He made the leap from an investor who buys apartments to a developer, A., after he had bought more than 10 apartments in recent years in several countries, renovated them and sold them or continued to hold them and enjoy the rental income. Now he came to me with a 3-story house that he asked to buy and turn into 6 apartments. The business plan looked impressive, as did the photos of the house. Despite my attempt to explain to him that it is not a simple matter at all to convert a house into a residential building, and that surprises are to be expected along the way, A. insisted on carrying out the deal.
The following week we flew together to begin getting the project moving. We visited the property, which looked in reasonable condition, but abandoned and unfinished inside. We began meeting local professionals to set up a team to handle the deal, and in parallel the local partner began the DD process (legal examination of the property). The broker accompanied us to all the meetings; A. introduced her to me as the one who would be his partner in the project, and she insisted on working with professionals she knew and rejected every candidate we presented. Despite our recommendations, A. chose to work with the professionals introduced to him by the broker, who also made sure they were attractive in price compared with the professionals we recommended.
Everything flowed along smoothly, more or less, and then it happened. When the works were completed it turned out that the municipality was not willing to issue an occupancy certificate because parking spaces had not been arranged as required in the building permit. It turned out that the broker had not updated A. about the requirement at the start, nor had the architect. It further turned out that she had negotiated with one of the neighbors to buy part of his plot and turn it into parking for the building, without success. Now A. is left with a house converted into 6 apartments, which were sold to investors and buyers, but the building stands like a white elephant, unable to receive an occupancy approval until the parking spaces are arranged.
The professional hive that surrounds the developer is an important component in the success of the project. But no less important is familiarity with the local regulation and the requirements of the authorities. When operating in a foreign country, especially at the beginning, the importance of the professional hive takes on added weight, so do not compromise on the professionals you hire and do not evaluate them only on cost (what is cheap ends up expensive).
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית