slept on couches and roughed it during those early years, but it was well worth it. In 1999, a division of Compaq Computer bought the company for $307 million in cash and $34 million in stock options.

Elon used the money to launch X.com, an online banking services company with Harris Fricker, Christopher Payne and Ed Ho in 1999. In 2000 the company merged with Confinity, which led to a name change to PayPal. Elon made over $165 million in October 2002 when PayPal was bought by eBay.

Musk is now estimated to be worth around $169.8 billion according to Forbes.

At the start of 2020, he had a net worth of $27 billion, but throughout that year, his net worth increased by $150 billion, driven by his ownership of around 20% of Tesla stock. His net worth has dipped wildly from time to time to time due to fluctuations in the stock market, but in January 2021, Musk overtook Amazon founder Jeff Bezos to become the richest person in the world. Bezos reclaimed the top spot the following month.

How has he done it?

"I operate on the physics approach to analysis. You boil things down to the first principles or fundamental truths in a particular area and then you reason up from there."
- Elon Musk

It goes without saying that Musk has an uncanny knack for creating value, acquiring businesses for under market value then selling them at a substantial profit, using the proceeds to fund other business ventures.

He is perhaps the most celebrated and visionary entrepreneur of our times. But is he also a savvy real estate investor? We maintain that if you study his recent real estate holdings, you will realize that his strategy was planned, deliberate and undertaken with careful analysis of the marketplace – and he sold all his properties at a profit. Admittedly, some of his properties realized a somewhat meagre profit, but the macro view of the LA real estate and business marketplace supports his strategy.

In May 2020, Elon made an extraordinary announcement on Twitter, saying that he would “own no home… and sell almost all physical possessions.” He was derided in the press for being “whimsical”, ‘bizarre,” “making off the cuff remarks” and “going on a rant.”

But Musk made good on his promise...

Days later, five of his homes were seen listed on Zillow.  Why did he do this? It has been speculated that the 50-year-old billionaire decided to part with his real estate holdings, perhaps due to criticism of his massive wealth and of Coronavirus restrictions in California. Musk’s offloading of real estate came after a battle with the State of California. The entrepreneur had criticized the State’s Covid-related restrictions on operations at the Tesla factory in the Bay Area last year— leading to a lawsuit, which Tesla later dropped.

“Only house I own is the events house in the Bay Area. If I sold it, the house
would see less use...”
he tweeted.

A few days later, he put that property up for sale too: “Decided to sell my last
remaining house. Just needs to go to a large family who will live there. It’s a
special place.”

891 Crystal Springs Rd, Hillsborough, CA. - Zillow Listing

The 47-acre property is in Hillsborough, California and it is a 16,000 square foot “over 100-year-old mansion” with nine bedrooms and ten bathrooms. It is listed for $37.5 million, having originally cost Elon $23.4 million in 2017. If it sells at asking price, he will make over $14 million.

Elon Musk's Real Estate Portfolio [Analysis]

Apu Gomes/Getty Images

Let’s dig in and take a closer look. Altogether, Musk has spent nearly $80 million on zip code 90077 real estate in less than seven years, with another almost $4 million spent earlier in Brentwood.

Using the strategy of the ultra-wealthy by buying out the neighborhood for privacy purposes, he bought his first property in LA in 2012 on Chalon Road for $17 million and went on to purchase 2 more on the same street.

10930 Chalon Road, formerly owned by beloved Willy Wonka actor, Gene Wilder, and bought by Musk in January of 2013, is a modest (by billionaire standards) 3-bedroom ranch overlooking the thirteenth green at Bel Air Country Club. He sold the property to Wilder’s nephew with a stipulation made by Musk “...that it cannot be torn down or lose any (of) its soul.” He also gave him a loan to buy it. There seem to be some non-profit impulses in Elon’s character.

Elon’s multi-purchase strategy was similar on Somera Road. He bought and sold three properties on the same street, albeit with a lean profit from two of them, yet an almost $5 million profit from 954 Somera Road.

A snapshot of his former real estate holdings in Los Angeles may reveal more secrets of his strategy:

2232 Westridge Road, Los Angeles

2232 Westridge Road, Los Angeles

Details:
4-bedrooms, 3 bathrooms, 3,077 square feet, mid-century modern home in Brentwood. Saltwater pool, spa, cook’s kitchen, fireplace. 0.28-acre lot with multiple patio areas, two-car garage and panoramic views of the city, ocean and canyon.

Bought 2014 for $3,695,000
Sold 2019 $3,925,000

Property taxes at time of sale: $47,680 (an increase of 1.2% over 2019)

Profit: $230,000


954 Somera Rd, Los Angeles (Google Maps)

954 Somera Rd, Los Angeles

Details:
Six bedrooms, seven bathrooms, 9,300 square feet contemporary home topped with an egret-like metal sculpture. Has a large industrial-type building on the property.

Bought September 30, 2016, for $24,250,000
Sold December 22, 2020, for $29,719,000

Property taxes at time of sale: $310,079 (an increase of 4.5% over 2018)

Profit: $5,469,000


955 Somera Rd, Los Angeles

955 Somera Rd, Los Angeles

Details:
4 bedrooms. 4-bathroom house on 1.26 acre, built in 1962 and not updated since. Has a pool, spa and fireplace, wood paneled kitchen and teal carpets (!) Possibly bought as a “buffer’ house to shield him from nosy neighbors.

Bought July 10, 2017, for $4,300,000
Sold December 22, 2020, for $4,443,000

Property taxes at time of sale: $56,552 (an increase of 4.5% from $54,092 in 2018)

Profit: $143,000


958 Somera Rd, Los Angeles

958 Somera Rd, Los Angeles

Details:
Elon owned this 0.85-acre property for less than 2 years. It is a colonial-style, four-bedroom, five-bathroom house on 3,950 square feet. It was built in 1964 and has two fireplaces, a pool, large, paneled den and library, wet bar, eat-in kitchen and formal dining room. It has mountain and city views of LA.

Bought January 15, 2019, for $6,400,000
Sold December 22, 2020, for $6,774,500

Property taxes at time of sale: $79,079 (Note: taxes went up 1,763.8% on this property from $4,243 in 2018 to $79,079 in 2019!)

Profit: $374,500


10947 Chalon Rd, Los Angeles - zillow.com

10947 Chalon Rd, Los Angeles

“Project for the big thinker, designed to showcase one of the best views in LA.”

Details:
Six bedrooms, eight bathrooms, stucco house with hardwood floors, 7,000 square foot fireplace. 3.4 acres. 8-car garage, pool and spectacular views of the city and mountains.

Bought July 28, 2015, for $20,000,000
Sold December 21, 2020, for $20,948,500

Property taxes at time of sale: $209,409 (an increase of 4.5% over 2019)

Profit: $948,500


10930 Chalon Rd, Los Angeles

Details:
This three-bedroom, three bath stucco ranch home was a favorite of Musk’s. It was formerly owned by actor, Gene Wilder. The 2,750 square-foot home apparently has “unique and quirky Willy Wonka-type” features. It sits on 0.78 acres overlooking the Bel-Air Country Club and has an oval pool, five-car garage and guest cottage.

Bought October 24, 2013, for $6,750,000
Sold October 8, 2020, for $7,000,000.

Property taxes at time of sale: $91,519 (an increase of 4.6% over 2019)

Profit: $400,000


10911 Chalon Road (zillow.com)

10911 Chalon Road

Details:
Seven-bedroom, 13-bathroom luxury 20,200 square-foot stucco mansion, with a two-story library, theater and 1,000-bottle wine cellar. Soaring ceilings and luxury finishes, two-room guest suite, gym, master suite with dual bathrooms and closets. The 1.67-acre property has a lighted championship tennis court, fruit orchard and five-car garage and motor court.

Purchased December 21, 2012, for $17,000,000
Sold June 12, 2020, for $29,000,000

Property taxes at time of sale: $232,289 (an increase of 4.6% over 2019)

Profit: $12,000,000


Elon's Strategy

Here is why we surmise selling his properties was a smart move:

Taxes and insurance in California are rising:

  • Income tax. California already has the highest state tax rate in the country at 13.3%. A proposed increase to 16.8% with new surcharges on seven figure earners is in the works. It would add a 3.5% surcharge to gross income of more than $5 million, making the combined state and federal taxes a whopping 53.8%.  If approved in August, the new tax can be applied to income earned since January 2020!
  • Real estate tax. Taxes on 10911 Chalon Road increased 4.6% in 2019, that is more than double the increases charged in 2015, 2016 and 2017. Taxes for Somera Road went up 4.5% in 2019. His other properties faced similar increases.
  • Corporate tax. Many companies, including some owned by Elon, are moving out of California due to increases in corporate taxes.
  • Home Insurance. California has some of the highest home insurance rates in the country. Earthquakes and fires are contributing factors.

Add to this fact that his two main businesses, Tesla and SpaceX are based in Texas, giving him little time to spend in his multiple mansions, and it is a practical move.

Throughout his ownership years in Los Angeles, his strategy seems fairly simple: buy properties in a great neighborhood, then sell when business circumstances, taxes and overhead outweigh their value and use (and when you think the market is about to turn) so you can put your money elsewhere.

Adding up the combined selling price of his properties and you will see that Musk’s overall real estate portfolio grossed $101,810,000.

On an original real estate portfolio of $82,395,000, that’s an approximate 19% return. Not bad even in a seller’s market, considering the increasing cost of holding each property, including taxes, insurance and maintenance. There is also looming the specter of an interest rate increase on the horizon, which will do much to slow down one of the hottest real estate markets in decades.

The Big Move


In early December 2020, Musk confirmed that he was indeed moving to Texas, citing the fact that two of his biggest projects—Tesla’s new factory and a SpaceX facility -are located there. He is now an official resident of the Lone Star State.

It is unknown whether he is renting any other houses in Austin. And what of his girlfriend, 32-year-old singer Grimes, who lives in Austin, and their 10-month-old child, X AE A-XII? It is not known if they are together. Musk has five other children with his first wife, Justine Wilson but where they live is also unknown.

So, where is Elon living now you may wonder?

His current home will have you scratching your head.

In June of this year, he tweeted that he is living in a rented home in Chica Texas, near SpaceX headquarters. The house cost only $50,000; that’s less than the cost of a Tesla Model S. It is a prefabricated product made by the housing start-up Boxabl, and it is a 375- square foot house with a kitchen, a bedroom and a bathroom, rented through his company, SpaceX. In contrast to many other billionaires who own lavish mansions, Musk lives in an easily transportable 20x20 foot rented prefab!

A sample Boxable home

He also often sleeps in his office at the Tesla factory. When your meetings are set up in increments of minutes, as Elon’s are, it doesn’t leave you much time to commute home.

When a man who can buy any house in the world chooses to rent a box (frankly!) that costs less than your average ready-made home there must be a reason.  Elon has all the reasons in the world. No, make that all the reasons in the universe.

Simply put, he is on a mission to make the Earth greener through electric cars and to put people on Mars. To do this, Musk wants to free up his assets, and that includes selling all his properties when their cost and overhead outweigh their value to him.

Elon's appearance on Saturday Night Live

Musk is nothing if eccentric. On a recent episode of Saturday Night Live, he confessed to the audience that he has Asperger’s. Though he may have poor social skills, his business acumen, vision, focus and determination are legendary.

His career has certainly had its ups and downs. He’s been one space launch away from bankruptcy, but he knows when to hold ‘em and when to fold ‘em.

Watch out for future canny real estate investments. No doubt they’re on the horizon.

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