Yoav came to me with pictures.
Not with a table, not with a calculation, not with a registry extract. Pictures. A property in northern Portugal, exposed stone, a tiled roof, a view of the hills. “Look at this, Ilan,” he said, turning the screen toward me. “Don't you think it's simply gorgeous?”
He was right. It was gorgeous.
Yoav is an interior architect. All his life he has lived inside a world of aesthetics - materials, light, proportions. He knows how to see beauty that other people miss, and that is exactly what made him good at his profession. But it is also what almost made him fail at this investment.
He fell in love with the property. Truly fell in love. He spoke of it the way one speaks of the home one grew up in, not of an asset meant to return a yield. And when a person falls in love, he stops asking the uncomfortable questions.
I sat across from him and asked one question: “How much does it bring in per month?”
He didn't know.
I asked about the occupancy rate in the area. How much neighbors get on a similar property. How long it takes to rent such a property after a tenant leaves. How much it costs to maintain hundred-year-old exposed stone in the weather of northern Portugal. What the condition of the roof really is, not how it looks in the picture, but what is happening under the tiles.
To every question he gave the same answer: “I didn't check. But look how beautiful it is.”
The problem wasn't that the property was ugly. The problem was that Yoav had confused two completely different questions. “Do I love this property?” and “Is this property a good investment?” are not the same question. Sometimes the answer is the same. Often it is the opposite.
I asked him for a week. I told him we would take his beautiful property and put it through a check he wouldn't do for himself, because he is too in love.
What we found wasn't dramatic. No fraud, no forgery, no con man. Just numbers that don't work. The real rent in the area was lower than the seller hinted. The maintenance of an old stone structure in a damp climate was much higher than Yoav imagined. And the view of the hills, the reason he fell in love, could not be rented out. Tenants in Portugal look for proximity to the city, to transport, to work. Not a view.
When we put it together in one table, the annual yield came out such that it did not justify the money. The property was gorgeous and a bad investment, at the same time.
I sat with him and saw it on his face. A person who falls in love with a property and suddenly understands the numbers say no is like telling someone the house he imagined for himself will not happen. It hurts. And that is exactly the moment when most investors ignore the numbers and buy anyway.
I think about this a lot. Real estate is a business. A business in every sense. And a business is measured in numbers, not in feelings. If the numbers make sense - you go in. If the property is beautiful but the numbers don't work - you can admire it, you can photograph it, but you don't take it to a fashion show and you don't take it to the bank.
Beauty is not a yield. A view is not cash flow. A good gut feeling in front of a beautiful picture is not due diligence.
Yoav did not buy the property in Portugal. Half a year later he bought another property, less beautiful, truly less beautiful, in an area with real demand, numbers that work, and a tenant who moved in within three weeks. He did not fall in love with it. He simply earns from it.
He once said to me: “The first property was love. The second is a livelihood.”
That is exactly the difference.
If you are considering a real estate investment abroad and something about the property makes you say “wow” - stop for a moment. Separate the question of whether you love it from the question of whether it is a good investment. Let the numbers speak first. They are less exciting than a beautiful picture, but they are the only ones that tell you the truth.
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית