“We did well in South Africa, but when we decided to emigrate, we were limited in the amount of money that we were allowed to bring out $40,000,” Margolias says. “Once I bought cars for my kids and put some money down for furniture, I had nothing left. So I started, literally, all over again. That was at the age of 42.”
In the past two decades, Margolias has build at portfolio that exceeds $350 million in a variety of markets.
“My passion is real estate,” says Margolias who completed his first real estate deal at age 20 while still in college. “I’m passionate about what I do. No two days are ever the same. There are a lot of problems and challenges to overcome, and we’re dealing with big amounts of money, but it’s very exciting.”
Smart Business spoke with Margolias about why he left his successful South African venture and what he did to make his American venture thrive.
Why did you leave a successful enterprise in South Africa to start over?
If you look at the nature of the business that I’m in, you need to have a long-term prognosis. Real estate by its very nature is long term. It was very difficult in the politically uncertain times to make a long-term prognosis of what you thought would happen to the real estate market.
A cycle would last for one year. I decided the best thing would be to get out of that environment.
Coming to America was the right decision because I can buy a property and say my investment term on this is seven years or 10 years and (provide) reasons why I buy it for that time period. I know I can do that here, and I couldn’t have done it there. Even now, I could not do it there.
What were the challenges of doing business in a new country?
In South Africa, I was a big fish in a small pond. Coming to America, I was a little sardine, and it was difficult for me to explain to some of my investors that I knew what I was doing. I didn’t have a track record.
The biggest problem was to build a track record to show investors I did know what I was doing, and if they gave me the chance, I would show them I could do it. Eventually, little by little, I was able to build a track record. Every time you do (a deal), you build credibility.
How did you grow the business?
I knew I had the ability to put deals together because real estate is essentially the same whether you are in South Africa or America or the North Pole. I had to find the capital to get it going. The way I built it up was that I had the ideas and the ability to put the deals together and I took in partners as venture capital and was able to build up my portfolio that way.
How has your financial background helped you build your company?
My training is as an accountant. I really analyze from the numbers back to the bricks and mortar. I will look at a deal and make sure it works financially and then go look at the bricks and mortar. Very often, you go and look at the bricks and mortar and location; I check the economic viability before I go out and have a look at the property itself. That applies whether it is a warehouse, a public building or a condo conversion.
How do you decide whether to do a deal?
We’re offered three condo conversions a day. They come from all over Arizona, California, Florida, Georgia. We look at a lot of product before we decide. We look at where in the economic cycle that property is.
We also look at the very important tool of financing and how we can financially gear the property how much we can borrow against it, what kind of risk do we have to take. Is the risk without recourse, with recourse? We factor in the economics of the deal, the timing of the deal, and how we can finance it and what the risks on the finances are. You have to have an innate ability to discern which are the good deals and which are the bad deals. It’s very much instinct.
I often look at employment figures. Are they up? Are they down? This gives me a pretty good acid test for me to assess the depth of the market.
There is another element that goes into that, which I call perceived risk. Very often, when I’m buying properties, people will say, ‘Haven’t you overpaid?’ I assess my risk as carefully as I can. And as long as I’m covering it as much as I can, I will go into it.
We take some speculative views on property. We’ve bought condominiums where we paid the highest price ever paid for condominiums in that area. And we were able, because of its location, sell it within six months. There’s a risk.
Location, location, location was something that was drummed into me from an early age. But what I discovered was you could have the best location at the wrong time and you would turn it into a loss. Timing was far more critical than location. I’m not discounting location. It’s difficult. We have made mistakes.
You start off with instinct. Instinctively, you can feel there is an angle to the deal which you see that somebody else hasn’t seen or they have seen but don’t think is important. It started with instinct, but we are very, very careful. We look at three condo conversions a day, and we may choose one every two months.
We’re very careful; we do a lot of research. We don’t just do it willy-nilly.
Why don’t you specialize in one just area of real estate?
That’s a throwback to my South African background. South Africa being a much smaller economy, we looked at every kind of deal. We looked at offices, we looked at warehouse, we looked at retail, we looked at residential.
When I came to the States, I had that same discipline, and our portfolio is varied. We have taken that discipline of looking at all different property types and continued with it even in a country where people tend to specialize.
What is your most important role in the company?
I’ve got good people working with me, but all the acquisitions I’ve done, and when we decide to sell, it’s my decision. I guess it’s just a knack; I’m able to sniff out a good deal. Once I’ve zeroed in on it, I have very good people who can check out the financials, the legal side of it, check out the lease and everything else all very critical. The trigger is my ability to go out and find it.
I know that sounds arrogant, but I have the ability to discern good deals. Every day there is a challenge, and no two days are the same. The whole time we’re putting out fires, things that crop up. What’s so exciting about real estate is you can never envisage all the problems that could come down the pike.
No matter how careful you are, there’s something that you never forecast that could happen. It’s just working through it. Sometimes it’s a headache, but if it were easier, everybody would be in it.
What is the greatest business lesson you’ve ever learned?
The most important thing to me is my reputation. I’ve had somebody walk into my office and offer me a part in an office deal and give me a price. I’ve said, ‘OK, we’ll do it. Go to the attorneys. Get the papers drafted.’ And the next day, somebody else walks in (offering) a higher profit.
Because I’m committed to that (first) person, even though I wasn’t legally committed because it wasn’t written, I’ve honored my word with that person. I can’t tell you how many times that has paid back because you build up a trust, a relationship. Real estate any business is all relationships. To me, the most important lesson is building up trust and credibility. HOW TO REACH: Margolias Realty (770) 458-0555 or http://www.atlantaleasing.com/home.htm