Goal setting and the ultimate cycle in real estate

#IzmahShavuot Yair Tal #Post5

Many times I get questions from people like:
Investor: "What do you mean, buy an apartment in Israel or invest abroad?"
Me: Ahhh…….
Or, an investor: "I have $160, what do you think I should do?"
Me: hmm…. Ahh….
Unfortunately, I cannot answer these questions…
Not because I don't understand it, but because I don't have the necessary background to know what is right for a Hadva investor or a Shmulik investor
The background that I am trying to understand, so that I can direct the person in front of me, is related to the following questions:
The age of the investor (this way I will understand his horizon, his ability to take a mortgage, etc.)
What real estate assets do you already have?
What do you do (are you employed, self-employed, and what is the size of the household income)?
What are the long-term investments that the household has, which are usually invested in the capital market? (pension, welfare, further education)?
What is the ability to take the mortgage?
What is the leverage of other financial assets? (training, financial policies)
Does the investment have to be in Israel (for whatever reason), or is it also open to investments abroad?
If abroad is relevant - personal or group (each has its own advantages)?
After we have chosen: Israel/Sand and personal/group: is a productive investment or an improvement investment?
What is the investment term, i.e. when do you want to see the money back?
What is the cash flow requirement from the investment? Do you have to see this and that every month, or do you not have to?
What is the level of risk you are willing to be exposed to?
It is clear to me that some of those reading this can answer for themselves, and some - need an explanation about some of the questions.
Like for example: "What do you mean what is the level of risk? In what way do you want me to answer", asks the investor?
Me: "Imagine that you go into an investment and in the end you lose 30% of the fund (mother...). How do you sleep with that at night?”
The investor: "Losing 30%??? – I am committing suicide!” - Me: "The risk you are willing to take is zero..."
The investor: "It will be terrible and terrible..." - Me: "The risk you are willing to take is very small.."
The investor: "Very very very unpleasant, but I understand that it can happen" - Me: "The risk you are willing to take - small-medium"
The investor: "Look, it's unpleasant, but it's part of the matter" - I: "I understand, you're willing to take a high risk"
The investor: "I know I can lose, I'm more interested in how much I can earn" - I: "Okay - you're ready to take a high risk, maybe very high."
This is how I propose to answer the annoying question: What is the risk you are willing to take?
That is -
When I understand this picture, and usually - it's a conversation of at least an hour, I can start to lay out directions and even make recommendations. After I understood the background, and after I laid out the space of possibilities for investment - I know how to define and mark the goal.
So if you contacted me on WhatsApp, messenger or a corridor conversation, asked a simple question and didn't get a clear answer, it's not because I'm short-tempered... but because I don't know how to answer without digging a little in my mind.... Otherwise I feel it is superficial and irresponsible
But - do you know what I consider to be the ultimate cycle in real estate?
This is true for those who already have some experience and are already combining long-term and short-term investments.
My ultimate cycle is:
The improvement deal > when it ends - separate the fund from the profit > with the fund - enter into another improvement deal > with the profit - buy yielding real estate!!
It can of course be in any country. I will combine Israel and the USA here. It is easier than the profits to purchase yielding real estate in the USA, because in Israel - you need a little more money to purchase yielding real estate....
For example (theoretical, but not far from reality...)
Year 2019 - I bought an apartment in Perisail (on paper), in the Bonbon Towers in the green Kiryat Almogam in front of the sea....
Purchase price: 1.7 million NIS. Even then, it was an attractive price, because when the presale ended - such apartments were sold for NIS 1.9. I financed the purchase: NIS 900 equity and NIS 800 mortgage.
After 3 years, I sold the property. You know what happened here in 3 years, right?
Sale price: 2.9 million NIS.... Yes, that's what happened here if we chose the right city.
Total transaction costs in both directions (lawyer, purchase tax, financing, broker, etc.): 250 NIS.
Profit before tax: 2.9-1.7-0.25, i.e. 950 shekels
Capital gains tax: 237 NIS
And no - please, don't complain about the high capital gain you paid.
The purchase tax in Israel is terrible and deadly. Capital gains tax - reasonable and fair.
I wish everyone here pay lots of capital gain….
Net profit: 950-237 ie 713 shekels. Pretty…..
That is: I got back my fund in the amount of 900 shekels and another 700 shekels profit.
At 900 shekels - I am entering another adventure of praise.
For 700 shekels - I purchase a yielding property in the USA, or join a group that purchases a multifamily in the USA.
what happened here?
At the end of the first investment I go into 2 investments.
One - in the same risk-opportunity profile (improvement deal).
The second - out of the profit - creates an additional investment for myself at a lower risk, and also one that increases the current income.
This is how I increase the flow... increase the family's financial strength.... Shortens the distance to financial independence...
Say - great sage, not every time you can generate a net profit of NIS 700.
Obviously…. It doesn't always work. Sometimes I enter into an improvement deal and in the end I don't make a profit, because there were glitches. Happens…
But even if I earned NIS 200 - I am looking for a path for them to purchase a yielding property, or a holding in a group that invests in a yielding property.
As the years pass, my holdings in yielding assets have increased. The general risk level is small.
In my opinion, this is the ultimate cycle in real estate and it works correctly in the long term
And what is this picture?
As a swimmer, I also aim for long distances. Last fall I went through additional training as an open water trainer (he will answer that: in the sea).
I formed a group of 10 friends, all of whom swim regularly, and we train for an interesting experience. At the end of October, if we don't have any problems - we intend to cross the Kinneret laterally (ie a 10 km swim)...
Since we are 3 months ahead of schedule - is there still a possibility to join us…..?