The Success Tenets of MIGSIF
I am writing this letter to describe the investment tenets of MIGSIF since many new investors have asked me how we have produced such reliable and steady results through different market cycles since 2009.
1) Our main focus is on buying below market prices a product of higher value (We always want to know that we can resell ASAP at a profit. This is more of a margin of safety calculation because we never do resell right away as we much prefer to improve the property and dramatically increase its value.)
2) We look for unique sources of acquisition to get an edge in each market (We talk and build rapport with Bankers, Auction Trustees, Asset Managers, well-connected Brokers, High net worth individuals with private listings, other Funds Managers and Developers who over leverage themselves, etc. We keep networking)
3) We study and focus on affluent areas with high demand and higher-end properties with a history of recovering faster and more dramatically than other markets in the US (ie San Francisco Bay Area where we have focused a large part of our efforts in the past two consecutive years. We focus on one to two areas at a time)
4) We always have a clear plan backed by numbers for what we will do with the property. (How much it will cost, how long it will take, and what would be our back up plan in case things don’t turn out as planned. We get in with a good margin of safety during the acquisition by paying below market price and we add to that margin of safety when we rehab. We focus on the numbers)
5) We add value.
a) In residential: We usually focus on adding square footage and we always perform the highest quality rehab at the most competitive prices
b) In commercial: Our focus is on increasing the property’s income and taking it to the highest and best use in its local market
6) Time is always of the essence. The sense of urgency is embedded in everything we do and it is the culture of the entire team. (Time is money)
7) We have a top-notch experienced, flexible, and focused team of professionals who get along and get it done or they don’t belong and they are gone.
8) We avoid borrowing or over-leveraging. (We keep loans to a minimum and if we do get a credit line to finish a rehab it is usually at very competitive rates and terms)
9) We always have and keep cash reserves for additional rehab, cashouts, opportunistic acquisitions, etc. (One must always be ready for the good and the bad)
10) We do not mess with our successful business model and instead, we focus on keeping the momentum and energy flowing
11) We consider the relationships with other investors, associates, bankers, and brokers, etc. to be of the utmost importance and may be as important as the steady profits we produce
12) We keep a constant and vigilant outlook on any signs of market changes to get ahead of the game. With our high margin of safety in our acquisition business model along with our forced appreciation through the added square footage and other strategic rehab methods we have been able to make money in each and every transaction and have done so in every possible market cycle since 2009.
As the hedge fund manager, my top priority in the list of responsibilities to the investors is not only to make money but also to control risk. Before each acquisition, we go through all the details and our margin of safety. Once we are confident and comfortable with all the facts and figures, we go once more over the risk factors no matter how small they may be and plan carefully to stay on top of each transaction from beginning to end.
As an added safety margin, I have structured the fund in a way that investors have their capital cross-collateralized and secured by all the properties in the Fund and offered only a one-year redemption notice with no management fees, no acquisition fees, and no disposition fees.
It is always easy to make money when the market is up, our claim to fame is we make money in any market cycle and we have done so for several years. I remember when people when crawling out of the real estate and we were walking in hot and heavy. Our careful calculus of real estate wealth has paid off well to our entire investors’ group and many have reinvested and enjoyed the steady, reliable income streams MIGSIF has offered and delivered.
Sincerely,
Cherif Medawar
MIGSIF Hedge Fund Manager
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