#Engineer of the Week Eliran Simoni # Post 5 Dealing with Crises Hello everyone and Happy Purim! We are progressing with…
# Initiated week Eliran Simoni
# Post 5 Dealing with crises
Hello everyone and happy Purim!
We are moving forward with the week and here we are at the sixth and perhaps the most relevant post for today! Dealing with crises while managing property in the US.
Some say that every decade comes a global crisis. But to be honest… in a field like real estate there is much more than one crisis in a decade… In fact, every entrepreneur / investor starting in real estate should internalize that beyond any other investment channel - investing in real estate is an investment of people in people. In their life, in their residence, in their ability to earn a living. Therefore naturally crises will be a matter of routine.
Throughout the investment life we can be surprised by small and large crises and different types: whether it is a vacant or unruly and slaughtering tenant, a house burned down by a child's toy or a snowstorm that does a lot of damage, a hurricane (not uncommon in the US) So suddenly without an order in advance and without knowing when it will end….
The question we need to ask ourselves as entrepreneurs is how do we deal with crises and know how to get out of them for the best? And if we work with a management company - how does it deal with crises? How fast does she react? Wisely? How much does the management company know to put your interest as investors at the crisis management center? How creative is she in the solutions she offers?
We can tell from our experience about three cases from the last years, from mild to severe:
11.11.2018 - The house on Evans Street Wilmington NC burned down completely (see photo below) as a result of playing with a lighter of the tenant's child - on the face of it a real disaster. And what in practice? As the management company, we made sure to insure the house at the level of the investment. With quick treatment and within a month, the shocked investor received the full amount of his investment back from the insurance company. And if that's not enough, after about another month we also sold the land and thus the investor still profited from the sale (and of course entered into another investment to further increase his capital). Pre-calculated planning, quick management, creative implementation.
15.9.2018 - Hurricane Florence hits the southwest coast of the USA and causes great destruction to 30 houses of our investors (see a tree on the house below) - on the face of it a very bad situation, mainly because the insurance companies compensated some of our investors more, and some did not For compensation at all! Due to a high deductible or all kinds of different claims from the insurance company! In other words, some of the investors received more than they should have, since all the repairs were done by contractors who work with us on a regular basis and therefore cost us less, and some did not receive any funds at all or very little due to deductibles! When we realized that there was an "inequality" between the investors, we acted in an unusual way: we created one common fund from the insurance funds of all the investors. We took care of everyone's repairs with the money from the same fund! So it turned out that despite that challenging winter - all investors felt a good return and lost almost no tenants and rent. Our starting point was that it's better that no one loses than one person wins.
April 2020 - the corona crisis is already really present and the tenants are starting to stutter in payments - here personal field work and situation management in a sensitive manner adapted to each tenant was required. Some of our solutions to the situation were, for example, to go with the tenants to the municipalities and help them fill out the forms to receive the grant so that they can pay the schad, to understand with whom we can insist on the schad, and who can be transferred to monthly leases so that they can be taken out in case of Continuous non-payment. We offset preventive maintenance expenses, which can be postponed, as much as possible, we changed and updated business plans for the investment groups. Thus, here, too, a lot of creativity and solutions requiring fieldwork were required.
And the bottom line is that when you start investing in the US, keep in mind that there will be crises, it's an inherent part of the process. And when you invest and get help from a management company - make sure that it knows how to manage crises, that there is someone in the field on your behalf who takes care of your interest and knows how to maximize your investment even out of the ordinary.
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