"What does not kill you hardens you" - Friedrich Nietzsche
# Entrepreneur of the Week Adv. Guy Kleinbaum # Post 2
2010, New York. My first real estate investment ever in the US. I am another military man with no real experience in real estate investments, I scraped the last savings I had left after the 2008 crisis and another failed adventure in investing in a friend's business, and together with 6 other investors and an entrepreneurial company I knew as part of a real estate course I took part in, we bought a building near the sea And Long Island. I did not have much idea about the world of real estate then, I arrived in a new country and a road I had never walked. All the knowledge I came up with was just from the courses I took.
I decided to go for this investment because I really wanted to jump into the water and start investing, I had a kind of inexplicable urge to make the move already and I had confidence in the people who led the investment. Anyone who has taken part in real estate entrepreneurship projects knows that trusting the people who accompany you in the project is one of the most important things for any transaction and usually masks other shortcomings in a transaction with beginning investors who do not know how to recognize these shortcomings. It was hard for me to anticipate all the difficulties and challenges that were going to come up during the project. Everything looks amazing on paper, and the Excel absorbs everything as they say. But then, almost always, unexpected events are revealed, which you need to know how to respond to calmly and with a long-term vision, but then even in the beginning when you were a virgin in investments you were dazzled by the dream and everything looked very pink.
From this I learned my first lesson in real estate transactions: put the keys of the transaction only in the hands of the developers and the professional you know will be by your side even when not everything goes well and have proven experience in dealing with crises during projects, just as happened to us in 2012 when the hurricane. Sandy ”jumped in to visit….
Two years after we purchased an old building with 4 apartments which we renovated and rented, and we were close to the "exit", Sandy arrived and spoiled the plans. As you can understand the beginners Luck was not on my side this time (and the truth is never?). A storm like Sandy that comes once in a century or more to the same area in the USA, destroyed a significant part of the area and also the property we purchased.
This is the first time I learned that in America anything is possible. Both for better and for worse, and you must prepare well for all aspects of the deal, including insurance and increasing the unexpected part of the deal. This coin has two sides. With all this, in 2012 I came out of this investment with relatively small financial profits (but still profits?) but more importantly I learned many lessons and insights, which later helped me in new transactions and I think I applied them for my clients.
At this point also my background as a former Air Force officer, helped me a lot, to interrogate and draw the appropriate lessons. (For those who do not know the Air Force has a very advanced and thorough investigative culture, so after every event that happens, good or bad there is an orderly investigation from which intelligence producers will be used in the future to restore successes and reduce risks and failures) Interrogation is an important part of my work Accompanied by our internal investigation and lessons learned.
So after thoroughly examining and analyzing this transaction and the second transaction I have already managed to make in New York, I learned my second lesson in real estate transactions: the importance of the legal mechanisms in a transaction. The manager who accompanied this transaction did not demonstrate sufficient proficiency in managing overseas transactions and did not build strong enough legal and fiduciary management mechanisms that would secure investors' money. My lesson was that if you are already investing in collaboration with a professional manager with or without a local partner, you must make sure that the agreement has tools and sticks against the manager and / or local partner that allow flexibility and ability to even replace them if they do not work properly. It has meaning. It is not enough for the trustee to not only collect and save the investors 'money, but also to provide security mechanisms for the investors' money, in case different and varied scenarios occur in both directions, from precipitation to the transaction and from the transaction back to the investors.
In investing abroad I learned that there must be loyalty in every transaction to secure the investment money and in the US in particular I learned that no transaction should be made unaccompanied by Title issuing a Title insurance policy at least the transaction amount, while making sure the policy is registered in the buyer's name. Includes all the different aspects and scenarios that can happen.
By the way, for those who ask what TITLE is, it is a company that insures the property and property, and confirms that it performed a rights and obligations check on the property and found it free and free from liens, foreclosures and debts in accordance with the terms of the policy. An extremely important thing.
It is true that the various insurances and the various mechanisms for securing the investment make the deal more expensive, but in the United States, anything is possible for better or worse. We have already understood this and so have every investment overseas. And what now seems expensive to you, will later cost you much more.
In addition, in any transaction in Europe, for example, make sure that there is a minimum mechanism, in which the funds are transferred exclusively to the bank account of the trustee or notary, who handles the transfer of ownership against the registration of rights and his obligation to do so. Another important mechanism allows the transfer of funds to several milestones throughout the life of the project, depending on its progress, with each milestone measurable and engineering or legal verification, at the end of the procedure full registration of rights in favor of the buyer or group of buyers.
So after the first deal and difficulty, which despite everything I came out of with a good taste and a taste of even more, along with some partners and funds we were able to raise from Friends & Family, got into a new venture where we bought 2 buildings in Brooklyn. Also in this venture some problems and challenges were discovered and there we have already encountered more complex complications.
Her name I learned in my flesh about the bureaucratic mechanisms in America. What bought me before the deal was the short schedules of the deal compared to Israel which is notorious for the length and duration of the projects in it, but things did not go as expected. Every small complaint from a neighbor created delays and an 18-month project was extended and extended for many years. The City of New York and the DOB (Department of Buildings) have created delays on our things Israelis look very esoteric but in America as in America you have to work according to the book or you pay for it literally.
We were able to avoid some of the delays with better planning, this is how I learned my third lesson:
There are no shortcuts in investing - planning, planning, planning - this is the key to investment success and in general !. Many Israeli entrepreneurs and professionals I met along the way, including Israelis, tried to save a lot of space and then paid much more for it, it reminds me that in the military we would meet with the American Engineering Corps we would laugh that Americans take 3 years to plan and execution takes a year, Takes a year and execution six years. Therefore, I recommend that entrepreneurs arrange as much as possible in advance and in the most thorough and professional manner the business and legal infrastructure in your ventures, so that you do not later find yourself in problems that could have been avoided much more easily at first and projects unnecessarily lengthened.
Here comes the 1 10 100 law I learned during the time I was a project manager in the Air Force with which I will also finish this post (but do not worry there will be more interesting posts every day of the week).
The 100,10,1 law says something simple, what will cost you 1 NIS to fix at the initial planning stage, will cost you later to fix it 10 NIS during the project and 100 NIS at the end of the project, with all the problems that will be created Around, like for example lawsuits, unfortunately this lesson I see there are many more entrepreneurs who have not studied and it provides many lawyers a lot of work in the later stages and a lot of suffering for investors who have put their trust in these entrepreneurs.
In the army we called it paying in "Zoker" which is the desire to take cheap service or not to take at all and then in the late result you pay dearly for it.
So these are some of the lessons I learned during my first deals in the US, when in fact these and other lessons we did not get to talk about in this post are the foundations on which I built the service and all the different legal mechanisms for real estate developers and investors. My clients enjoy and continue to enjoy the experience I gained over the years when I shaved myself as a lawyer, investor and entrepreneur, and I am proud of that because not many lawyers can say they paved the way for success for entrepreneurs who are accompanied by sweat and tears they experienced in the flesh.
Despite my less successful attempts I described here in the post, I believe investing is a very important thing that everyone needs as part of preserving the value of money and the possibility of generating additional income that will serve you in a world where pensions are no longer enough. "In blood" as they say.
Tomorrow is a new day and a new post, in which I will continue to share with you more insights, conclusions and experiences from the world of investments during which we will talk about frauds in the field and the future of investments in general and real estate in particular?.
And this post must also end with "The above information is for informational purposes only and should not be considered legal advice and / or recommendation"
In the photo, I'm in the second project I invested in on the Ground 201
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