Penny Wise, Pound Foolish

5th August 2017

Over the weekend I met an investor who’s recently sold a company, and wisely wants to invest a chunk of the proceeds into property.

He doesn’t really have a strategy and is looking all over the country and at all sectors.

I would say more than 50% of getting into property is firstly to have a strategy.  This is required on all levels, from what type of asset class to purchase to tax and finance.

A lot of money can disappear into property very quickly and you may not have achieved what you wanted at the end of the process.

It may be more hassle than you expect, and there may be unforeseen tax implications if there has not been due emphasis on planning.

When it comes to paying for and valuing advice, we Indians are notorious for cutting corners.

You might be able to knock some money off paying for a deal in the short term, but this mentality will cost you in the long run.

This mentality doesn’t just affect advice, but the relationship is also ruined or in the very least becomes tainted, when you bargain too much.  It devalues the other party.

Maintaining and honouring a relationship will ensure a lifetime of good deal flow and advice.  Compromising and going back on your word, doesn’t ensure a healthy long term relationship.  This occurs fairly often in this business; people get excited about the property deal, and in the process they end up killing the golden goose which gave them the golden egg in the first place.  It’s cheap, and unfortunately very prevalent more so in the Indian psyche than others, in my opinion.

Currently, we are in the midst of a development deal, which will end up being valued at least about £3-4m when finished, so a sizeable chunk of real estate.  I advised the owner to ensure he gets proper advice, which will need a special combination of legal know how along with tax expertise, and the person needs to be commercially minded enough to understand the whole deal holistically.  The quoted fee was £15k, this would have ensured the deal was executed in the most efficient way possible, leaving no stone unturned.  It requires a skill set which an individual professional would not have.  However, the client is umming and aaahing regarding the fees.  From where I am standing, spending £15k in the right manner to save potentially millions is a no brainer.

Then we have those who reverse what they say, or reduce the fees which have been agreed when the time for payment comes.

There is a price to be paid for not keeping your word, as the name of this company suggests.  This price is first paid in your own psyche, then your own body and then your relationship with the person you have done this too, and then there’s the karmic effect.

It doesn’t even make sound business sense, as the relationship which is honoured and kept intact will produce money long term with the minimal hassle.

With this mentality you will lose opportunities and ultimately cash.

Suresh Vagjiani

Suresh Vagjiani
Suresh Vagjiani
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