Moshe, a former army man, went into early retirement and was looking for an occupation. With his retirement lump sum he bought an apartment in Beersheba, renovated it, and rented it to students. A few months later another opportunity fell into his lap to buy a second apartment in the same building, and so he did. Over time he accumulated a number of apartments, and began offering his services to friends who had left military service. His name began to precede him as someone who knows how to locate deals below market price, carry out renovations efficiently while saving time and costs, and add value to properties.
I met Moshe on a flight to Bucharest. He told me he was flying out to look at a number of real estate opportunities after hearing from several acquaintances that it is easy to operate in Romania, and had decided to expand his activity to Romania. He was drawn to the low real estate prices in Bucharest and to the high growth potential of the Romanian market. After hearing about my activity, he asked that we arrange breakfast the following day, to see how we could cooperate. That was the beginning of a friendship.
Over the following months, after we connected Moshe with professionals in Romania (the owner of a construction company, agents, a management company, an accountant and more), we checked quite a few deals for Moshe, and for some reason in the first year he did not manage to close a single deal or buy even one apartment. It was not that there were no opportunities Moshe found, but each time, by the time he had carried out the checks and made a decision, the apartment had already been sold. Moshe experienced frustration. He could not understand what the problem was and why the “system” he had built works in Israel and in Romania he does not succeed.
I met Moshe at the Romanian partner's office in Bucharest, and together with the partner we tried to understand the source of the problem. We went over the entire process from the moment of receiving a message from the agent about a potential deal until Moshe made the decision and gave his answer. Moshe's checks took anywhere from a few days to 3 weeks, whereas our initial preliminary legal checks, carried out in parallel, took two to three days at most.
As we dug deeper into the examination, we understood that the problem was Moshe's feasibility study and business plan, because of the size and diversity of the city. In Israel, Moshe knows the data from the experience he has accumulated, and has built himself an “Excel” that knows how to calculate the feasibility of a deal and give him an initial answer within minutes. In Romania Moshe had not cracked a “system” that could give him the Go/No Go answer faster. His “Excel” was useless. He struggled to obtain the data he needed.
I suggested that he obtain from the contractor a detailed price list of items and line items, so that for every future deal that comes to the table it would be possible to calculate the expected renovation costs without needing to obtain a detailed price quote from the contractor (true, there will always be exceptions, but at least it would be possible to get an estimate quickly). I showed him another tool for monitoring rents by area in Bucharest, so that he could get a quick answer on that too. We also agreed to focus on a certain type of apartment and on certain areas of the city only, to make things easier for him (focusing on a specific niche in the real estate market allows you to build up know-how and be more efficient).
When we met 6 months later at my office in Nes Ziona, Moshe was already the owner of 2 apartments in Bucharest and in the process of buying another apartment for a client. The time between receiving the offer from the agent and Moshe submitting a purchase offer had shrunk to only 3-4 days.
Moshe's story is an excellent example of the importance of preparation, perseverance and flexibility in real estate investments abroad.
In a competitive market, speed is the name of the game. You need to be able to make quick decisions and shorten the examination process, as Moshe did. It is important, as an investor and/or developer, to take the time-out, or to plan in advance the development of tools and processes that will help you analyze deals efficiently. This can include software, checklists, local contacts and more (the importance of in-depth research before investing in real estate in a foreign country is something I emphasize again and again, every week anew. This includes understanding the economic situation, tax laws, purchase and sale processes, and more).
Moshe's story is an example of an Israeli developer who managed to overcome the challenges of international real estate investments. He proved that with perseverance, flexibility and a willingness to learn, it is possible to succeed even in a foreign and competitive market.
Be flexible and be prepared to adapt your strategies to changing market conditions.
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית