#Israeli Entrepreneur of the Week # Post3
The main transactions I made over the years were improvement transactions and entrepreneurship - flips on apartments, building villas, entrepreneurship of purchasing groups, etc.
These are deals that I invested money in at the beginning, usually with additional financing and at the end of the deal, after a few months or a few years, I sold and enjoyed the profit.
In the meantime I lived off the cash flow I created in my business or the sale of a matured property.
During this time I lived well, no complaints but from time to time I would get into a suffocated situation, the cash flow is suddenly not enough for the monthly expenses and on the other hand all the transactions are leveraged so not only is there no income, there are also additional expenses on repayments and interest. Every time I got to a period like this then I had to solve the cash flow problem urgently and took out more loans to last till the next sale and that way I further increased my monthly expenses.
Sometimes it happened that instead of taking another loan then I sold a property even if it had not matured yet so I sold at a profit and sometimes at a loss, just to solve the problem.
That's how I grew from crisis to crisis.
It would seem to me a spin…
I got the cap when such a crisis came, a little longer and I could no longer get any more loans (in retrospect to my delight) and I did not have anything for a quick sale. I grabbed my head and did not understand how could it be that I own properties worth millions with tremendous potential, I make impressive real estate transactions, worth a lot of money and suddenly my credit does not go through the store ???
How can it be?
I realized I had made some mistakes:
1. I became addicted to the big deals with the big potential
2. I was complacent or arrogant and assumed that what was was what would be - that the current flow would continue to knock, that prices would rise, that the market would be boiling and that at any moment I could realize and balance
3. I neglected the small, quick trades in which I met the money frequently (and come on, I really enjoyed them)
4. I did not worry about a constant and regular flow
And my conclusions are:
1. cash flow is king - cash flow transactions are the best (properties that are rented and put in money every month), on the face of it there is less profit but in practice it is the other way around.
Cash transactions make money every month and even if I have a big loan and no profit left every month, at least the deal is not a burden and does not pull me down. During the holding period of the property its value increases (usually) in de-interest and if I was smart and purchased it with financing then the de-interest is on the value of the property which is 2 or 3 times higher than the capital I actually invested. The most fun is the de-interest rate on the bank's money. And over time, the payments I made to the bank also repaid some of the loan so another gift awaits me at the end of the period. A type of savings account with a high return.
3. Entrepreneurship and improvement deals are also good and fun but need to take care of a steady and current income in advance with a positive balance that allows me to make an improvement deal without fear, even if the deal is delayed or fails and even if I have to continue paying its loan, then my cash balance will allow it Without changing the standard of living.
I wish you to find the right balance between cash flow and improvement transactions and that this balance will give you a high profit in peace of mind that you will calm down, that is the goal of us all…
blessing and success