GOLD ! Norair Yeretsian

The Gold Obsession : Real or Hype ?

It has been around for thousands of years.

” We have gold because we cannot trust Governments.” said President Herbert Hoover (1933) .

Was President Nixon right to end the Gold standard (1971) ?

Did the American and world economies just out grow the restrictive Gold standard ?

” They wonder much to hear that gold, which in itself is so useless a thing,
should be everywhere so much esteemed, that even men for whom it was made,
and by whom it has its value, should yet be thought of less value than it is. “
Sir Thomas More (1478-1535) Utopia of Jewels and Wealth.

A obessive yellow piece of metal called : Gold.  Who says it has any value ?

What is the value of  Gold and why should I care ?

I do not like Gold, neither its look or its concept of a storage of wealth.

We , Man say it is so — valuable, a treasure, something we need to show we are wealthy.
The powers that were – said it was an item of  worth. So men would seek it out and fight for it.

” Who has gold has a treasure [that] even helps souls to paradise.” 

 Even religious groups joined in the chorus for Gold.

Gold is not going to save you.

If you are lazy, unproductive, unimaginative, lacking creativity, drive, will and determination , your fortune will never come.

Seeking Gold is an old idea, whose time has come and gone.

What is value but some intangible thing that most of us may agree upon ?

Fads have come and gone, but Gold has been consistent – people have desired it.

It is easy to move and in the old days played the role of a common international currency.

War breaks out, take your gold and run !

A story was told about a hundred years ago about this supreme possession;
” a man who boarded a ship carrying his entire wealth in a large bag of gold coins.
A terrible storm came up a few days into the voyage and the alarm went off  to abandon ship.
Strapping the bag around his waist, the man went up on deck, jumped overboard, and
promptly sank to the bottom of the sea.
Asks John Ruskin: ” Now, as he was sinking, had he the gold? Or had the gold him ? “

This is a new age, so maybe we are beyond it, get over it and around it.

 It was political and economics mixed in, as we moved to this new age.

New Rules and not the status quo, those that have the Gold ruled.

On the investment side was Gold a good investment ?

Valued at $ 35 / ounce in 1970 , by January 1980 to$ 634 then rising to $ 850 record high January 21 .

By 1985 the value/price was $300/ounce, the stock market crash of 1987 caused a bump to $ 486.

” At the end of 1997, gold broke below $300. It had fallen by more than 60 percent in the course of less than eight years.”

( The Power of Gold : Peter Bernstein, 2000 ) 

As of this morning $1247 Canadian / ounce and chatter that it May be going up to $ 1500 ( Sept/2010).

Is this a good investment?  What about the  volatility over the years ? 

Gold is supposed to be a store for wealth and a hedge against inflation ?

 However the proof is not in the numbers over the years, too many bumps.

Gold does not pay dividends , No cash flow. So it is only speculative .

So you have to be a good market timer to make money.

Not just understanding the local market but one who understands and follows the global market place.

As well as making all the right calls on gold, in a complex system of currencies,governments
and geo-politics and the world of speculators. This is not the play ground for the small investor to consider.
Exercise caution !

What are your thoughts about Gold , does it command your attention ?

Let’s discuss it versus other investment opportunities ,

 Join us : www.yinvestthinktank.blogspot.com

Twitter : EnvoyCapRealty

Envoy Capitol Realty Inc., brokerage     Toronto , Canada
Buy/Sell/Lease/Manage/Develop/Syndication — Investments

email :  capitalmoves@gmail.com

Blog: www.capitalmoves.blogspot.com

Nor Yeretsian   [ Facebook ]   (  September 13,2010 )

Money Never Sleeps Nor Yeretsian

With the right investment, income and cash flow will be continuous.

With the wrong investment , expenses and de-valuation will be continuous.

Due Diligence is your short-term and pre-investment requirement
so that  risk(s) will be minimized / mitigated.

Let’s continue the discussion … email us @ capitalmoves@gmail.com

Twitter at EnvoyCapRealty.

Face Book : Nor Yeretsian

www.capitalmoves.blogspot.com

nyeretsian@yahoo.com    (July 19,2010)

Envoy Capitol Realty Inc., brokerage  Toronto, Ontario Canada

Buying/Selling, Leasing, Management, Development of Real Estate in Toronto .

Investment Strategies : Tax free Cash ! Norair Yeretsian

Know your Risk Tolerance before venturing into any investment strategies.

Many options to consider and each has its associated risk(s) and reward(s).

You have the freedom to make money or lose money.

Here is an option : A-II , to consider. It works like this …

You start with a $ 150,000 income producing acquisition in year 2000.

You leverage your investment with a 75% loan- to- value mortgage and
hold the investment for approximately ten years (2009, end).

At which time (2009 / begin 2010) it’s appraised value is determined to be $ 500,000.

Year 2000 —-( ten years)———end of  Year 2009——begin Year 2010
$150,000 ———————————————-$500,000
LTV 75% : Debt equals : $112 ,500 ————LTV 75%: $ 375,000
Equity :   $ 37,500  ——————————- Equity  :  $ 125,000

Debt has been reduced over the ten years , however these principal payments are
with after tax dollars.

Assuming the balance of the mortgage at the end of year ten is $90,000,
we are increasing this with the new financing to $ 375,000.

So that we receive $ 285,000 of new funds into our account [ War chest ].

A number of big assumptions were made :

1. Property is an income producing property …generating Cash Flow !
( your home would work also, but you must have the income to support the debt)

2. For the whole thing to work — Property value must go Up!

3. There is enough Income to support the new financing and you get approved .

4. Since it is a loan to the investment : this amount is tax free ( for now –until sale) .

You have $ 285,000 new funds to enjoy , to invest – to buy another property.

On it goes, it could go on forever or if you over leverage and values drop : you’re out of the game !

The down side concerns :

(1). If property values go down ( and it all becomes upside down, Debt is greater than Values )?

(2) If your income drops off or your tenant(s) leave or stop paying :
can not pay the interest on the loans?

(3) If the  Bank decides not to renew or extend your financing this become a real concern -
may have to liquidate at an inconvenient time: values are low and you are selling under stress. ?

(4). Can you live with the uncertainty  and a little stress ?

(5). You could extend this type of financing indefinitely.

However , if you get to far ahead with a heavy debt burden it becomes
a monster that you may no longer be able to control.
And you are no longer the master ( lord), you have become  the slave to the debt.

Beware.

A professional is always in control.

IF the above numbers held and you Sold the property,
we could do some further calculations to figure out what returns the investor received.
Without the operational cash flows( CFBT – CFAT ; numbers )  to consider or worry about .

Investor Yeretz invests  :
$ 37,500 of equity (year 1 and by year 10) it has grown to and sold for $ 500,000 :
the mortgage has been reduce to $ 90,000 therefore $ 22,500 equity build up .

sale price……………………….. $500,000 sale price
cost of sale (less)…………………. 37,500
balance on mortgage (less)……..90,000

sale proceeds before taxes …. $ 372,500

Return over 10 years     :    $ 372,500
__________________________   =   X          ………..     X = 993 %increase over 10 years

Investment                      :          37,500

Average annual return ( without the benefit of TVM , so simple average ) :  99.3 % a year .

What a large number and yield , wow !

Average annual rate of return on investment (TVM menu on the calculator ): 25.81 % .

1 P-YR    End

N =10

I/YR =  25.8084 %

PV= 37,500

PMT = 0

FV = 372,500

With the beauty of  Time Value of Money , the simple average  of 99.3 % comes down to 25.81% annually .

This is still a great return , relatively speaking .

More in future blogs as we discuss similar types of investments and their returns.

Leave a comment below ….

nyeretsian@yahoo.com    June 18, 2010

Don’t Panic…Fear returns to the markets Norair Yeretsian

There is no need to panic, please remain common.

Even though the US economy doesn’t seem to be doing any better
after the government spending near one trillion stimulus dollars
and will require either tax increases or spending cut backs in the
future to keep some sense of  balance  in a budget.
( in a federal budget, if that matters any more ).
Not to mention the billions of dollars that are being printed
monthly by all governments to cover spending on the all
sorts of programs and wars.

To keep things interesting after the sub prime mortgage mess in the
US which included the participation of the rest of the world economy
either directly or indirectly.
We now have Europe being challenged financially and collectively.
Starting with Greece, and the billions it needed to beable to meet
obligations from its fellow members.
Questions are being raised whether this is the test of the strength
and determination of the Union and whether it will hold ?

I feel like I’m in a Monty Python comedic skit.
It seems that we are flying auto-pilot and the pilot is in the washroom
( WC) cleaning up and the co-pilot it telling the rest of us to remain calm,
there is nothing to worry about, its just a little turbulence we will be coming
out of  it shortly. There is no need to panic, remain in your seats…however
let’s review the emergence procedures and exits anyway.
Our confidence is in question and the markets are worrying all over the world.
There is a sense of uncertainty and an unspoken sense of panic among the passengers.
This will be yet another variable that will  effect the markets at all levels from
daily purchases to investment consideration.

“What lies behind these jitters ? New nervousness about geopolitical risk, with
tensions rising in the Korean peninsula, has not helped. But that comes on top
of two wider worries.
One is about the underlying health of the world economy.
Fears are growing that the global recovery will falter as Europe’s debt crisis
spreads, China’s property bubble bursts and America’s stimulus-fuelled
rebound peters out. The other concerns government policy.
From America’s overhaul of financial regulation to Germany’s restrictions
on short-selling, politicians are changing the rules in unpredictable ways.
And the scale of sovereign debts has left governments,with less room to
counter any new downturn; indeed, many of them are being forced into austerity.

The danger is that these fears reinforce each other in a pernicious reversal of
the dynamics of 2008-09 . Then, coordinated government action on a grand
scale stopped the global financial crisis from turning into a depression.
Now, thanks to incompetence and impotence, governments may become
the problem that will drag the world economy down.”
( The Economist : May 29 – June 4, 2010)

How does this effect the purchase / sale — investing in real estate ?
The confidence in the market place by sellers and buyers will be effected.
The lenders and their willingness or tightness going forward will impact
the investment environment. We are all connected in this global economy
and so it seems logical that what happens there will have consequences here.
So to come close to understanding the situation we may be in.
We need to step back and look at the bigger picture.

Share your view of where we seem to be going …below with comments or
On Twitter @ EnvoyCapRealty …

nyeretsian@yahoo.com         June 6, 2010

Calculating a Canadian Mortgage HP10BII Norair Yeretsian

Here is a sample of a Canadian Mortgage calculation on the HP 10 B II , with
the appropriate keystrokes so that you too can reproduce these results.

Sample illustration A :

A property is sold for $ 4,250,000 in Toronto, Ont, Canada and the buyer needs
to  finance it. He approaches a mortgage lender and a package is prepared and
presented to several lenders. One lender offers :  a 65% loan to value ,
with a 5 year term mortgage  and 21 year amortization with monthly payments
with  monthly payments (representing both principal and interest ;
at an interest rate of    8.25 % .

Make sure your first clear all [shift] [C] this resets the calculator to zero.

We must next convert the interest rate from the stated rate 8.25 % to the
appropriate rate which will assist us in getting the correct Canadian monthly
payment, based on a semi-annually compounded  not in advance arrangement
as per Canadian law for blended rate mortgages of principal and interest.

8.25 [ shift] [ Nom%]

2 [shift] [P/YR]

[shift] [EFF%] … displays shows : 8.4202

12 [shift] [P/YR]

[shift] [NOM%] … display shows : 8.1117 this is now parked in [I/YR]

This 8.1117 , is the HP Canadian Mortgage Factor .

The balance of the TVM menu Icons can now be populated
with the appropriate data.

21 [shift] [N] display shows : 252

present value of the mortgage amount $4.25 million x 65%= 2,762,500 loan amount

2,762,500 [ PV] display shows : 2,762,500

0 [FV] display shows : 0

solve for the payment by pressing : [PMT] display shows : - 22,859.30

We can multiple this by  [X ]  12 , which will give us the Annual Debt Service.

ADS = 274,311.64

To get into the Amortization Schedule of the Calculator, we simply press …

[shift] [ Amort ] on the display we see :  (1-12) ,
this represents the full first year : EOY1 numbers ,
Then we press [ = ] display shows Principal payments .
When we  press [ = ] display shows Interest payments.
Then we press [ = ] display shows Balance outstanding for the EOY1 .

By pressing [shift] [Amort] : (13-24) , we get EOY2 numbers, and
again [=],[=],[=] …

If we wanted the EOY5 numbers ; we would press the following ;

1 input 60 [shift ] [ Amrt ] gets us to the end of year 5 :

display shows : (1-60)  [=] 308,437.84 principal amount paid over 5 years

[=] 1,063,120.37 this is the total interest payments paid over 5 years.

Again ; [=] gives us the Balance outstanding at the end of 5 years :
2,454,062  EOY5

Let’s put it all into a Mortgage Schedule :

……………… Principal ………….Interest ……….Balance

EOY1… ….$ 52,137 ………….$ 222,175 ……..$ 2,710,363
(1-12)

EOY2…  ...$ 56,527 …………$ 217,785 ……$ 2,653,837
(13-24)

EOY3 … …$61,286 …………$ 213,025 …….$ 2,592,550
(25-36)

EOY4…….$ 66,447 ………..$ 207,865 ……..$ 2,526,104
(37-48)

EOY5 ……$ 72,042 ………..$ 202,270 ………$ 2,454,062
(49-60)

Totals …$ 308,438 ……..$ 1,063,120 ………$ 2,454,62
(1-60)

Hope this works for you. If you have any suggestions for improvement
sent us a comment below or Twitter @ EnvoyCapRealty

nyeretsian@yahoo.com       June 5, 2010

Skyscraper Dreams…….. by Norair Yeretsian

Some of us just dream, and some of us actually acquire,build, manage and add value.

The story of the Great Real Estate Dynasties of New York is chronicled in
the book Skyscraper Dreams by Tom Shachtman (1991).

Harry Helmsley “could forecast the economic direction in which a
neighborhood was heading, knew what improvements (new elevators,
more shine to the brass, better windows) would bring in new tenants,
and could figure out which rental leases could most easily be renewed
at higher rates.” Helmsley’s business was not only brokerage ( sales)
like most brokerages, he made a significant fraction of his income from
management, ” which gave him a broader perspective.”

Harry Helmsley understood the sale-and leaseback structure, this
would enhance his company’s capacity to make deals for buildings
but also the fortunes of his property management firm, which could
operate future properties when sellers didn’t want to .

” At the time, the banks, insurance companies, and investment houses
wanted to have nothing to do with real estate.
Burned in the depression, they were overreacting by staying
completely out of the kitchen.

Scarcity of financing translated into fewer groups trying to buy, even
though a plethora of attractively priced buildings were available.
So there were tremendous opportunities for people with both the money
and the acumen to buy. Helmsley found and evaluated the properties,”
and his partner Wien checked his analyses and provided the cash to
buy them : ” a perfect match .”

” In acquisition real estate, partnerships are always desirable.
What you looked for was someone ( preferably a relative) with a body
of expertise that overlapped your own but was different, who could follow
your logic, correct fallacies or inaccuracies, and then bet with you on a
common project and accept the gains or losses from it without breaking
stride or quitting the field of play. You tested that partner on one or two
transactions; if you were still in tandem after several, you kept going and
grew closer together and more bold in your outside reach. “

Here is part of  the formula for your successful partnership and
acquisition vehicle, the other consideration(s) follow.

” In New York real estate, a successful operator later wrote,
” Property is appraised according to the return it brings investors, and
the effect of the syndicate has been quite simply to double values.
A building worth $ 5 million to a corporation is now worth $ 10 million
to a syndicate. ” Because the syndicate would pay taxes at an individual
rather than a corporate rate, Wien and Helmsley could offer top dollar,
spend more to acquire properties than other buyers, and beat out almost
any other bidder.

Though Wien invested alongside the other members of the syndicate,
Helmsley did not. Harry’s  income came from his broker’s fee and from Wien
allowing him to assign the management of the building to his own subsidiary ,
which guaranteed him a continued income from the building.
Wien and Helmsley pledged investors at least a 10% percent annual return
for a period of  ten years; after that, the building would probably be sold,
and investors would then receive 50 percent of any profit — which could
be very considerable, as most buildings went up in value.”

This could be the simple framework and timeframe for your syndicate in the future.
Becareful not to over estimate the returns you pledge to your syndicate partners,
you do not want to disappoint, by not delivering.

Your success going forward will be impacted by your delivery.

With the advantage of hind sight , there is a lot to learn from the  great real estate
Empires and Dynasties of New York, about their successes and failures.

As a real estate practitioner, Harry Helmsley covered all bases of the real estate
business and leveraged his experiences and knowledge to achieve great success
in the business of real estate. Having started as a bicycle courier in the City,
Harry Helmsley owned or had an ownership interest in over 200 buildings in
New York City and an empire valued above $ 1 billion,
by the end of his career in real estate.

Let’s continue the discussion @ EnvoyCapRealty : Twitter  or below…

nyeretsian@yahoo.com May 27, 2010

Money for Real Estate : One Norair Yeretsian

One of your greatest challenges after searching, finding, analyzing,
deciding and negotiating to purchase an income producing property ;
is finding the Money to  cement the deal together.

Well , if you already have all the needed funds you’re there .
( no need to continue to read this blog move on the strategies )

Residential mortgages for single units or multi-unit residential
apartments are much easier to arrange and close.
In Canada, these loans are  CMHC insured and the lenders have
reduced exposure to risk.

Commercial and Investment lending is not insured , so much
more risk to possible loss by lender(s). The lenders are less motivated
to lend to commercial. Commercial loans are more complex, there are
financial statements to consider, appraisal reports to read,
environmental assessments to consider, etc.
It costs the lender more money to facilitate and administer, so they charge for it.
They need people who are smarter and trained in this area, this is usually lacking
at most banks in the country.

This also creates a degree of  illiquidity in the
commercial real estate market place, which the private lenders take advantage
of and move in with their money at higher rates and more challenging
terms (negotiable).

This puts downward pressure on any price increases in commercial /
investment real estate.
This maybe another reason why valuations and pricing is less volatile in
commercial real estate in Ontario.

Where do you find this money ?

What is the cost of this money ?

What are the terms for this money?

Scenario  1 : 25% down payment 75 % financed
You have some equity, but need to find the balance of the Acquisition Price.

Scenario 2 : 10/20/30 + down payment , balance VTB / STB financing

Scenario 3 : set up a   limited partnership / or a simple partnership
You have no money. Where do you start ?

Scenario 4 : syndicate the project , through a corporate vehicle.

Scenario 5: WEIT  ( whatever it takes ) +  AAC ( at any cost )

Where can you find money ?

Usual sources include : the banks, trusts + credit unions,
life insurance companies, some pension funds…

You may want to go to a broker first and have them access
these sources on your behalf and for a brokerage fee(s) but
they will organize a presentation for you and they are motivated
to get you and your project the funds.
Make sure they only get compensated on performance
( the loan actually happens ).

Private money is also potential available, you can access them
through the gatekeepers: lawyers /accountants/business managers.

Depending on the amount(s) you may be seeking , if the local lenders are tight
you may consider going international.
Some of these groups have offices here in Toronto/ Montreal/Vancouver , Canada .

What is the cost of this money ?

This is a good question to ask because , you want to know whether
your  investment can’t handle it . Is there room to pay this amount and
still keep it interesting for you and your group.

The cost is not a fixed item, it is negotiable.
It could range from zero ,1,2,3,4 points or percent of the amount borrowed.

There are also costs such as application fee,  appraisal(s) , environmental
assessments, survey  and other due diligent costs. These again are not fixed
amounts, but they will be in the thousands and not hundreds of dollars.

And its all negotiable, yet another reason to get a professional on your team.

Some of the name(s) in our local market place with respect to finding funds
for your real estate investment opportunity :

Commercial Financial One : www.cfogroup.com
……………………………. (905) 886-6542 : Mark Kay

Firm Capital : www.firmcapital.com

First National : www.firstnational.ca

Romspen : www.romspen.com

Exercise caution when dealing with any lender, remember they are in business and their prior is their interest , not yours .

The better professionals you have on your team,  less costly errors will be made. Using a knowledgeable realtor is an asset.

Let’s continue the discussion on Twitter @ EnvoyCapRealty

nyeretsian@yahoo.com       May 22, 2010

Capitalization :Direct vs. Yield Norair Yeretsian

Direct Capitalization Rate, also referred to as overall cap rate (OCR) ,
it is the overall return from an income producing property on an all cash position.
It represents the one year view of the property.
The formula is derived from the income approach to value :

OCR = NOI / Value   :

overall cap rate equals net operating income divided by value.

example : OCR   is    10 %    =   321,600   /  3,216,000

Yield Capitalization is a more dynamic perspective of the property
and it relies on discounted cash flows looking out 5 to 10 years
( or more) into the future of the property’s performance.
This is a lot more work, and with many more assumptions
being required to be made with the associated risk(s).

example :  CFBT # s from initial investment ( year 0) to EOY 1 CFBT … to EOY5 CFBT + SPBT#

time line ( also taking into account the Time Value of Money )

…… Year 0 -)->–EOY 1—EOY2—–EOY3——-EOY4—–EOY5

(804,000) .122,610..137,323..153,802..172,258.. [192,929+1,750,000]

….CFj ……..CFj……..CFj…….CFj ……… CFj……  CFj …

Flow 0 —— 1——– 2——- 3———— 4——– 5 –

Using the HP10BII calculator , you can easily run these cash flows with
the following key stroke entries :

step 1 : make sure your calculator is set to  1  P-YR
[ press shift   1 p_yr to comfirm it]

step 2 : start entering the cash flows with the initial flow
( initial investment ) going in as a negative …
[ press 804,000 then the +/- key to set :
-804,000 enter into [ CFj ]

step 3 : enter the balance of the cash flows
enter the  number 122610 [ CFj] you should see flow 1 quickly
appears and disappear, then enter the next cash flow,
till the final cash flow : make sure you add the together the
EOY5 CFBT + SPBT and enter the total as one cash flow,
otherwise your time value of money ( time line) will be thrown off.

step 4 :  by pressing  the  IRR%/YR  key , the internal rate of return is the yield
on the invested capital in the property ( stated as an annual rate ).

Therefore the result you should get on your display is :  31.01 % .
This is the before tax yield .

If we changed the Sale Proceeds Before Tax to $ 1,000,000
with the EOY5 cash flow and re-ran the numbers the resulting
IRR%/YR would equal : 21.71%

These are both great yields, now the challenge is go out and find them !

We could continue playing a What if game with altering cash flows
over the years and different  revisionary values.

There were a number of positive assumptions embedded in the above
cash flows which may not happen. Caution is the order of the day,
your assumptions must be made clear, rate of increase year over year.
The cost of capital, the rate of inflation, the risk associated with the
asset and the location. Many many more…tenants?

Let talk about it,… twitter : EnvoyCapRealty

or just below…

nyeretsian@yahoo.com May 20, 2010

Capital Madly Getting off in all Directions Norair Yeretsian

” Markets can remain irrational a lot longer than
you and I can remain solvent .” John Maynard Keynes

This is one of the biggest challenges we investors face,
to be rational /analytical ,to have goals and targets and
have a planned /systemic approach. And then we are faced
with the irrationality of the market place as driven by the
irrational humans that invest in it.
If we then explore the irrationality of the investor in this
challenging market place ; chaos .

Irrational Buying versus Rational Buying , what’s your bet ?

Everyone has a motivation, some rational,others irrational.

Most investors are motivated by making money :
cash flow and capital appreciation .
If you can’t see how to make money or calculate how
to make money in an opportunity,
your not investing you are doing something else.

Follow the money and you will understand ,
I was told by a sophisticated investor.

Well I can follow the money if the investor is rational
and the investment is made rationally.
If  I  can connect all the dots the investment is logical
and rational at least on one level .

If you can not connect the dots and the investment calculations/analysis
does not seem to work or make any sense –
then there is something else happening (irrational behavior ).

Well  either the investment is  rational or irrational , it can’t be both .

You can calculate the yields and returns, measure and count the cashflow.

Rational equals logical, irrational equals  emotional .

What rational investing is easily understood.
It is following a logical, systemic approach that we can calculate.
We can see the motivation : return on the investment and return of the investment.
It is more tangible and less subjective ( future sale of the asset in 10 years ).

Behavioral Economist tell us that the average investors
are full of irrationalities :

1. Too self confident; ignoring luck.
They have an illusion of control by exaggerating both their skill and the importance of that skill.

2.They have an Optimistic Bias — too bold.

3. Risk Averse , overly timid.

4. Too scared / afraid of loss.

5. Quick to trade.

Who always makes the sensible financial choice ?

Daniel Kahneman (Princeton psychologist) said :

” Psychology has a story to tell about investing, and its different from the one economics tells.”

Average investors are full of irrationalities and inconsistencies, according to Behavioral finance.

Things get really scary when one thinks about irrational investors and
their approach to investing versus the rational investors:

and the idea or rather the confusion or miscalculations/ misunderstanding
of the market  ; and the famous quote

” The markets can stay irrational a lot longer than you can stay solvent. “
And of course government(s) do not help, they seem to inflame the situation
or create concern when none seem to exist just to keep things interesting
and cash flowing through the economy.

Let’s continue the discussion : Twitter ; EnvoyCapRealty or
just leave a comment below

nyeretsian@yahoo.com May 16, 2010

Acquisition Criteria : What’s yours ? Norair Yeretsian

Have you established your investment acquisition criteria yet ?

Do you ask your clients  what their acquisition criteria is ?

Do you have a game plan ?

Why would you waste your time with a client who doesn’t
know where they are going, or when and if they arrive ?

Ask the client what they want or need , then Listen !

Once you understand their need/want, go find it.

Then deliver it to the client –simple. Deal done !

Obviously — different investors small and large have
a  variety of wants/ needs, from simple to complex : portfolios.

Some are better prepared, with written plans, a budget and a
cash flow business model for success ( determination).

With an appropriate timeline to acquire this asset and appropriately leveraged.
Financing being negotiated or already in place.

Institutional investors have plans and acquisition criteria.

Institutional quality assets to be purchased.
Defined as being acceptable by prudent institutional investors
(example : insurance companies, commercial banks ) .

Assets will consist mostly of private real estate investments
primarily in the following categories : office, residential apartments,
retail shopping centers, industrial and hotel .

The portfolio should be diversified as to risk/return mixture,
geographic location, category of real estate asset, investment leverage,
age of building and the management of the asset.

Core investments will make 35% of expenditures(+/- 10% ) ,
value-added 25% (+/- 10% ); opportunistic 15% (+/- 10%);
global publicly traded real estate securities, 25% (+/- 10%)
and infrastructure, 0%-10%.

Warren Buffett has established investment acquisition criteria
Berkshire Hathaway Inc.’s criteria was to invest in companies that
have demonstrated consistent profitability over a long period of time .
Where they have returned a steady 15% average annual compounded return.
Have great management in place to continue delivering this return.
A business that has a distinct advantage, a brand / a patent , etc…
A business that has a higher barrier to entry.
A business they can understand and can determine how the business
makes the cash and  derives cash flow.
And based on some of these criteria and for a business in the value
range of between $ 5 to $ 20 billion.
Mr. Buffett claims that it would normally take them 5 to 15 minutes
to tell you whether there is any interest in pursuing the opportunity .
His organization can do this because they do their homework and
are normally aware of most opportunities in the market place.

An investor with an established acquisition criteria — will be
more focused , because they have a target — they know what they want .

This makes it more efficient for all parties in Buying/ Selling / Leasing
and for the realtors involved .
Everyone knows what they need to do in  order to concluded a Deal !

Let’s talk about it … Twitter : EnvoyCapRealty or send a comment below.

nyeretsian@yahoo.com May 14, 2010