Category: Multifamily
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Rafi Mizrahi is an out of country real estate investor. He has been investing since 2010 and has developed the skillset to overcome investing out of country. He has extensive experience in raising money from out of state investors building and managing professional teams all over the country, Property Valuation, negotiating an acquisition. Rafi started as a single-family investor, and since 2010 he has been involved in more than 300 transactions as the acquisition partner and as a capital raiser. In 2017, he shifted the focus to multifamily and he syndicated 766 units worth more than $50 million dollars.
Key Points From The Episode:
- Rafi starting off as a java developer, getting laid off in 2007.
- How reading Rich Dad, Poor Dad changed his life.
- Shifting from investing in Israel to USA.
- The amazing knowledge transfer in America.
- Figuring out how to invest in American deals from Israel.
- Starting in single family, transitioning to multifamily.
- Problems that come with trying to scale in a single family niche.
- The importance of buying properties undervalued.
- Doing due diligence on individuals, in addition to the properties.
- How to build a team from another country.
- Finding good mentors.
- What to look for in a property manager.
Books Mentioned: Rich Dad, Poor Dad By Robert Kiyosaki
Transcript:
[00:00] RM:
You got to trust the process you have built and you know and always say what can be the worst thing that can happen where, where it might you know where it might that might my plan will fail. Try to find where it is and be prepared.
[00:00:16] KR: Intro
Welcome to Ritter on Real Estate, the show about how to passively invest like a pro. On each episode, I interview real estate experts who give their top investing advice, strategies, and tools that break down the insights into practical steps to avoid the pitfalls and make better investments. I want to help you passively invest like a pro. This is Ritter on Real Estate, and I’m your host, Kent Ritter.
Hello fellow investors Welcome to Ritter on real estate where we teach you how to passively invest like a pro. Today, my guest is Rafi Mizrahi and Rafi is an out of state and really out of country real estate investor. He’s been doing that since 2010. He’s developed a skill set to overcome the distance. He has extensive experience in raising money from out of state investors building and managing professional teams all over the country, Property Valuation, negotiating an acquisition, and Rafi started as a single-family investor, and in 2010 or in 2010 and since he’s moved and involved in more than 300 transactions as the acquisition partner and as a capital raiser. In 2017, he shifted the focus to multifamily and he syndicated 766 units worth more than $50 million dollars. Awesome, awesome success. Rafi, excited to have you on the show today. Thanks for being here.
[00:01:34] RM:
Thank you, I’m excited to and it’s a pleasure to bring to bring some knowledge and help others.
[00:01:42] KR:
Absolutely. That’s what we’re here for. So, before we dig in, just start from the top give our listeners an idea of who you are and, and how you got to be where you are today.
[00:01:56] RM:
Cool, cool. So, I actually have been in real estate All my life I was in a I.T before I was a Java, Java programmer. I thought that will have success and actually I further will get rich through working hard as an employee and you know, for everything will be fine, you know, the way I was educated and then 2007 I got fired with the actually the group was closed, and I found myself without a job for half a year. didn’t find any job, no interviews, nothing and I read Rich Dad, Poor Dad, everybody. You know, I think everybody read that that book is like an it’s a Bible for real estate.
[00:02:38] KR:
Absolutely.
[00:02:39] RM:
And yeah, and I decided, you know, it’s blew my mind I said, it was like a wakeup call for me. So, I said, I got to do it. I really wanted to commit to that. I didn’t know how it will happen. I had no idea you know about the journey, this journey where So, I am today I can only secretly you know, dream about it and you know, I started buying in Israel and Israeli Israel, I bought apartments, not the building apartments like condos, and it’s very small market and very competitive.
So, in 2010, I decided, you know, after I heard about the crash, I decided to shift my focus to no binding in the state. I didn’t know anything about the U.S real estate. Nothing right. But I used you know sites like bigger pockets, talk with other investors one of the things that I saw in in America which is it’s amazing, the way people share knowledge with each other, you can you know, I can reach out to you; Hey I need your advice and you know, if you have time, we’ll jump on a call with me and help you have podcasts and it’s amazing, right that way the knowledge goes out and other Americans doesn’t really understand how lucky they are to have that. If you go to Europe, try to invest in Europe when you have a different language and you don’t have any a website or you know share information website or they’re not the way to so I started talking with people and they you know, I saw that you know people from California they invest in Cleveland, they invest in you know in Florida, they invest out of state so I say if they can do it, I can do it. Why the money What is the difference between me and them it’s so they have like five-hour flight maybe and I have 24 but right so.
I can do the same I need to find how to do it from five-hour Israel. So, this is how I started my journey. When I have a go, had ago. I want to do it without being able to fly for every product property. I buy, I want to Find, you know, build a system that I can do it from here. So, I started buying houses, I made the, you know, I did a lot of mistakes on the way. But you know, every time I got it, I got better and I did over like you said 300 transactions, I did fix and flee, wholesaling, buy and hold, you know, tried all these say Niche, and then I decided that, you know, my dream was bigger, and I shifted to multifamily. So, yeah
[00:01:42] KR:
so, yeah. So, you started so you started investing in the US in single family houses? Right and where were you investing.
[00:05:43] RM:
So, I started in Orlando, and Orlando got very hot, very fast and I didn’t know anything I didn’t know about off market deals at that time. So, I decided to shift to another market and I went to, I went to a very short time to Atlanta and then shifted to Cleveland, and I found a market in 2012, where, you know, it was a buyer market? You know, you were offering, you know, below the asking price and you know, you got to deal with, you know, below the listing. right, so, I was there. So, I started in Orlando, but most of the time I’m working in Cleveland, Ohio.
[00:06:26] KR:
Gotcha. Okay and then, what was what was it that drove the shift from single family into multifamily?
[00:06:35] RM:
So, you know, I did, I did about 10 transactions, sometimes 10 transaction a month, and, you know, and flips and, and I, you know, I dreamt to go very big, I wanted to do millions of dollars and, you know, I didn’t see it gonna happen through single family, I thought at the scale, there is a problem with the scale and I felt like the management companies also, you know, a problematic in the single-family space, because, you know, management company, when he, not all of them, of course, right, I can say, you know, in general, but, but most of the management companies in the single-family day, they got to add some fees on the walkout is, right, because it’s very, you can’t, they don’t end a lot, they don’t profit a lot when they manage single family home. So, it’s a lot of like, there is like a conflict between the management company interest and the set and the investor. So, and I heard the multifamily that, you know, you can scale the management company got paid from you know, that you pay the salary, you have a man, you have your own handyman that can do the workers, and I said it’s much more scalable, and the profits when you, you can go higher and higher and make more money. So, I decided to do that.
[00:08:04] KR:
Gotcha. So, it’s really this, this idea of single family than, you know, the number of transactions kind of limiting your growth and, and you just had this idea you wanted to go bigger.
[00:08:14] RM:
Yeah, it’s not it when I say I want to make money, it’s not that I’m greedy, right. I want to in my investor to make money too, but from, you know, my personal goals, I want to I want to make, I wanted, you know, more for my family. So, you know, I understood, I gotta, you know, go bigger than, you know, try more transactions all the time.
[00:08:37] KR:
Now, I get that 100% and so, I’m just, I’m imagining you in Israel and thinking about investing in the US and I love that perspective. You said, well, you know, if somebody in California can invest in Florida, you know, why can’t I right. It’s just, it’s the little ocean in between us, right and, but there had to be, I imagine trying to make come to that decision. There had to be limiting beliefs that you had to, you had to come face to face with and conquer. I mean, what, what were some of those things that that went through your head as you’re trying to make this decision? And how did you overcome those?
[00:09:14] RM:
So, I think the first thing that everybody who would that doesn’t know the culture, I didn’t know the culture before. So, you know, I was afraid that I will get screwed right So that the trust it’s a trust issue more than so, anything. So, I what I did to overcome that is two things. One, the first rule in real estate is always buy below market value. So, I said my defense will always be buying below market value and make sure that I will be the owner, meaning if I have the right team, especially we’ll start with the attorney. Right. Even though in a housing market, you don’t have to have an attorney when you buy in the market. I actually used in attorney from the beginning, in the housing my niche, because I wanted at the beginning, especially to be protected.
So, from the legal point I had the attorney to be secured and also, I learned how to how to find what is the market value for a deal and I was buying below, so I have this, you know, gap and to be secure not to lose money, then is about to overcome this belief. I said, okay, it’s like, let’s say, I’m filthy rich, okay, and I want to buy a company and I have no idea in the business, right Why do I do? Right, I need to, I need to bring somebody who is okay knowledgeable, right as CEO or something. So, what I did, and you need to do due diligence, so I thought the best way is, is to do due diligence on people. So, you know, instead of just talking to you and heard about you, I will also go and ask people about their experience with you. Some refills you have made, you gave me and some refer some people, you So, don’t even know that they you know, give a feedback on you. So, it’s about the due diligence.
[00:11:25] KR:
Gotcha and who you doing due diligence on.
[00:11:28] RM:
So, management company, contractor, you know, the agent I was working, you know, so, and they inspector they title, you know, all of the all of those I was doing that, you know, checking on them with referrals from them and also, you know, checking online, asking people who use this contractor and give a feedback and I think I have; I think I even have a tip on that. Because that’s something I also teach my students, I haven’t told them, but I’m the top mentor in Israel, I teach people how to buy houses in the state have more than 1000 students. So, one of the things. I teach them is always ask the contractor, their referrals, about the good things they had, as an experience with things a contractor, but most of the bad thing, the things that he needs to be improved, because I think everyone has something he is good at, and something is bad at. So, all he needs to be improved. So, by asking those question, people suddenly can say, oh, you know, what, I think this point, and you know, where you So, know, you know, you know, more of the truth by doing that.
[00:12:47] KR:
Gotcha. So, it sounds like to overcome your, your limiting beliefs, or the barriers to investing in the US, you really are one you, you hired an attorney, right, even though you may not have had to spend that extra money to have that extra protection, right in the contract and somebody that was knowledgeable in, I’m assuming, kind of in the state in the market, right Yes, you’re able to gain that knowledge, pay a little more, but, but sounds like it paid off. Right; So, you made that upfront investment to have that protection and then it sounds like you really focused on process to help you through that. So is it kind of, you know, instead of biting off this huge chunk, it’s like, maybe, you know, stepping, turning that into So, little steps, right, and taking these little steps to continue to move forward and you said, your focus on due diligence. So forward? it sounds like you’re focused on process was able to help you kind of, you know, complete these little steps which ultimately, you know, took you leaps and bounds, right and got you into forward? the US and into forward? markets and once you get going then you’re then you’re just learning you’re learning all the time, right; You’re building relationships and, and you’re able to get started but your yeah, always interested on because the hardest thing is just that getting those first deals and just, you’re getting started and, and getting the mindset right, right to be a real estate investor.
[00:14:15] RM:
Right. I remember the first time I was scared, even though there was an attorney and everything but you gotta you got to overcome that you got to trust the process, you have built and, you know, and always say, what can be the worst thing that can happen? Where, where it might, you know, where it might that might my just, plan will fail try to find where it is and be prepared.
[00:14:38] KR:
Yeah. So, you’re actively thinking about where just, your blind spots are, where you may have risks, and then and then planning to mitigate those right. I think that’s, that’s right. Good. Yeah. I mean, you know, every transaction that I do, there’s always that kind of feeling in your stomach of like, oh, you know what might happen? I hope this goes right. You know, even though you’ve done all the diligence, you’ve done all the underwriting you’ve, you’ve even gone through all the physical inspection and all these things. There’s always that, like, when you get to the closing table, like, oh, I hope I hope this works out, right; I mean, it’s that
[00:15:15] RM:
it’s actually great. I think, you know, I wouldn’t want to, I don’t want to lose it ever. Because it’s like a defense mechanism. Once you don’t think about you don’t, you’re not oh scared, but you concern or, you know, thinking about the risk, then you’re, you know, you’re not paying attention to the, to the details, right
[00:15:36] KR:
I think that’s a really good point. It’s like, if you get too comfortable, you become lackadaisical, you’re not, you’re not focused on those things and, like, you take your eye off the ball, like they say, like to use a baseball analogy, right and you and that’s when things that that maybe you would have mitigated in the past, because you’re thinking in this way, you know, they can pop up because you just get too comfortable in the process. So, I agree with you. It’s that that pit in the stomach feeling is kind of that, that check to make that that pushes you the extra mile to make sure you’re you’ve done everything to make sure that the deal is going to be successful and so I agree with you, I hope I don’t lose that either.
[00:16:17] RM:
Yeah, say it’s a good it’s a good skill, or is it good mechanism, defense mechanism to have as an entrepreneur?
[00:16:25] KR:
Yeah. So, as you shifted from single family to multifamily, I mean, what had to change in your process to be able to make that shift?
[00:16:38] RM:
I think, um, you know, it’s funny, because when I started, I thought, okay, I did 300 transactions, I, you know, okay, I learned about new underwriting, it’s different underwriting then, you know, underwriting a single-family home deal, and much more complicated. So, I think this skill is single-family the first one, but what is more challenging even that is that the broker relationships, because in single family arm, you just, you know, send an offer, right Or you have a wholesaler, you are a good friend of him, and you can get that but in, in a more in a in a commercial, multifamily space, you know, there are like, a few brokers and so many buyers, right. So, it’s hard to build a relationship and they don’t care. Right; I did 300 transaction, which I think I’m not, you know, I’m not an arrogant guy.
But I think it’s So, a it’s a nice track record. But when you come and tell broker you need to Finance transaction, they don’t care. Right. Right. It’s like you started all over from the beginning. So, I think that was, I think the challenge to be able to go back to the beginning, like, I’ve never done anything before. Right. So, I think that was the biggest challenge shift into multifamily.
[00:18:01] KR:
Gotcha. So just building a developing those relationships with the brokers.
[00:18:06] RM:
Yeah, and understanding the how it works and it’s actually, it’s a state of mind that you need to grind from the beginning, right, because I remember, when the beginning it was hard to get deals or how to structure the deal in the single family and after, you know, after so many years, it was easy for me, it wasn’t a challenging, you know, to get a flip or, you know, and suddenly I need to, you know, start from the beginning. So, it’s more to mentally, I got, I am a new student, it’s a new environment, starting all over. So.
[00:18:42] KR:
Gotcha and it’s, uh, you know, like you said, it’s a much more complicated process, it’s, you know, it’s, it’s a long can be a longer term, and, you know, investment you’re bringing, because you’re syndicating, you’re bringing other people as money into the deals as well, right, which is a whole different level of, you know, of just responsibility, right; And so how did you? How did you build a team in the U.S from Israel that would allow you to, to be able to have new student these large transactions and raise capital and do everything that needs to be done to successfully invest in multifamily?
[00:19:26] RM:
It’s a great question. I tell you, because I’m a mentor in Israel. I teach people that when you want to, if you if you want to succeed in a new environment, something new, you gotta, you know, learn about the process, you know, put your put effort and learning, have somebody that have done something you want to achieve. So that’s one, you want to have somebody you want to be an environment of somebody who is to set steps ahead of you. So, you know, you can learn the small things, not the main We’ve been doing it for so long as already forgotten, right; So, when somebody is two steps ahead of you, and somebody behind you, that is one step behind you, because when you teach him, you organize the, you know, you organize the information in your head, and you implement it even better. So, I said, I gotta do if I do that for my students in Israel for the single-family space out, and I need to find it for myself. So, I found a mentor and his work in America who has been doing it and joined his group, you know, and, you know, started, he did the same that I’m doing for my students. So, and by doing that, you know, brokers started to look at me different because I still I had like the, his, his track record and I was doing the work, right and he could have signed alone, and I knew I can raise funds, and I raised the funds because of my network. In Israel, I raised the funds in Israel.
[00:21:02] KR:
Gotcha. So, you found a mentor in the U.S, and then I’m assuming that mentor, obviously gave you the credibility, but also probably give you access to the connections to continue to build out your team? right to, you know, find the different people, you need to find the property managers and contractors and right and those, so most,
[00:21:26] RM:
yeah, and so to cut you off, but more like the attorney and the financing broker, but I believe, the way I work, I wanted to find the management company by myself, because I thought I have enough experience and a vision, why don’t want to look in a management company, you know, to find my own management company.
[00:21:50] KR:
Gotcha, gotcha and how has? How is that process work? Do you find it any difference? And I guess you maybe don’t know any different, but in dealing with the management company, and managing them and doing the asset management process from overseas?
[00:22:07] RM:
I think first is, it’s again, starting by doing the right to diligence on a management company. So, I, you know, for me, a management company, when I look, I want to see that they have a presence and experience in the property type I’m working on, for example, if it’s a C class, I want to find somebody who are have enough experience in the C class space in that area. Right. So, it’s all about the due diligence again, and then the asset management I used, you know, the experience of others how to do the asset management, and, you know, you get better and better every day, you know, what, to more put into, you know, more focus on when you do an asset management.
[00:22:54] KR:
Yeah, no, that’s great advice. So, raffia, you know, I appreciate you coming on today, I want to before I let you go, I want to take you through our keys to success section, we’re going to keep few questions I want to ask you, and the first one is, what is one question that every investor should ask their deal sponsor?
[00:23:14] RM:
I think they need to ask about references talk about, again, it’s the same due diligence you do to every everyone in the business you need to ask for people who has been, you know, has been working with them as investors and ask the investors the question, what was, you know, what was good? And what needs to improve? Because there is always and if the query, if the answer from the investor will be everything is perfect, then now, you can also ask, I believe that you need to ask a sponsor as a sponsor, what he thinks he needs to be better and there it should be an answer to because we all have something, we, we want to be better, and we know we need to be better. So, I think that’s something you need to ask
[00:24:03] KR:
good under here, you’re seeking out that transparency and honesty, right and there, their ability to identify weaknesses, and, and be truthful about that and then I like the idea of getting some references, you know, and talking to folks, I think that you know, that’s another step that a lot of folks take, but I think it can be a valuable vetting step in the process.
[00:24:29] RM:
And I got to say, I have checked that with a with a few sponsors, and a few mentors, and it’s not any smooth transaction, smooth process, you know, it takes that they take it takes them time to sum them deliver or they say no, I cannot give you investors. You feel like something is not a transparency, so it’s like a mirror for the process. I like the transparency.
[00:24:58] KR:
Gotcha. Rafi what are you most proud of in your career?
[00:25:04] RM:
I think persistence. I’m very persistent on my dreams and on my, you know, taking care of my investors and my students and people around me. So, I think, persistence on that. That’s, that’s my, that’s something I’m proud of.
[00:25:20] KR:
Very good and what books should everybody read?
[00:25:04] RM:
I think Rich Dad, Poor Dad, it’s the Bible. It’s not a you know GO TO DO book, right. It doesn’t have like, okay, you do that these days. But that’s something everybody should read.
[00:25:40] KR:
It starts with the mindset, right and I think that really sets the mindset of an investor. Explain explains very simply, it’s very approachable. The reasons why you should, should become an investor. Right. Right. Very good and lastly, what is your number one key to success?
[00:26:02] RM:
I think honesty. Honestly, I’m persistent before honesty is the key. Because when, you know, I think, when I talk, you know, to be to be honest, when I talk with Americans, they are surprised by my honesty, sometimes. Right. So that’s even break the different, right, the gap and, you know, it’s easy, easy to do that, or honesty is about learning what you want to achieve and people, you know, help you on the way you understand. So, I think honesty is So, one of the key to my success.
[00:26:39] KR:
Very good. It sounds like honesty, and also the ability to, to communicate, where you’re where you’re trying to go and kind of ask for help on that way. But be honest, they need that that assistance. Right. Very good. Rafi. If people want to learn more about you and your investments and what you’re doing, how can folks reach you?
[00:27:01] RM:
Oh, so they can go to my website, www.proudcommunities.com, that’s their website and you know, they can reach out to me and I would love to help people. I like helping people, other people, you know, whatever question they have. I’m here to help, So
[00:27:18] KR:
great. Well, we’ll make sure that’s all listed on the show so the folks can get ahold of you and once again, Rafi Mizrahi and thank you for being on the show today.
[00:27:26] RM:
Thank you. Thank you very much.
[00:27:28] KR:
Have a good rest of the day.
[00:27:30] RM:
Thank you. Have a great day, everybody.
[00:27:32] KR:
Thanks for listening to another great episode of Ritter on Real Estate. Hit the subscribe button to make sure you don’t miss out on the content that will make you a better investor. Also visit kentritter.com for articles, videos and tools curated just for passive investors from next time. This is Kent Ritter with Ritter on Real Estate and go out and invest like a pro.