# Initiated week Post 4 - Nir Babjani "Real Estate"
And also the fourth lesson in real estate: know the investment
For the first three years I went through a roller coaster of great but also difficult experiences that forced me to face things I hadn't imagined. However, I persisted and managed to stabilize my field operations in Atlanta.
By 2014 I was already more learning experience and doing in-depth market research again. I decided I needed to start all over again! This is I stop buying in Atlanta and going to set up an infrastructure in the Cleveland Ohio metro. sounds strange? In this post I will explain why and with important principles I learned about real estate in the US in the perspective of an Israeli investor learning experience.
Looking at the last ten years, quite a bit of water has passed through the Great Irish River in northeast Ohio. I marched with all my investment in the Cleveland area. Over the years I have made a number of different types of investments like flip deals for sale in short term capital gains. I also made an investment in building in Michigan. Some were great and some were just a waste of time and effort as I thought as an investor then and right. Today, in retrospect, it turned out to be a high added value thanks to the lessons, connections and experience I gained and leveraged for entrepreneurial work.
During all these years I have meticulously documented every detail. I really don't know why I bothered to work like this from the beginning as an investor, maybe it's the habit of my way of working on a daily basis. The result was that over time things started to connect and become clear. I formulated some rules of thumb that I invest with and will end my introduction series with here, and in fact I continue to work with them to this day.
- Do not fall into the pit. Knowing how to ask the right questions is more important than knowing the answers - What is the challenge in investing? For example, is the renovation complex? Too complex about the work my contractor usually does? For example, renting a tough area is right for me? Is there an appropriate management capability? Flip Deal Who is a Local Purchaser? Does the broker have a successful attempt to sell a similar property in this market?
Under no circumstances waive transparency to such details. A skill that every investor must know is how to ask the right basic questions. Obviously for an entrepreneur this is equally relevant and also with regard to capabilities like the infrastructure you have in the field. I learned that this is the most important thing to identify what is right and what is too risky for me no matter if I am a "passive investor" or an "experienced entrepreneur".
- A deep hole is a relative thing. What is risk? Risk is all I don't know! Risk is a subjective thing, because there are uncertain things (for example, anything related to the future). But besides that, there are known things, but it turned out that I just did not know them personally and so I fell into deep ignorance of my degree.
- How to get out of a pit. My approach to problem solving today - who knows? One who has done and succeeded consistently. Because whoever knows how to solve a challenge then for him it is not a problem at all! On the other hand if I do not have what it takes to solve the problem, then I will not have all the theoretical knowledge in the world (including a course of the real estate god himself) because even if I can identify risks there will always be a practical dimension of thinking and solving problems. I found myself dizzy and tormented to build a solution on the ground, knowing that if I did not do so I would find myself as a familiar press next in line.
- The ignorance exists - There is no such thing as a deal that has no need to settle. Nor is there such a thing to solve a problem without paying for it. Therefore, there are exactly 2 options. First, you knew how to take challenges to your degree and of course you would still pay for them. The insight is that it is important to learn how to calculate and balance the meanings with the expected payoff. This is how you decide what is right for you. Alternatively, as long as I did not know how to take on challenges, the payment for the problems created was higher than I planned, and here necessarily the payment not only in money, but also in time, worries and efforts. I shared in post 3 how this thing happened to me.
What do these common insights have in common? We are progressing to the answer.
I made a decision to target real estate for rent in Cleveland because there was an opportunity to reach a renting audience with middle socioeconomic status and above, at affordable prices I had not found in Atlanta that was getting more expensive.
In Cleveland, the discovery of hundreds of medical centers around northeast Ohio spoke to me. I realized that even though my property would be in the community where a nurse and the server who work at the medical center and not the doctors live, it is still a target audience that suits me more than the rental properties in Atlanta in the amounts I had to invest.
Today, after 100+ deals in Cleveland, there is above all a dimension of experience to detail and space ability. I write Cleveland but I work in the suburbs of northeast Ohio. And there are details here, for example, Euclid is the second largest city in northeast Ohio and I do not work in this area, I forgot to keep out of ignorance in a place that does not fit my criteria, in a non-standard property configuration and today I am reviewing property status and avoiding overly challenging renovations.
Connecting with the people in the field worked better for me, because in the first place I knew how to work with them more correctly. The result was that the activity here took off and it was natural to continue to focus the activity where I am more successful.
I learned to approach the work systematically. Complete data collection, questions and correct estimates of opportunity and risks, and derive accurate price calculations. The result was that I started making informed investment decisions quickly. Only this is how I make decisions today.
The common denominator for the insights guiding principle in my thinking today in the context of real estate investing - is balance!
Risk management is a profession of optimal balance that is necessary to implement in investments. To a sophisticated investor, he is the one who knows how to balance his investment activities wisely and not to think like the first years in the form of maximum return on a given amount of money.
I will end with an important key to understanding investing in real estate as I know it. I intentionally emphasized above that it is worth asking who is the potential end tenant who will rent the property or purchase it?
I once thought about how much the property costs and did a rent calculation for the height of the property with the goal of setting yield targets at 1 or 2% to filter deals. What an amateur I was and paid for this lesson of super-analytic reference to numbers as if it were a shopping return. Of course the story in numbers is necessary and I also do not pretend to claim that there is one way to do real estate, but I do say that the truth I discovered in my way is that as long as I did not understand the potential tenant pool for the property, I did not really understand the investment.
So what are the keys to the way you succeed in real estate? What did you learn about reasons for failure and what to avoid?
Responses