Working with investors
One of the most fun things about my job (if not the most fun) is working with investors. I think it's very much about the components of my personality that are expressed in this area: the need to make interpersonal connections, the desire to help people, the opportunity to meet new and interesting people every time, and the possibility to observe the behavior and decision-making of the person in front of me (for all the very intricate complexity of the human soul) .
At the same time, as with anything fun, here too there are quite a few difficulties and complexities. The method I work with my investors is by merging them into a joint LLC for the same project. The advantages are clear: everyone is under a uniform contract, it makes it very easy from a tax point of view, saves me as an entrepreneur a lot of fuss and bureaucracy, etc., etc. The disadvantages of this are usually the different desires and perceptions of the group members. In the deals I offer, the level of influence of investors on the deal is very small and therefore a very careful walk is required here between honoring their desires and personal requests, and deciding when I “cut” a particular issue that needs to move forward.
I have found that beyond all the nice returns and numbers, the thing that is perhaps most important to investors is the transparency of the whole process, from start to finish. Unfortunately, there are many crooks in our market who make a bad name for all those involved in the profession and investors are already coming "ready" with all the concerns and questions, which are certainly understandable and acceptable. So I make sure to send my investors a detailed quarterly report of all expenses and income, send photos and videos on my every trip there, update them regularly on anything new (progress of the renovation process, tenant entering or leaving, etc.), sending references and confirmations of Transfers and anything else that can give the investor peace of mind.
In addition, I highly recommend setting clear and clear expectations for each stage of the transaction. Investors need it, and rightly so.
I remember in the beginning I sat down with an investor and we talked about the structure of the deal and its various components. When we got to the taxation issue, I told him I was taking care of all the bureaucracy of it in front of the American accounting firm I work with. We continued the conversation and moved on to the next topic. When the end of the year came and he was required to submit the annual report, he did not understand why he had to pay it out of pocket. He claimed that what he understood from me at that meeting was that this treatment of mine also included the payment required for the preparation of his report. So even though it's a very small amount of money in relation to what he invested and even though the returns he made on this deal were phenomenal, what was left in his head was this expense that was supposedly not talked about between us. At one point he may have even felt that I had actually done an exercise for him and it took me a long time to regain his trust.
Today I come to every such meeting with such a checklist spring, so that nothing falls between the chairs.
There are many other topics that can be discussed in this context, so I suggest starting the discussion - write me questions here that are important for you to know (whether you are an entrepreneur or an investor) and I promise to answer everything.
And last but not least:
If you read the content I shared this week, liked it and the topics interest you - I also invite you to my business page:
I would love to hear from you feedback / ideas for collaborations and more…
Shabbat Shalom,
Yaron Shifoni - Miami Tel Aviv Real Estate Investments
Yaron, 2 questions-
1. Why are you incorporated as an LLC and not an LLP?
2. What are you. Offering your investors as part of the deals? If you are not comfortable answering here I would be happy in the details, I am interested in representing investors and seeking deals
Good post! I would like to know what lengths of flip projects you lead? What is the business model and profit sharing?