He’s back! Our resident investment and business guru Philip Michael answered your questions on this edition of Ask Philip. How should you handle international business relationships? When is prime-time for starting a real estate business? Let’s discuss.
Q. Hey, Philip, what are some red flags I should look out for?
A. The whole key thing is to trust your gut and just employ common sense. In terms of red flags, it could be anything. If someone isn’t upfront or transparent, those are red flags. Those are always red flags. It always boils down to common sense.
Are they trying to hide something? Or are they not willing to get into an agreement with you? It basically comes down to the same thing that you would look at if you’re trying to establish a friendship with someone. If you just feel off, maybe something’s off.
But again, the actual question is quite broad, so if you hit me back next week about a specific scenario, I can give you a better answer.
Q. My good friend Philip, what are the key differences in making business decisions in Denmark and the United States?
A. Oh, my God. That’s really a tough question because it’s really cultural. Whenever you have international business, you have to be very cognizant, aware and sensitive also to the cultural nuances that exist.
For instance, in Denmark, people are very much not cutthroat, per se. So it’s very friendly. And that surprised me a little bit because I did a real estate deal with two very top operators over there to the largest private-equity firms. America is more of a capitalist society that, on that level, can be very cutthroat, and to some degree, you may have to be. But it was really surprising to me that people are very, very nice and friendly. Now, granted in the contracts is probably where you stand your ground, and you ask for stuff and things of that nature. But it’s just that people are very much friendlier in Denmark. People are warmer, and are more inclusive, in a sense. But it’s just different.
At the end of the day, one thing that permeates or even transcends any cultural restrictions is if you say you’re going to do something, do it. Be upfront and honest. Other than that, doing business in Denmark and in the U.S., I really have to think about that because there’s a lot of nuance to that particular question.
Q. Hey, Philip, is it smart to start a real estate business during this time?
A. Now, are you trying to start a brokerage? Because it can be really good business, in certain markets (maybe not so much in the larger markets like New York City, LA, San Francisco, because there’s a large degree of metro flight at the moment.) People pay top dollar to live in real estate in the big cities, but they don’t pay the big bucks for the actual brick and mortar. You pay for everything that surrounds the brick and mortar: arts, culture, restaurants, nightlife, networking, all that stuff. And if those things don’t exist, then your purchase decision gets narrowed down to just a brick-and-mortar. And then you look at it: Wait a minute, I’m paying this much for 1,000 square feet or 500 square feet. For this much, I can get 2,500 square feet in an area with things. And working, if not normally, a lot closer to normal than we see in the big condensed cities. It all depends on where you want to go and what you want to do.
It also could be a situation where you want to start a real estate acquisition business and become a landlord on a small scale, buy some property and rent it out to people who may not want to live in those markets permanently. But what is coming right now is they’re escaping the big metros.
In short, yes, it is. I think it is an excellent idea. We’re doing a lot of real estate business. Obviously right now we’re picking up more properties than ever before, so I personally think it is good. We just have to make sure that you jump into it where the opportunity makes sense and not where it doesn’t make sense.
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