Michael Koh – real estate investor

by admin on January 25, 2011

A single question prompted a life-changing decision for real estate investor Michael Koh. Asking himself what if he only had three years to live, Michael began traveling extensively around the world, eventually selling everything he owned and moving to Buenos Aires, the city he had fallen in love with. Confounded by corruption and wasteful business practices endemic to the city, Michael found a way to offer superior service and smart advice through his multiple real estate firms. Now with over 170 properties and a growing list of wealthy investors placing full trust in him, Michael has created an entirely new niche founded on investment savvy and strong business ethics.

Living room of a Koh apartment in Buenos Aires, photo by Esteban Lobo

Following is an excerpt of my interview with Michael Koh. For the full interview and his great advice for anyone thinking about their career, buy my new book Field Trip: Volume One, featuring Michael and 11 other mentors in different fields of work. Available on Amazon here!

You were doing quite well working as a senior executive for a company in Dallas when you asked yourself what if you only had three years to live. What prompted you to ask that question, and what was your answer?

Well, I feel very fortunate that I’ve always had the vision to think many years or a decade ahead of time. I was working very hard and was very successful at what I was doing. I was still fairly young at the time and had accomplished quite a bit for my age. I was working with high profile and wealthy businessmen, wealthy families and corporations and municipalities at the time. Life was good. I was making a lot of money and living the American dream.

I witnessed first-hand that having oodles of money didn’t necessarily equate with being really happy in life. In fact, I saw some clients pass away after retirement. And many others that made tremendous sums of money, but they weren’t really enjoying life. They lived to work instead of working to live. They were a slave to their work.

One day I woke up and asked myself literally what I would do if my doctor told me I had just three years to live. I imagined what would be important to me and if my priorities would be different. For a few weeks, I wrote down on paper the things I would do or wanted to do. I started to prioritize things as if I really only had three years to live. I came to the conclusion if I really only had three years to live, I’d want to travel and see the world. I had traveled quite a bit within the USA and parts of Europe and Mexico, but those were only twice-a-year international trips. Nothing too adventurous or extravagant.

If I really only did have three years to live, then money wouldn’t be a concern. I was single at the time, I had no children, and I decided if I had three years, I’d travel all over the world to cities I’ve always wanted to go to but was too busy working to think about going to.

My list came together, and more and more cities were going on the list. At the time, I didn’t know if it would be possible to hit so many places, but I’m happy to say I hit every city on my list. And even today, my family and I still continue to travel around the world constantly learning about new cultures and seeing new and interesting cities.

Our oldest daughter is 23 months old and she has been to 25 cities in 12 countries on 3 continents with more trips planned. I think it’s important to give a global picture to your children so they don’t have such a sheltered view of life.

The view from a Koh apartment in Buenos Aires, photo by Esteban Lobo.

Out of all the places you traveled during those years, what was it about Buenos Aires that kept calling you back? Did you imagine moving there?

I always try to explain to people it wasn’t just 1 or 2 or 3 things that I could specifically name I loved about Buenos Aires. It was dozens and dozens of small things I really enjoyed about the city, the culture, and the way of life and attitude here. There are certainly many more beautiful cities around the world than Buenos Aires.

In my travels, I was going to really beautiful cities on a non-stop basis — one week I’d be in London, the next Paris, Zurich, The French Riviera and enjoying the beaches there. Playing at the Casino in Monte Carlo, visiting museums in Florence, or enjoying the beautiful architecture in Prague.

Buenos Aires has a lot of life and energy that to this day I have yet to witness in any city around the world — and I’ve been to over 500 cities now. It was amazing to see 70 year old senior citizens up at 2:00AM drinking coffee in a cafe here. In the USA, turning 65 seemed like such a depressing point for so many. And an exciting evening for some would be ordering a pizza after 10:00 PM. Yet here you had people up all night, celebrating and embracing life all hours of the day and night.

I loved the simplicity of families actually spending time with their loved ones in the parks, which are all full.  I really enjoy architecture and loved all of the older buildings of Recoleta mixed with the newer buildings in Palermo. It was an architectural delight for me.

Don’t get me wrong. Not everything is “rainbows and unicorns” in Buenos Aires. When I started coming here, Argentina was in the middle of a financial collapse. Their currency had just been devalued and their banking system was a mess. But what really surprised me was the almost calm in the streets. The banks had just confiscated two-thirds of the locals’ money and wouldn’t release it from the banks, and yet people were just banging pots and pans in the streets. I’m quite confident if the same thing happened in the USA, you would have people blowing up banks — or worse! I looked at everything that was going on and really thought that would be the low point for Argentina.

You know the old saying, “buy when there is blood in the streets.” I’ve always believed and followed that principle when investing.

I would come down every month, and I did dream about moving down here, but in the early days I didn’t think it was realistic. But the rest is history, and I’ve lived here for well over years now.

A Koh apartment with 5-star accommodations, photo by Esteban Lobo

Since your background was not in real estate and you didn’t speak Spanish at the time, what led you to believe you could build a successful real estate business in Buenos Aires? Did you consider other means of making this move?

I didn’t have any real estate experience. Other than owning my own home, that was the extent of my real estate experience. My Spanish at the time was very basic. I had taken a few years in high school, but that was long since forgotten and unused other than the occasional trip to Mexico.

However, I consider myself a really driven person with a Type A personality. Once I started traveling, I started taking classes at night after work. I’d study Spanish in my car listening to CD’s, listen to Spanish at the gym on my iPod, and I studied flashcards at night. I really immersed myself in Spanish. After I moved to Buenos Aires, I went to classes 3 hours a day, worked, had a private professor for 2 hours, then at night I’d study on my own another 2 hours — so I was studying Spanish 7 hours a day for the first 8 months after moving here.

Although I didn’t have real estate experience, I had a tremendous amount of business and marketing experience. On a daily basis in the U.S., I was dealing with municipalities like the City of Dallas, Dallas County School District, big institutions like the Federal Reserve Bank, Fortune 500 companies, and wealthy families and hedge funds. I negotiated all contracts for my company, handled the marketing and new business acquisition, and essentially brought in all the income for the company. I feel very fortunate to have come in contact with such class acts on a daily basis.

When I seriously started thinking of moving to Buenos Aires, I looked at all the industries that had the potential to make money. There weren’t too many options besides real estate. I had no interest in working around food or beverage. So I started to really study the real estate market, the laws, tax issues, and complexities, and I started developing contacts here. I also have always loved architecture and design, so this was a good opportunity for me to utilize those skills.

I also enjoy studying economics, and I took a deep look at the situation in Argentina. I saw the downfall of the real estate market and financial collapse here as an opportunity. Contrary to what some may think, I don’t like taking risks. So I studied in detail the laws, spent one year putting together a very detailed business plan, and I always thought I’d move to Argentina when I retired.

During my due diligence phase, I started leasing out properties and subletting them, and I learned a tremendous amount about what people were looking for. But mostly I based it on my extensive travels and what was important to me. I loved having a luxurious and comfortable mattress, being in a great location, having great amenities in the building, friendly staff, and internet access that was free. And that’s what I put together and developed.

One day I was sitting in my office working on my business plan, and I started thinking I was confident that with hard work and dedication I could make this work. I thought out almost everything in detail and told myself I’d be crazy if I didn’t at least try it. If things didn’t work out, I could always come back to the U.S. and easily find another executive level job. But I may only have one opportunity to move to South America and try to executive my business plan while real estate prices had artificially had fallen so low.

Rooftop pool at a Koh apartment in Buenos Aires, photo by Esteban Lobo

At what point did you realize your attention to detail and commitment to providing great service was the key to capturing an entire market niche there?

I noticed it right away. The big difference between the first world level of working and Argentina was night and day. Argentina is not third-world by any means, but the way they did business here when I arrived was really horrible. Companies didn’t spend any money on marketing, and they didn’t get back to a request in a timely manner with their potential clients. Sometimes I’d email companies and not hear back for 4 or 5 days. Also, no one at the time was marketing investments to Americans, Europeans, Canadians, Australians and Asians. I started doing that, and immediately I could see I had a huge advantage being American with very strong references from the USA from the likes of the Federal Reserve Bank, who was a good client of mine.

I told myself that if I created a good product that competed with the 4 and 5 star hotels, then I’d be successful. When I started coming to Argentina in 2002, there were no organized apartment rental companies because there wasn’t much tourism at the time. Before the financial meltdown here in 2002, there wasn’t much tourism here because it was more expensive to come to Buenos Aires than it was to go to Paris. Remember at the time the dollar was stronger than the euro, and the Argentine peso was at parity with the USA dollar 1:1, so it made flying to Paris cheaper than coming to Buenos Aires with everything being priced in dollars here at the time.

I have always been very detail-oriented and very quick to respond to my clients. In my professional career my pet peeve was never going to sleep at night before every single email is answered, and I am proud to say that I have maintained that level of commitment even to this day when I often get 400-500+ emails a day.

When I was buying my first few properties for myself, I saw the way the realtors worked here. It was really disorganized with them often giving out wrong information, never really answering my tax questions, or giving out inaccurate information, and never any advice to do an inspection or any due diligence. They wanted to close a sale as quickly as possible so they could earn their commission. And others just outright lied. So I wanted to provide a service that was always ethical, honest and very informative, and always very responsive.

A well-appointed kitchen plus balcony with view at a Koh apartment, photo by Esteban Lobo

Once I created a company that provided those things, the business exploded. I basically created the model that almost all of the local rental companies have copied and are using today. I’ve had multiple competitors tell me they outright copied our business model, and I’m flattered by that. There is something to be said for creating an entire industry in one of the largest cities in the world, and I’m really proud of that.

The actual point when I realized that I created something different was when every single day I was getting dozens of calls/emails from potential investors to invest their money and buy a property here. It may sound crazy, but I haven’t met many of my clients face to face. In the early years, once I qualified an investor and they retained me, I took a power of attorney document to buy and manage their property, and then they would give me free reign to purchase what I wanted if I felt it was a strong investment.

It was a bit surreal for an investor to say, “Michael, I have $1 million dollars, and I want you to buy what you think is the best property. Or buy a few properties. Or buy something and renovate it tastefully.” I really loved that, and when I saw the trust that people had with me investing over $100 million dollars in cash, I knew I had created a special niche market. Keep in mind, the market here is all 100% cash over the table with no mortgages or loans, and at closing you are actually handing over $100 US bills, so it’s very surreal! The amount of trust needed by investors sending in cash is tremendous. Most foreign investors definitely wouldn’t trust a local with this kind of transaction. In one transaction many years ago, I was buying an old building for a hedge fund client of mine. The purchase price was $3 million U.S. dollars, and the seller demanded all-cash at the closing. So imagine going to the bank and counting out $3 million in $100 bills! It took hours to count it. So you can imagine the amount of trust and faith investors had in me being an all-cash market.

A quiet sanctuary in a Koh apartment, photo by Esteban Lobo

………….

“From the start, I knew that I wasn’t competing with other cheap apartment rentals. I wanted to compete with the 4- and 5-star hotels. These hotels are very expensive, and the average hotel room in Buenos Aires has about 290 sq. feet. They charge up to $20 US per day for internet access. My goal was to buy, renovate and furnish well-located properties and then rent them out for a fraction of the price of high-end hotels. And we have succeeded.”

Michael Koh, photo by Jamie Waters

To read the full interview with Michael and hear his great advice for anyone thinking about their career, buy my new book Field Trip: Volume One, featuring Michael and 11 other mentors in different fields of work. Available on Amazon here!

http://www.kohinvestments.com/

http://www.mikesapartmentsba.com/

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{ 1 comment… read it below or add one }

Kathleen Crandall 04.12.12 at 11:37 pm

I have stayed in one of Michael’s apartments in Buenos Aires and had the time of our lives. We have travelled the world and are fortunate to have stayed in some of the finest accomodatiins in Paris, Prague, Madrid, Singapore, Shanghai, Rio and Instanbul. So, we had high standards. Michael’s apartments location was wonderful. We walked out the guard gate and walked in any direction and had a wonderful time. Each time we took another route and had more fun each time.
Michael is a visionary. The apartment that we stayed in felt liked someone cared a lot the moment we walked in the front door.

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