Drinks And Food Have The Best ROI
Yesterday, I had a phone call with a banker from New York.
Actually, he’s an ex-banker who founded a start-up that has reinvented the way home buyers borrow money – let’s call him ‘John.’ He has created an interesting loan model that puts the risk on the lender, not the borrower.
(I’ll have more about this start-up in the future, with a possible investment opportunity for those interested.)
Our conversation quickly evolved from his start-up to the broader real estate market. I explained what I was doing in other countries – buying real estate for less than the cost of construction, with a currency arbitrage opportunity.
He laughed at what I was doing and said, “I love it! It’s like forex trading with great collateral. It doesn’t even matter if you make money from the currency because you’re making yield from the rental rates.”
“Exactly,” I responded.
“But, how do you find the real estate? How do you find tenants? Who manages everything?” he asked.
I explained to him how I find partners in every location that I invest in. I find locals who know what they’re doing and have a stake in the investments.
They invest with me or I give them equity in the investment. My gain is their gain. My loss is their loss. Their hard work (and honesty) rewards them as much as it rewards me. If they cheat me, they’re only cheating themselves.
I told John that I never invest without a contact on the ground I trust. I might find the best deal in the world, but if I can’t find the right people, I pass.
“Ok…” he said, “But how the heck do you find these people to partner with? That’s gotta be like finding a needle in a haystack!”
This time I laughed, “Exactly. I do all the hard work. I physically travel to different locations to meet people. I figure out who knows what they’re doing and I search for the most capable people. Most importantly, I form relationships. I form friendships. Human connections, that are rare today.”
John responded, “That’s interesting. You know that I’ve been on the phone for almost 5 hours today with 6 different people and I don’t even know what they look like. And now that I think back, I realize that the best deals I have ever done are always in person.”
“Doesn’t surprise me,” I said. “It’s quality over quantity. I might spend a lot of time traveling and meeting with people, but it’s much more effective than sending endless emails and hours on the phone with people that I don’t even know.”
John and I talked a lot more about real estate and business. About how he sees his startup being a great place for investors to put capital to battle incoming inflation… again, I’ll have more about that in the future.
I share this conversation with you for two reasons.
#1 Human relationships are highly underrated. You’ll be shocked by how much more you can get done when you have the right people working with you. And when that relationship is face-to-face, it’s even more valuable.
#2 Competition in this space is almost zero. I’m talking about going out of your way to physically meet people and strike up business together.
If you go to Facebook, LinkedIn, or any social network, you’ll find everyone constantly sending messages to each other. It’s easy and free to do. But it’s also a bit cheap. Meaning, sending an email or message to someone is easy and free, so there is not a lot of implied value to the message.
Meeting someone for a drink or meal subliminally suggests more importance. Both parties are taking a significant amount of time and money to make the meeting happen. There is more value.
When I travel to meet with others, the competition is almost zero. Very few people put the time and effort into making real valuable relationships. This is especially true in uncrowded locations. Like most of the countries I listed in the Best International Real Estate Buys For 2017.
And for an investor, that is something that you should always be looking for: uncrowded trades.
It doesn’t matter if it’s real estate, stocks, collectibles, private companies, or whatever. If it’s crowded, then a lot of the value is probably priced into the investment.
By searching for uncrowded investments, you’re automatically giving yourself a better chance at success. Yes, you need to do extensive due diligence and spend time making relationships, but when your competition is low, your gains can be very high.
I might spend more time and money investigating foreign real estate than I do stocks. But my rewards are also lopsided in favor of where I have the least competition in foreign real estate markets.
Remember this anytime there is a buying frenzy.
And keep this idea in mind for some news I’ll have in a couple weeks.
In the meantime, if you’re itching to get our there and make things happen, lots of airlines are having sales on flights to China right now. For example, United is having a sale from multiple US locations to Hangzhou for less than $500. That’s cheap to fly across the Pacific!
Would you mind sharing what it is you look for in the property you buy and in the people you deal with?
Do you have like a checklists of minimum requirements and maximum deficiencies or do you go with your intuition and “get a feel” for them?
Great insights, thanks. I am also wondering how do you connect with these people before you go and meet them?