YMV - knowledge, financing, execution. I write in advance that this post does not constitute any recommendation for Bizzo...

Then the bank asks: "What is the purpose of the loan?" What's your excuse?

YMB - Knowledge, financing, execution.

Writes in advance that this post does not constitute any recommendation for a real estate transaction or financing transaction. The purpose of this post is to enlighten your eyes and explain to you what are the three basics with which you can become or continue to be a real estate investor.

When we want to generate passive income from real estate investments or make an exit deal through real estate investments, we have 3 sources / steps that are MUST to make the real estate transaction work and to profit from it. The 3 sources are intertwined.

1. Basic Knowledge Sources of Information = In order to execute a successful real estate transaction, the beginner (and also experienced by the way) must use any reliable sources of information whenever possible. The first step is to complete basic knowledge gaps with regard to real estate investments. This can be done alone and can be done with the help of professionals. What is certain is that it is a must! An investor who comes to invest in real estate without sufficient knowledge will find himself with a medium or poor investment at best and a failed investment and $ 0 in his pocket at the least good.

Knowledge: Basic understanding of calculating returns (not just mathematically), conducting in-depth market research on all levels (country and region I intend to invest in, population and mentality, real risks in the transaction, asset real estate programming, rental market, currency gaps, economics and more), Understanding the financing options and implications of taking financing, understanding the taxation began with the real estate transaction, bureaucracy, the legal side of the transaction and more.

Investment Type: Exit / Yield / Land / Hotels & More. Understand what type of investment is right for you. And how much money you will or will need to invest and whether the risk is right for you or not.

An excellent example from abroad from personal knowledge: real estate investors who purchased land in Romania in the early 2000s without understanding the meaning of the deal found themselves with NIS 50,000 that sat idle for about 15 years and in the worst case probably went down the drain - days will tell. Of course in agricultural land that has not yet been thawed.

These investors did not do market research, did not understand the risks in the deal, even though they were written on the wall in the giant and ultimately trusted those who sold the deal to them.

NIS 50,000 Invested in the early 2000s Suppose buying an investment home in 90% financing (yes it was possible once) in Rehovot or even in Jaffa could have yielded a much less risky return of 300% on equity for the same investor And even more so

The knowledge can be gained independently through courses, various forums such as our forum, social networks, information sites and more. If you have no experience at all, escorting a professional can certainly make the experience simpler and more fulfilling.

2. Sources of financing = Is it possible to carry out a real estate transaction without equity? The answer is yes. Is this recommended? The answer is not for everyone.

Sources of financing are a prerequisite for anyone who wants to make a real estate transaction unless he wants to invest only equity in the transaction. The solid investor will usually want to do so by leveraging a small loan.

* Possible sources of financing for the real estate transaction abroad *

A. Solo loans by the banks in Israel - These are usually relatively expensive loans and will not be suitable for rental real estate transactions. They will be more suited to exit deals and not in all cases. You should always try to get an offer from the bank, sometimes there are surprises mainly for customers who do not pose a risk to the bank.

Example of a solo loan (without a mortgage): NIS 150,000 with a 5% interest rate for 5 years. A monthly payment of about NIS 2800 with a monthly repayment that may cost.

B. All-purpose loan known as an existing property pledge - if you have an existing (residential) property you can mortgage it up to 50% of its value. In this case you can get a loan for any purpose against the pledge of the property.

Example: Ronnie has a property in Tel Aviv and the value of the property is estimated at NIS 3m. Ronnie has a NIS 700,000 mortgage that will expire in 15 years.

Ronnie will be able to get a loan of NIS 800,000 (the total debt will increase to NIS 1.5m, which is 50% of NIS 3m).

The terms of the loan vary, but its advantage can be extended for a long period.

third. Loan under Education Fund / Savings Policy / Pension.

I previously wrote a detailed article on the matter and I am attaching the link in the comments.

The advantage of this option is the possibility of Grace thus allowing excellent cash flow from the rental of the property without a monthly repayment of the loan for up to 7 years.

D. Supplemental loans / customer retention loan from the banks

If you purchased an apartment in the country and took out a mortgage, you can get loans on excellent terms from the bank. For example: Mizrahi Tefahot Bank provides a NIS 75,000 loan at near zero interest rate (linked to the prime interest rate of course) for long periods of 15 years.

Banks have secret loans for retaining customers. If you don't ask, you won't know they exist. These loans are also usually in excellent conditions. For short periods the monthly repayment is high.

God. Non-bank loans - These are usually very expensive loans and some require a mortgage. The interest rate environment is over 5% at best and over 10% at least.

and. Interest-free loans association - For those who have not yet known the association, you should know. You can get a NIS 30,000 loan with no interest and no linkage. For periods of up to 4 years. Very suitable for those who have loan repayment capacity but do not have the equity to carry out the real estate transaction. It's a non-profit.

G. Loans at a local bank in the target country - There are countries where loans / mortgages can be obtained even for non-residents. Those who have a specific example and would like to add in comments can very happily.

In the Czech Republic, for example, in some projects, a mortgage can also be obtained for Israeli residents under bad conditions at all. This is not overwhelming except for projects with a bank escort. And not always the possibility, and of course not for everyone.

* This post does not explain this recommendation for taking out a loan or making a transaction. Taking a loan has many risks and you should understand them before you do it. Also, not every loan is suitable for any real estate transaction *

3. Execution - Once we have figured out where to invest and what to buy, and with us sources of financing to execute the transaction, Mazen has come to find and buy the money!

Finding real estate can be done independently and can be done with professionals. It is likely that if you do not have a destination affiliation (language, friends, family, work) you will find it difficult to locate the property independently and in case you sometimes have an affinity it will not be easy.
It is very useful to find professionals who can bring you an excellent deal quickly and efficiently and of course professional and reliable.

It is very important that the professional who accompanies you take care of all the bureaucratic matter related to the real estate transaction and also know how to refer you to trusted professionals: accountant, lawyer, financing consultant, asset management company and more

Wait, how do I know the professional is trustworthy?

You can never know by 100% but you can reduce the risk.

Some of the questions you should ask yourself and those facing you:

A. How long have you been dealing with this?
B. Can I talk to real estate investors who helped you?
third. What does the escort process include?
D. What are the costs for the process?
God. How long will it take to execute the transaction?
and. What is the project schedule?
G. Who is behind the company in Israel
H. Who is the company overseas abroad?
ninth. What are the collateral?
J. What are the risks in the transaction?
What is the profit potential?
XNUMX. Is it easy to realize the property at any given moment?
XNUMX What is the regulation and what are the tax laws?
XNUMX. Is there a way to get financing for a transaction in the target country?
T.W. Who accompanies the legal party in the transaction?
TZ. Any other question that can shed light on the deal and make you understand most clearly what the prospects are and what the risks are.

Returning again, this post does not constitute any recommendation for making a transaction or taking out a loan. It is highly recommended that you help professionals every step you take and make decisions only after you understand the risks and whether you are ready to take them.

Remember: YMB

Knowledge, financing, execution.

Successfully!

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Responses

  1. Nice information. To your question, foreign investors can receive in Spain (depending on the bank, the branch and familiarity with the system) up to 60% of the value of the purchased property mortgage, for a period of up to 30 years at a non-linked fixed interest rate of about 2%. In this way, the flow picture of the investment can be excellent - that is, flow from the first day despite the use of high leverage. Of course, the variable interest rate is even lower. It is important to emphasize that the issue of leverage for foreign investors in investments abroad is not self-evident and can allow for a significant increase in the return on equity.

  2. Excellent post. I wanted to add two things: It is possible to get loans from banks today for any purpose up to NIS 200 at an interest rate of less than 5% (from the experience of a customer who recently received NIS 100 in prime + 1.8 for 5 years). Secondly, Spain and Portugal have nice mortgages from the country and the repayments are dwarfed by the return.

  3. totally agree
    The financing market in Israel is one big jungle and the competition in it is not big enough. Which means most borrowers pay far more than they need for financing.
    However, we are in a relatively low interest rate environment, making it possible to make exaggerated transactions at ridiculous costs.

  4. Eitan, a very important post, thank you very much, I would like to add that the financing market in Israel is a complex and cruel market, going to get a mortgage or high financing without a professional who does market and negotiation with the banks is like going to trial without a lawyer, in Spain for example the mortgage consultants were unable to obtain good terms More than what the bank offered in advance, but they were able to obtain mortgages for those whom the bank refused when they came alone, in Israel when they come with a financing specialist, each case is a savings of hundreds of thousands of shekels over the life of the loan. What's more, only in Israel the calculation method is Black and Sholes.