Throughout my career as a professional engineer and 15 years investing in real estate, I have always asked myself this fundamental question before dedicating my time and capital into my next project… “What do I need to know to confidently understand the risks in this project or investment; and has everyone got skin in the game?”
This is how I came up with the simple ‘Building Block Method’ to investing. The fundamental principles are quite simple. Think of them as you would build a home. 1. You can not build a home properly without having a solid foundation to build upon. 2. You need to have a frame work of walls to 3. place your roof and 4. the inside needs to be properly finished to move into the home.
This process must flow in this order every time you build a home or you will not be successful! Fact!
I think of investing in real estate in a very similar process flow. One of which builds upon the step before to create a successful and repeatable end result. This is demonstrated to all parties involved so they know what must occur before any time is committed to understanding the investment opportunity and the risk involved.
Step 1: The Foundation Stage: There must be guarantees made by the parties whom are making the most money and profits with an equal amount of accountability, if they do not perform what they set out to.
• this sets the entire foundation of performance driven accountability from the top down
Step 2: The Framing Stage: All contractors, general trades and professional sales teams must agree and legally bind to a “Performance Contract” to hold them 100% accountable to their results.
• this establishes a frame work of parameters from which all parties must operate from within
Step 3: Completing the Roof: There must be 3rd party reporting on all work performed. Monthly progress reports and inspects on the quality of construction and 100% transparency on all invoicing. Bi-annual financial statements must be provided to all secured investors via accredited and internationally recognized chartered accounts.
• this is what holds the structure of the deal together to ensure quality upon completion
Step 4: The Finishing Touch: All transfers of property and money must he handled, registered and reported by a 3rd party law firm to ensure all legal agreements have been honoured and priority repayment of creditors and investors are returned in the order agreed.
• this is what furnishes the project with the security in knowing the parties get what they paid for and invested in
Once I have all of these fundamental building blocks in place, I then find the next best real estate investment opportunity that fits these criteria, in this order.
If this was helpful, please let me know by commenting below.