"The little citizen…
"The little citizen
Had to pay big
And I'm interested
Jordan more than anything "
In 1985, Shalom Hanoch wrote "Waiting for the Messiah". You all know the song. The song tried to convey the feeling that prevailed in those years in Israel after the Galilee Peace War and the economic crisis in Israel in the 80s that the event most associated with it was the fall in shares due to the affair of regulating bank shares. In '85 I was 11. I remember the atmosphere. I understood? No. Remember? Yes.
The first two words in the small part I quoted are for my most important tastes in the song. "The Little Citizen." Most people see, and rightly so, the little citizen as the victim of the event, but fail to see his or her part as a factor. I will expand.
Fast forward 35 years and we are at the end of one of the strangest years in history. On the one hand disasters. On the other hand we went into perspective. On the one hand an economy in trouble, on the other hand a real estate market at an all-time high, and the burning question for everyone is to know what will happen next. Analyzes are not lacking: What will the incoming president do? What happens to unemployment? Where will all those who long for the corona follow? I choose to look at another parameter.
I was recently approached by an Israeli couple. Put their money with an entrepreneur with 5 years of experience who accompanies investors in order to renovate a house. The house named after LLC owned by them, the plan is reasonable to turn the property from single to 2 family and sell. The amount: a few hundred thousand dollars. The result? At the moment the house is not finished, the plans are not approved, the amount invested is already equal to the value of the property for sale and the forecast is bleak. There will be a loss of tens / hundreds of thousands of dollars here. Once again the small citizen will pay big.
Who will guess what the right question is here?
The right question here, and in 1985, is what did the little citizen have to be involved in something that he did not understand well enough and that could not absorb its consequences. The answer by the way is well known: the feeling of the little citizen that he is missing out. Everyone makes millions in real estate and that he stays out. Which brings us to the attached graph. Who does not know?
Not bad. I will explain.
This graph that I really like is a graph that describes the cycle of real estate but out of reference to the active players at each stage and the emotions or motivation that leads them.
The first stage in the recovery of a real estate market is called Stealth Phase in which investors who are considered Smart Money are active. Why? Because here the champion investors are really active. Lots of courage because everyone is post-crisis depression.You're moving here against the current.
The second stage is the Awareness Phase. This is the stage where other professional investors realize that recovery is starting and start getting involved in transactions which encourages the market recovery at a higher rate. This is a stage that still requires courage but a little less. There are already positive indications so that there will be support during.
The next stage The Mania Phase begins with some communication. This is always the media…. The truth is not necessarily in this case, but naturally a media exposure begins to what is happening and recovery and suddenly the little citizen sitting in the house sees that many do a lot in real estate. "N. He pays Issachar to buy him a house in Brooklyn, become 2 families or do it alone…. And what is actually happening in the market? This whole process of running prices upwards goes into acceleration on space.
And how did it end? Look at the graph. Always the same. After the denial phase comes the collapse. Always.
Let's go back for a moment to the little citizen and why this graph is important. If you know this graph and identify the active market players you can deduce at what stage we are and what will already happen. To me it is clear. When the small citizen and the small citizen chose to be real estate entrepreneurs in New York, to invest hundreds of thousands of their capital with no previous experience, I know that as an experienced investor it is time to take a step back, and beware. The public, which is a laundered word for "inexperienced" or "amateurs" If you think to yourself that they are an exceptional example, I have surprises for you. I do not mean to offend anyone here, but how many "investor mentors" are active today who until two or three years ago were in a different career? It's not good, I did not say, what I meant was inflation Their is an indication of the stage we are at.
Of course I'm also not against investing in real estate, that's what I do for a living. I'm in favor of doing it with open eyes to the market situation today, to the safety margins taken, to the real level of risk the deal embodies (not what you were told in the presentation, real), yes work with Experienced people (and I will give credit here to those who went through the previous crisis. When everything collapses around you the perspective often changes) and another important thing is to calculate a path of failure. When everything beats well no problem, what happens with no? What happens if I can not sell the property? Does rent from rent cover costs? What happens if the down payment falls? Am I still profitable? As long as you really understand the risks, as long as you cover all the sensible options, as long as you understand your exposure to the deal if it sucks and still feel comfortable with it, then go for it. .
In my opinion, just my opinion does not have to agree, caution is the name of the game now, so Deir Balk is recommended here, but keep working.
Good luck to everyone
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