You never know what a chance conversation or meeting will bring, and I'm not the type who connects easily with people, but over the years I have learned that every meeting is an opportunity to get to know people, and from there new friendships or business opportunities may arise. The CEO of a leading company once told me that it is easier for him to do business with someone he feels comfortable sitting with over a glass of beer.
A. married, several years ago, a woman we had studied with at school, and over the years we met at quite a few social events, trips and shared picnics. A. knew what I do for a living, so I wasn't surprised when he approached me at one of the events and began questioning me about buying property abroad while we sipped beer. I gladly shared my knowledge and gave him tips on how to proceed. We ended the conversation at the end of the evening with me suggesting that he come to consult me before making any deal.
A. “picked up the stick,” but a little too late, and showed up at my office one bright afternoon to announce that he had bought 4 apartments in a building that was supposed to be run by an international hotel chain in an Eastern European country. The price was very attractive, he explained, the building would be ready for delivery in a few months, and of course there was the name of the big hotel chain. I asked a few questions to understand the deal in depth, but I did not express any opinion (although deep inside I was angry even at the foolishness A. had committed), and I did not point out the “holes” in the deal (in terms of the security and the commitments regarding management going forward).
About a month ago I met A. at a wedding, a forced smile plastered on his face. “So,” I asked, “how are the apartments in Eastern Europe?” He sighed. “Don't ask,” he muttered, “it's an ongoing nightmare.”
It turns out that the “amazing” deal he had jumped at proved to be a honey trap.
The slick marketer had painted him a rosy future: fantastic returns, worry-free management, family vacations in his own private apartment... A. was tempted, he admitted, by the thought of “easy money.” He imagined the money flowing into his bank account every month, effortlessly.
But reality slapped him in the face. Construction was delayed again and again, the delivery date was pushed back, and so far he hasn't seen a shekel of his investment. The conversations with the marketer became frustrating. Vague promises and evasive answers replaced the grand promises. A. felt helpless.
“He promised me the moon,” A. told me in a trembling voice, “said it was a once-in-a-lifetime opportunity, that apartments like these were being snapped up like hot rolls...”
But A. forgot the first rule of real estate investing: “Never fall in love with a property, fall in love with the deal.”
“I want you to look at the contracts and tell me what I can do,” he said, truly desperate.
We agreed that he would email me all the agreements he had signed, and after I had reviewed them we would set up a meeting to determine the strategy and tactics.
The agreement A. signed was as full of holes as a sieve. It lacked many protections that I assume any lawyer A. had turned to would have asked to include: no clear date was defined for when compensation would begin in the event of a delivery delay, no mechanism was set for calculating the compensation, there was no reference at all to the marketing promises regarding management and returns, payments were not made conditional on construction progress, there was no option to cancel the agreement, and more. A. relied on the marketer who offered him the deal, did not delve into understanding the agreement, and as noted did not have it checked by a lawyer on his behalf.
A.'s story is not unique. Many investors fall into similar traps. They are tempted by promises of fantastic returns, by “amazing deals” that “you can't miss,” and by aggressive marketing. They forget (or are not aware of) the saying of Grant Cardone: “Success in real estate is a process, not a one-time event.”
A.'s story is an important reminder for all of us:
- Never invest in real estate abroad without professional legal advice. A lawyer experienced in international real estate can help you understand the contract, check all the legal aspects, and identify potential risks. You need someone who will look after your rights and protect you from unnecessary risks. Remember, professional legal advice is not an expense but an investment.
- Don't rely solely on a marketer's word. Always carry out your own due diligence, and make sure you understand all the details of the deal.
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית