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Tuesday, 4 March 2014

Eight simple steps from the Talmud to avoid the next real estate crash

Sukkah 29

Kelly and Simon are a successful young couple, both professionals, earning good salaries.  Since they were married four years ago, they’ve been renting, but feel that the time has come to stop throwing their money away. 
“Rabbi, we’d like to buy a house.”
“That’s wonderful,” I said, “You seem hesitant.  What’s the problem?”
“You know rabbi, just before we got married we watched the housing market bubble explode and we’re scared that now might not be the right time.  We’ve come to seek your advice and blessing that our investment be okay.”
“Well, you know that nobody can predict these things,” I cautioned them, “but the Talmud does provide guidelines for success in the real estate market.”
“Really?” they looked at me incredulously, “Pray tell!”

The Talmud lists four reasons for foreclosure and Rav enumerates a further four causes for house pricing depreciation.  If you avoid these mistakes, you will be successful!

1. Holding on to cheques that have been cashed in order to attempt to recash them – While this scenario was more prevalent in the days before banks were all computerized, the Talmud refers generally to illicit business dealings.  When we are ‘yashar’ (straight) in business, G-d is straight with us. 

In other words: Don't cheat in your business dealings!  Don't cheat on your taxes!  When you are involved in a real estate deal, be absolutely honest about the condition of the property.  If your real estate dealings are G-dly, then they will be successful!

2. Lending money on interest – While such a practice is not unethical, the Torah demands that we act with piety in an effort to assist our less-fortunate brothers and sisters.  If we have been blessed with abundance, we are not enjoined to give it all away to the poor – Judaism is not socialist.  But we are required to lend money interest-free in order to help the needy with dignity.  Obviously, this law does not apply to business lending, for which there are mechanisms such as the heter iska to effect a business loan.

The best application of this Talmudic tip is to help a young couple with their first down payment.  It's getting harder and harder for young people to afford a down payment.  Meanwhile they are throwing money away on rent while desperately trying to save money for a deposit.  If you can extend them an interest-free loan towards their down payment, then your property will, in turn, be blessed.  It's great to see many synagogues are now offering such loans to new families in their communities.

3. Failing to protest social injustices – The homeowner class in society should never take their good fortune for granted.  We have a responsibility to ensure affordable housing for all, such that there are rental options even for the most needy.

Before hiking up those rents on your investment property, think about whether your tenants will be able to afford it and what their options are otherwise.  Never take your good fortune for granted. 

4. Publicly pledging charity and failing to pay up – Every good society has boards and committees to deal with the problem of homelessness.  But if all these committees do is sit around and discuss solutions without following through with their recommendations and resolutions, then it is all for naught.

Use your political connections to demand government subsidies for those who can't afford basic housing. The Almighty treats us measure for measure - when we strive to put a roof over others' heads, G-d protects the roof over our heads.

5. Withholding wages – The Torah mandates that we pay labourers immediately upon the conclusion of each day’s work.  Payday loan and pawn shops are clear indicators of the sad fact that many people live day to day.  Just because we can afford to wait to receive our paycheques does not mean that our workers can.

Make sure that tradespeople are paid on time.  Make sure that contractors are paid on time - they have workers to pay, who in turn have mouths to feed.

6. Oppressing workers – We are forbidden to take advantage of cheap labour, whether we are paying below the minimum wage or ‘forgetting’ to pay our employees on time.  Or whether we are giving them demeaning tasks and expecting unreasonable work hours.  

Treat your workers with the utmost decency and respect.  They are human beings too.  

7. Passing the buck of communal responsibility – Sometimes we get so caught up in our own affairs that in spite of our affluent positions in society, we become community sponges.  We are required to dedicate not only ten percent of our money to charity, but ten percent of everything, including our time.

Are you doing your part to serve the community and society?  Your property will thrive when you are committed to the success of community and institution building.  

8. Arrogance, which is worse than all the aforementioned combined – When we believe that our prosperity is due to our own achievements, we begin to look down upon others who have not achieved our degree of material success.

Never forget that all material prosperity is in G-d’s hands.  He has made you who you are today.  Be eternally grateful for His munificence and ever-ready to help those around you.  He has chosen you as the vehicle through which He will bestow His bounty upon them!

If we abide by these eight principles, the Talmud guarantees the longevity of our real estate investments and our general material prosperity and success, as the Psalms state, “And the humble shall inherit the land and take pleasure in [a life of] great peace.”

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