The market is full of temptations, how do you differentiate?
We have already encountered the following scenario many times.
The girl had already made a decision to enter and invest, but then she told us about all the objections and warnings that the family “advised” her about entering into investments…
How risky is it to invest?
how charlatans they all are,
How is she going to lose the money.. etc. etc.
So true! There are disappointments and falls.
We also experienced it all.
After all, we also invest in ourselves and have accompanied hundreds of investors in recent years.
We know what it’s like. You know the fear.
We too have experienced successes, we have experienced disappointments and we have suffered burns.
We know exactly how that feels.
Therefore, our rule for those interested in investing is this:
“The intensity of the pain of losing a significant amount that you will have
It is much stronger than the intensity of the pleasure of earning twice as much”
and what does that mean?
that before you enter the investment, you must know with your eyes open 3 parameters:
1. What is your investment strategy?
2. What are the chances – as well as – what are the risks?
3. Understand reality as it is (neither become too beautiful nor too bad)
And what is the great news?
that if you know what you are doing, you can build passive income that will grow over time, until the point of departure for financial freedom (yes, you can expect it in advance).
and all this –
without taking unnecessary risks,
without trying to “time” the market,
without taking care of tenants and all the headache,
And without looking for the get-rich-quick “bonanza” investment.
All you need is exactly the 3 parameters from above:
1. Know what your investment strategy is
2. Know the risks versus the chances
3. And to know the current reality as it is
All this can be known at the level of the numbers and build a plan going forward, all that is needed is to sit down once and spread the data on the table.
How do you beware of charlatans and amateurs in real estate transactions abroad?
Types of investments:
Investments have 3 basic elements: security, yield, and liquidity.
We must give up one of them.
We believe in lifetime cash flow income from real estate investments:
In cash flow transactions in properties that are purchased well below market value (without expenses and hidden fees and surprises) and that have a healthy improvement element.
And here is the best mix between returns and risk:
Class C properties in areas B or C but very specific.
What not to go for?
Never go to Class D assets even if there is a potential return of 40% per year – don’t touch it, and don’t even consider it.
I won’t even explain why. just no.
dispersion:
Scattering, scattering and once more scattering.
Don’t buy a single remote control home.
Scattering helps not to lose money.
In a single transaction for one asset – there is risk.
In a portfolio of yielding assets, a single failure in one asset invalidates sixty.
In addition, there is a low correlation to the risky capital market and we see it even more strongly this year.
Revenue distribution:
Rule of thumb: the profits between real estate investments should be divided between rental income and capital gains.
Both should “sit” on an excellent deal, already in the purchase.
The first has control – the second is selective.
Make sure that the part of the rent generates a stable and regular income.
That’s why you are investing in the US.
This is what contributes to a better night’s sleep.
Make sure you are in an area with very good employment and income data.
These are your tenants who work in these places.
As for the exit part, no one has a crystal ball – therefore, make sure you enter the transaction below its market value and in demand areas.
It’s not just that we are in the business of cash flow investments, even when the land value of the field changes – the tree will continue to bear fruit (rent).
And here is the most important:
If there is anything you will take from this article?
This is what it says from here:
How do you choose an investment manager or an entrepreneurial company?
There is a situation that some of you will say that I am not objective, true. admits guilt.
But I say these things on the assumption that you who are reading these lines are in a dilemma as to what and with whom, so it is important for me to say clearly:
Large companies that are not the local entrepreneur, they are not real estate companies but marketing companies,
There is a huge difference, an investor once told us that his fingers are already “burning” to invest, but his wife is pushing for them to go with a big and well-known company.
The most obvious, isn’t it?
So I’ll keep it short and simply say:
Do not invest in large marketing companies that are not the local entrepreneur themselves.
Not because of matters of integrity, God forbid, and not because the investor is not important.
The investor is very important!
It has to fund 50 or 100 salaries, beautiful offices and the amazing presentations you get.
But that’s because of the model itself, it just doesn’t work.
The number of links in the investment chain between you, the investor, and the property, which require absolute control, as well as the number of potential points of failure between the investor and the transaction and the management company – is enormous!
And one more note:
In large marketing companies that are the “Middle Man”, the people who check and decide on the investment – they are not the people who will manage it for you.
Most of the time there won’t be those in communication with you either, you won’t even know who they are.
The analysts in the plaid shirts and the marketers in the button-down shirts who sell and manage the investment – have never visited the property, some of them have not even been to the US!
Just like learning to swim by correspondence.
And add to that the turnover of employees (employees) in these companies, who today are here and tomorrow they are in another company, without any personal commitment to you.
How can it be??
Well, the model of large companies, which are amazing companies for marketing, but they are not the local entrepreneur in the field – the one who knows every bump in every property in the project, unfortunately is a model that has proven its failure, and it makes a lot of sense to understand why – believe us, we were there, with the shirts and buttons.. ..
But let’s go into more detail…
1. The difference between large companies and a real local entrepreneur
2. Choosing the right investment route for you
3. And what does the legendary investor Warren Buffett think about it?
If the company is in the hat of “supervising the entrepreneur” – then in reality it is not.
She actually mediates and is at odds with the investor on so many points,
And worst of all?
Just from the very structure of the commissions that some of them take, it will reflect by definition – a high investment amount in relation to the property’s value, that is, it will usually cause your investment unit to be higher than the real property’s value from the beginning –
Which is horrible investment mistake #1!
Our important advice: do not invest in a property according to market value or more.
Even 10% below the value, it’s like entering in the value if you take into account broker commissions in the purchase and sale.
You need to make sure that the total investment is significantly lower than the value of the property
Regarding prospectus:
‘A prospectus is security’ you say?
So a prospectus does not guarantee anything. You have nothing to be impressed by investing in the prospectus.
It costs hundreds of thousands of shekels, will you, the investors, finance it, and in return? He won’t promise you anything.
Nada
It’s better than a presentation, because you can tell fewer stories, but it doesn’t promise you anything.
The building in the USA, or the property portfolio, or the American economy, they are not so interested in the prospectus written by a law firm in Israel.
Therefore, the most important element above all is: who manages your investment.
Invest in choosing your managers, before you invest. There is nothing more important than that.
Indeed, it is not easy to find good investment managers.
However, when you find them, you will find that you have found the ones that suit you best.
Now let’s talk about choosing the best investment route for you
People think that construction properties are always risky and that you cannot lose money in multi-family properties.
This is not true!
It all depends almost on management.
Yes, ok, I hear you – and it’s true.
In real estate there are also things over which there is no control, right.
And there is also a higher power. No one said that real estate is money in the bank.
And yet, regarding what is controlled – everything is managed.
Bad management, even mediocre, can sometimes drain all the investment money.
Regarding the fees of the managing company:
Every entrepreneur and every company is entitled to commissions and profits as part of the syndication, that’s perfectly fine and fair.
You don’t want your entrepreneur not to make a profit.
but! And there is a great sadness:
The less the percentage of the fees the company charges depends on the success of the project, and is charged anyway – this creates a greater conflict of interest with you, the investor.
Therefore, note that the developer is in the deal with you also in the hat of an investor.
Remember:
It is better to invest with a good manager in a bad sector, than to invest with a bad manager in a good sector.
Investment managers who are also the entrepreneurs in the field are much better than institutional investment managers, who with all their titles and honors, and even the most talented ones, and some of them are our friends, today they work here – tomorrow somewhere else.
did you know
In US mutual funds, the rating of the fund manager is more important than the track record of the fund itself, which only makes sense.
In David Swanson’s book Portfolio Management
He showed a 17% difference in the annual return of good versus bad managers, on the same investment instruments.
And to finish:
You will always meet with the entrepreneurs themselves who are the people in the field and they are the ones who manage your investment.
Make sure they control the assets and the management company (critical).
After all the dry data and figures, make sure that they, the managers, the people, “go through with you” also on the level of gut and intuition, regardless of whether they are nice or not, and if something doesn’t sit well with you – listen to it.
And now for Warren Buffett’s advice:
We strongly agree with what he said about the qualities of investment managers:
“Look for integrity, intelligence and energy. If you don’t ensure the first – the other two will destroy you”
