Victory Investment

Archive for May, 2011

Decided to go to law school, start working at a law firm, and realize you’re actually more interested in finance and investment banking?

You’re not alone.

It’s fairly common for lawyers to switch into finance and investment banking specifically. There are several paths from law to investment banking.

You can get a banking job immediately after finishing law school; you can work as a law firm Associate for several years and then transition over; and you can go to business school after practicing for several years and interview for banking jobs as you complete your MBA.

It sounds appealing to go immediately from law school into investment banking. However, it is difficult to pull off and most banks do not recruit someone immediately out of law school. They would have difficulty placing the candidate and deciding whether to make him an Analyst or Associate.

This method becomes easier if you had finance experience prior to law school, in which case you just need to tell a good story about why you went to law school.

If you haven’t had this experience, it’s better to work for a few years at a law firm and transition over.

Going to business school after law school is only recommended if you’ve practiced in a completely unrelated legal field like Intellectual Property or Environmental Law.

How To Work In Law And Then Switch To Banking

You need to Corporate Law. Don’t even think about Intellectual Property, Litigation, or anything else. Do Corporate Law.

Recruiting is ultimately a numbers game, and you increase your odds greatly if you have Corporate, Securities, or M&A legal experience.

Once you have a few years experience working on transactions, you can consider switching into finance.

Contact all your friends in the industry and ask for referrals to recruiters; contact former clients and ask about setting up informational meetings or discussing opportunities at their firms.

Target industries and clients you have experience with. If you worked with a lot of technology companies, go for technology investment banking firms; if you did Mergers And Acquisitions, go for the M&A departments at banks.

Also, try for boutiques and middle-market firms rather than bulge brackets unless you work at one of the top few law firms – it will be much easier to get into smaller places.

How To Sell Your Story In Interviews

With a Corporate Law background, there are 2 main points you’ll need to prove: 1) that you have quantitative and finance skills and 2) that you really want to make a big career change even if you’re on Partner track at your law firm.

You really need to focus on financial skills in your interview preparations. Know the 3 financial statements cold. Be able to explain models and valuation methods because they will ask you tons of questions here, especially if you were an English or History major and have no finance experience.

This is one of the few cases where getting a CFA might actually help you get into investment banking – it would give you the finance knowledge and show your interest in the field.

Making the case for a career change can actually be easier. You want to emphasize you were always interested in corporate finance and dealmaking, and went into Corporate Law for those reasons. However, you got frustrated with your inability to BE the dealmaker and how you had to just sit on the sidelines, and so now you want to switch into banking and be a player.

Be prepared to face tough time answering investment banking interview questions if you have not prepared your mind and focused on the subject for some time. It is like doing a rehearsal for a play where you need to memorize the lines and also get under the skin of the role.

Investment banking job requires being on your feet and thinking in a flash. Correct analogies will save millions of dollars and a wrong take could spoil the entire show.

There are several facets in investment banking that could come up for questioning by the interviewers of the company you apply to. They could ask you common investment banking interview questions about the stocks you follow or which aspect of the job excites you the most. It could be research, trading, sales or even corporate finance and you need to think on your feet to home in the point.

If you chose to apply to a particular company, they may ask you the reason for applying. You would have to justify the reason for choosing the company over others and your reasons have to be spot on and on the dot.

Each investment banking company is vying with the other to get a large share of the business and your arguments have to satisfy the company you are applying to. Leadership issues could come up among investment banking interview questions.

You would have to tell them about your leadership experience and how you effectively managed to handle stressful situations and came out a winner. It is an issue of nerves you have to wrestle with all the while during and after the interview process when you take up the job. Decisions require taking in a flash and there is no room for errors.

Upfront and real time information about the market is an added advantage to make a serious bid for the job. You have to be prepared to answer questions about other banks that you have approached and why you have chosen to come to the company for an interview. You have to possess tact to answer all the investment banking interview questions correctly.

Diagram 1 illustrates the financial components of your home:

• Existing borrowings – represented by the blue section of your home.

This is the amount of your loan not yet repaid. This loan amount (unless used to purchase an investment property) is not usually tax deductible.

In this example, if your home was worth 0,000 and you had 0,000 remaining on your loan, your existing borrowings would represent 30% of your home value.

• 20% equity – represented by the red section of your home.

This is the safety net that lending institutions like to have as their safeguard against the borrowings on your home.

Usually this safety net represents 20% of the home value required in equity that is unable to be touched unless you want to pay LMI (Lenders Mortgage Insurance).

In this example 20% equity of 0,000 is 0,000

• Remaining equity (what you’ve already repaid on your loan or gained through capital growth on the property) –represented by thegreen section of your home

In this example it shows that the remaining 50% of the value of the home is available to use as security for other purchases. To access this remaining equity (in this example) to purchase an investment property, there are two options: (A) establish a line of credit; or (B) apply for a standard term loan with a redraw facility or an offset account where the remaining equity amount can be invested until required.

Typically the existing loan (blue) and the new portion of the loan (green) would be refinanced; however it is common to split these and create separate sub-accounts in order to keep the non tax deductible (blue) amount clearly differentiated from the deductible (green) investment amount. Your accountant should be able to help with this.

In this example, 0,000 is 50% of the value of your home available to purchase an investment property.

The example continues with the purchase of an investment property for the sum of 0,000.

When you do find the investment property you want to purchase, you can fund the acquisition with:

(A) A new loan for the investment property (typically 80% of the purchase price to avoid LMI).

The tax man (through tax rebates) and your tenants (through rent) help pay for the new loans; however sometimes there is a shortfall that needs to be serviced. This should be taken into account when borrowing to ensure that the loan on the investment property can be serviced within your budget and should include some margin for any unexpected interest rate rises.

“All you need to do is sit back and let the property take its course with capital gains

generating some additional equity over the next seven to ten years, as it has proved to do so

(even in tough times) over the last century”

This 0,000 loan is represented by the pink section of the investment property in Diagram 3. Plus,

(B) Part of the green remaining equity in your home. The remaining 20% of the purchase price (usually representing the deposit) plus stamp duty, conveyancing costs and other associated expenses can be taken from this equity. In the example it would require you to draw 0,000 (assuming 0,000 [20% deposit] and ,000 [5% total acquisition costs*]) of the available 0,000 (represented by the yellow section in diagram 2) leaving 0,000 of the remaining equity. This could also be used to purchase an additional investment property if serviceability allowed or you could use this equity to fund any shortfall in your new investment loan repayments.

Then all you need to do is sit back and let the property take its course with capital gains generating some additional equity over the next seven to ten years, as it has proved to do so (even in tough times) over the last century. Once you learn this strategy you can repeat it as often as you want, provided you can re-pay the borrowings. Disclaimer: *Acquisition costs vary in each state. For demonstration purposes only, we’ve assumed 5%.

“Carbon will be the world’s biggest commodity market, and it could become the world’s biggest market over all” – Barclays Capital

The above quote pretty much sums up why I think that carbon offset investing is the hottest thing to look at in the field of investments, green or otherwise. We believe that this commodity will always be valuable and will always keep rising in value because of several important factors. What are these factors?

First, this is a brand new market. You’ve heard of getting in on the ground floor. Well, this industry is very close to that. Expectations for this market are high, and estimates of the potential size of a U.S. cap and trade market (the term used in the U.S. to refer to carbon credits) alone range from 0 billion to trillion in the near future. And it will not stop there. Carbon trading is expected to dwarf the global foreign exchange market soon and forex already dwarfs the global stock market. We’re talking big. And just as importantly this will be a growth market for years to come.

Second, many investment banks such as JP Morgan Chase, Morgan Stanley, Barclays and Goldman Sachs have all entered the market place. Nearly every investment bank has set up an environmental markets division and there are now a host of funds that are dedicated to the sector.  You know when the big boys get interested that there has to be a lot of money involved.

And what advantage do carbon credits themselves possess? Unlike other green investments, carbon offsets don’t depend on any particular technology or company to be successful. Carbon offsets themselves are going to increase in value and are already tradable the same as any other commodity or security – stocks, bonds, etc. Why invest in a particular technology or company that may prove to be unsuccessful when you can invest in a commodity that will always have value – carbon offsets.

The hardest thing that you’ll encounter when you attempt to get involved in green investing of any kind, and this goes for carbon offsets too, is the sheer number of projects that are available, the different types of technologies that are being developed and the unsubstantiated claims that many companies are making about their products. It’s not easy to sift through and find the right projects for investment.

So what should you do? We suggest you do some basic research about carbon credit investing. You’ll get plenty of information if you Google “carbon registry websites.” These are sites that are generally run by organizations that monitor the market and provide carbon offset investors with a lace to store the records of their various purchases. These sites also contain lots of basic information about carbon offsets and are an excellent place to start gathering facts.

I hope that this article has helped you to clarify some of the issues involving carbon offset investing and that this will help you to become a successful green investor for your own financial good and the good of the entire planet.

I’ve been asked many times what is best way to begin investing in commercial multi family real estate. To decide what is best for you you need to keep the following in mind: How much money do you have, your skill set, and of course your expected profits.

The task of a new real estate investor who wants to learn about multi family investing takes much time and involves developing new skills sets that can be prone to mistakes. This is probably why many people either fail to start, or fail to succeed. I have found that most people would rather be part of a multi family apartment house deal where they can learn about multi-family ownership, and secondly also put money into an investment that gives them a fantastic return. I suggest that the best way for a new investor to succeed with the least risk, and best return is to piggy back on the experinece of others investors who have already been successful

What is The First Step and How?

You should simply create a commercial multifamily investment fund and bring in experienced partners for a share of the profits! This is very simple to do. Now, before you solicit the first membership, you need to sit down with an SEC attorney and ask them to create an investment fund that allows for the collection of investment dollars for the purpose of acquiring multi-family property. You do not even have to have had a property identified; just the purpose of the fund would have been established and documented.

Then you will open the fund to potential investors. Then anyone you speak to about the opportunity, you hand them an “accredited investor questionnaire” that they would have to sign. Once that is returned to you, then you give them an “Offering Memorandum” describing the fund and how it worked. There is one more important document to create and that is called a “Private Placement Memorandum” that will satisfy the SEC’s requirements of complete disclosure. Here’s the real catch, this is the one that would keep you out of jail.

All the funds you are going to collect should be held by an escrow agent. You should not take control of the funds personally and if an investor wanted their money back before you purchased a property, they would be entitled to because it was clearly stated in the Private Placement Memorandum that they could do that up to thirty days before the scheduled closing date of a property. So that’s all the legal stuff! You want to make sure this is in place before you even start to talk to investors.

What about buying the property?

The type of property that you are going to go after is to be clearly stipulated in your Private Placement Memorandum.. This is where it gets fun! I believe that with the impending commercial foreclosure crisis, you should be looking for either a B+ to an A class multi-family property that can be purchased for pennies on the dollar. None of this no-money-down stuff. The number one criteria is that you are going to buy a great asset at a ridiculously low price from a bank who is desperate to get these non peforming loans off their books.

Why would you be able to do this?

Because since you are shopping with cash; no schemes, no seller-carrybacks, just cold hard cash will give you the upperhand in negotiating. Here is how it works. Let’s say that 100 investors put up ,000 apiece into the fund. When the fund closes, you can contact several lenders and say that you have ,000,000 available to help their balance sheet and take some troubled assets off their books. The remaining 0,000 should be kept in reserve to run the property. I can assure you, there are many banks right now that have been told by the FDIC that they need to raise cash fast. These banks should be your first stop. Your objective should be to buy good property, property that you would want to live in yourself, fix the problems with it and then sell it and do it again. Every step of the way, the investors would be involved and would see how the process works and everyone gets paid accordinly to their proportional investment.