We met a few years ago, when he asked to buy a building in a European country that was close to the university and convert it into apartments for students. He made several trips to the country, met with professionals and built an impressive business plan. By the time he came to me he was already firm on the idea, the costs and everything around it, and all that was required was to carry out due diligence on the building and negotiate with the owners, in order to make the purchase and get going.
The checks revealed that there were several heirs and the negotiation dragged on somewhat. During the negotiation a friend persuaded him to also carry out engineering checks on the building (it turns out he had not done so earlier). The negotiation with the heirs progressed, but he did not manage to get all the answers he wanted/thought he would get regarding the engineering condition of the building, and so one morning we woke up to an ultimatum from the heirs - sign within a week or we sell to someone else. The client deliberated, feared the risk, and gave up the opportunity.
Several months later another building was offered to him for purchase in the same city. Again deliberations, checks, thinking, and the building was sold within less than a week to someone else.
The third time he came to me with a development proposal it turned out that he did not have the required initial equity.
The fourth time he came, he again began comprehensive checks that took time, and this time the proposal also came from a new country that he had to research in depth, so he took a breather and began to study the country and the deal, which in the end turned out not to be economically worthwhile.
Throughout this period he continued to buy investment apartments from time to time, and to sell apartments he had bought whose value had risen.
Two weeks ago he came with a proposal for a new development deal. It is a building in a European capital that until now served as an office building, but because of its central location he wants to examine the possibility of converting it into a hotel. I suggested that he work with our team, an architect, an accountant, an engineer, whom we would connect him with based on our experience and our familiarity with the country and the market; that way we can help him reach a decision faster and also control costs. I gave him a few phone numbers of contacts, and in parallel I spoke with them and gave them background on the client and the proposed deal. Now we wait and see whether this time a new deal finally gets going.
So how do we know when the time has come to “jump into the water”? Here are a few questions you should ask yourselves:
- Have you carried out comprehensive due diligence? Have you examined the property in depth, both legally and from an engineering standpoint? Have you understood all the required permits and the risks involved in the deal?
- Do you have the required equity? Make sure you have the financing necessary to carry out the deal, including equity, loans and additional financing.
- Do you understand the local market? It is important to research the country and city in which the deal is taking place, to understand the demand, the competition and the local laws.
- Do you trust your team? Surround yourselves with experienced and reputable professionals in international real estate, architects, accountants and lawyers.
- What risk are you willing to take? Every deal carries a certain risk. It is important to define for yourselves a maximum level of risk that you are willing to accept.
- What are your decision anchors? What are the criteria most important to you when making a decision? Make sure you have clear anchors that will help you decide.
Remember, making informed decisions takes time, research and consultation with professionals. Do not be afraid to ask questions, to get different opinions and to take careful steps. At the same time, do not let fear and doubt paralyze you.
International real estate development can be a tremendous opportunity for financial success, but it requires courage, determination and hard work. Is it time for you to “jump into the water”?
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית