Brandon Donnelly — Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly. — Page 665

Professor Scott Galloway's recent post called "The Algebra of Wealth" makes the argument that there are four key factors in the creation of wealth: focus, stoicism, time, and diversification. Some of you may argue with his points around diversification. I've heard Warren Buffet and Charlie Munger say before that diversification is really just admitting that you have no idea what the hell you're doing. Because if you did, you wouldn't need diversification to protect you.

That said, I like a lot of the points that Galloway makes on his blog. For one, he calls bullshit on the age-old advice that you should just "follow your passion." Finding something you love to do is important and ideal. I feel incredibly fortunate that I found something (there were pivots) that I want to be my life's work. But that doesn't mean that I didn't and that I don't think about money. As I've said before, I never understood why money is often a taboo topic in architecture schools .

Galloway also takes a stab at defining, what is rich?

" I know a lot of people who make an extraordinary amount of money, but few people who are rich. Rich is having passive income greater than your burn. People on a path to money focus on their earnings; people on a path to wealth also focus on their burn. Joseph Heller said, "It takes brains not to make money." (Note: I think he was casting a favorable light on his starving artist friends). This may be true, but it definitely takes brains to hold onto it (i.e., money). "

" My father receives $48,000 per year from Social Security and his Royal Navy pension (he was a  frogman ). He spends $40,000, and it’s enough to make him happy. He swims every day, watches a shit-ton of hockey (Leafs fan), and on Fridays goes to The Taco Stand (an actual restaurant in La Jolla) where he orders something called a michelada. (Apparently it’s medicine delivered in a chilled salt-rimmed glass — he claims his hair is regrowing and that he’s sleeping better. I believe half of that so … I believe it.) Anyway, it’s not your income, but your income-to-expense ratio, that determines if you’re rich. "

When I was growing up, my dad used to always tell me that it doesn't matter how much money you make, it matters what you do with the money that you make. That is another way of saying, focus on your income-to-expense ratio. Spend less than you make and be strategic with what's leftover. This is a good principle to follow for real estate as well. As a rule, it's generally a good thing when your revenue is greater than your operating expenses and your NOI is positive.

But there's another important message in Galloway's excerpt: you don't necessarily need a lot to be happy. (Sign me up for The Taco Stand on Fridays!) And if you're in position where your passive income is greater than your burn, then you also have something called freedom.

For Scott Galloway's full post about The Algebra of Wealth, click here .

Eleven years and a few setbacks later and we now have a completed laneway house.

As Bill Gates once said, "most people overestimate what they can do in one year and underestimate what they can do in ten years."

Construction is all finished up and Mackay Laneway House is available for rent starting immediately.

For photos and more information, click here .

Here are a few interesting stats from a brief report that New York City published this month about their supply of new housing units:

• From January 1, 2010 to June 30, 2020, New York City delivered 205,994 net new housing units across the five boroughs.

• This total includes 202,956 units from new construction and 29,161 units from the alteration/conversion of existing buildings. However, it also factors units that were lost as a result of demolition (-17,400) or alteration (-8,723).

• Brooklyn saw the most supply, followed by Manhattan. The four highest-growth Community Districts were responsible for 1/3 of all new housing additions. These CDs are all formerly non-residential areas that were rezoned to allow living.

• Manhattan saw the greatest loss in housing units as a result of alterations (people combining units). This was most prevalent in wealthy neighborhoods such as the Upper East Side, Upper West Side, and Greenwich Village.

What is interesting about this last point is that it shows you that cities are far from static. New York City lost 26,123 housing units during the above time period, with 8,723 units being lost to alterations and people combining units.

The orange areas on the above map are neighborhoods which actually became less dense over the last decade. And of course, this phenomenon is not unique to New York City. We are seeing the same thing play out in some/many neighborhoods in Toronto.

What this mean is that the role of new development is really twofold. It allows a city to grow (i.e. house new New Yorkers), but it also replaces lost housing and relieves some of the pressures on the existing housing stock. I don't think many people appreciate this dynamic -- or perhaps they don't care.

For a copy of the full report (it's only two pages), click here .