The Magic Formula of Real Estate Investing! – Dror Dorinbaum – Post 6

The Magic Formula of Real Estate Investing! – Dror Dorinbaum – Post 6

“The Magic Formula”
So we got to the finale, it felt like such an abbreviated travel diary. I read a lot of posts that talk about almost everything, and I thought it would be right to share mindset and not just theoretical content to bring added value. Most of you have poured compliments and I cherish it thank you, I’ve just shared a little bit of my own way, and some stories that have affected her.
For this post I actually made content that interested me a lot in the past and did not find a lot of sharing on the subject, perhaps because of the sensitivity threshold, or simply because there is no right and wrong, but there is best practice, which has succeeded for many others and “may” succeed for us as well. And I’m talking about a partnership or its common jargon in the real estate world: joint venture and short for JV.
Naturally, the idea of working in a team always sounds good because there are a lot of advantages to teamwork that everyone knows so I thought I’d look into case studies and analyze them in a way that I understand how to do it badly and how to do it well. To my surprise, I discovered that the vast majority of JV real estate transactions are done in the worst possible way and therefore most have failed.
The basic idea of the JV framework is to make a transaction through at least one additional partner who brings something to the table that will make the deal more profitable. simple! Right? So how come so many people are doing it wrong?
In order to understand what is less working and what is more, it is necessary to define what each real estate transaction consists of, and it is built in a total of 4 components. (Sometimes 3).
1.The transaction (locating the transaction itself the property and the contact)
2. The project manager (the one who manages the entire purchase/improvement/construction/rental/sale/administration process vis-à-vis all parties, and working with all suppliers and partners throughout the life of the project)
3.E-cash (nothing to expand – cash)
4. Financing (long/short-term bank/non-bank financing capability)

And now for the starting assumptions:
-If there is no deal itself, there is no profit or loss.
-If there is no one to run the show, the deal will remain in Excel.
-If there is no cash, even 99% financing will not help. And 100% non-existent bank / non-bank financing).
– If there is no financing, the return on capital (ROI) has sometimes dropped significantly to the point of impossibility, but it is still possible to make transactions without financing using only cash, and make a profit, so this is the only component without which a successful transaction can still take place.
So far it sounds pretty logical, and now let’s take some scenarios that on the face of it sound like should work and will never work as is:
– Two partners with insane knowledge in real estate project management, without liquid cash or raising 100% financing.
– A partner with cash, and a partner who brings the deal of the century! But they both do not know how to manage a project.
-Partner with cash, and partner with fundraising ability, without the ability to analyze or locate a good deal and manage it.
-Partner with cash and project management ability, and partner who brings the deal. But both do not have the ability to raise funds.
When opened this way, it is quite clear how it can work of course, but more importantly it is quite clear that without one component out of four, either the deal will not be executed, or it will be unprofitable, or it will fail in operation. And therefore according to their level of equal importance they are basically equal in their value.

Continue reading on our site…
https://www.forumrealestateusa.com/en/2021/05/Entrepreneur-of-the-Week-Dror-Dorinbaum-Post-6-Formula-e/

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