Rafi Mizrahi (03:21):

And immediately, I knew that it’s a sign and I’ve got to do something else. So I started my journey, and like a quick background, track record about my track record. So I’ve been doing it for 13 years, 11 of them from investing in the States from Israel. I did over 300 transactions in the single-family space, fix and flip, [inaudible 00:03:43], buy and hold, helping investors. And in 2018, I shifted to multi-family, and I syndicated six deals, 766 units total. And now I’m very active. So that’s kind of my short story or background.

Robert Leonard (04:02):

There are a lot of different asset classes or even businesses that you could have chosen to invest in. You mentioned that you realized that you probably weren’t going to get rich just being an employee. And I know you found Rich Dad, Poor Dad, which led you to real estate. But there’s a lot of different ways, even that you can do what he talked about in that book that isn’t necessarily real estate. So why did you choose real estate specifically?

Rafi Mizrahi (04:22):

So I was working with computers before. So I could have gotten into [the] stock market, investing in the stock market, but I felt like it’s going to be, again, with a computer. And real estate is with people, and you always need a roof above your head. So I thought people make me more excited [about] doing that. So I decided to go on real estate.

Robert Leonard (04:49):

How did you get into your first two properties? I know they were in Israel, but what were those properties like? And what was your strategy with them?

Rafi Mizrahi (04:57):

I didn’t know anything about fix and flip at the beginning. I didn’t know about it. I thought to myself, “I will buy a property.” In Israel, you don’t have a lot of single-family homes. It’s not common. It’s more about apartments. You buy a condo, more as a condo in buildings. So I was looking to get a cash flow. I said, “I will get a cash flow,” and I didn’t know what would happen after, because you can’t live from one property, one cash flow from one property. It’s impossible. But I said, “Let’s see what will happen.” I wanted to show that I can. So I didn’t think about what will happen later.

Rafi Mizrahi (05:33):

So in the beginning, I was looking in a city called Tel Aviv, which is in the center of the country. It’s very expensive. So I started going further and further to [inaudible 00:05:45] markets and I found a reasonable price. So I bought properties over there. It’s a city called Ashkelon, that it won’t say anything to anybody, but anyway, I created a cash flow, and then I find out that, “Okay, now I’m getting, let’s say $500 net. How can you live from 500?” But at the same time, my friends were in IT or were employees. They didn’t have the time. And they tell me, “Rafi, we want to have this cash flow too.”

Rafi Mizrahi (06:19):

So I started finding homes for other investors and get paid for consulting, for finding them the homes, and making sure it’s renovated and everything. So that was my business at the beginning. So this way, I learned from a lot of transactions with other people’s money. I can’t say with other people. I was helping others, but learning about real estate from that.

Rafi Mizrahi (06:41):

After two years, the prices in Israel went very high. It was impossible. It’s a small country and it was very fast. It was almost impossible to get a good deal. And when I say a good deal is buying below market value, it was very hard. And I heard about the crash in America and I said, “Okay, maybe I will start buying in America.” This is what pushed me to go to America.

Robert Leonard (07:05):

Before we talk about your long-distance approach to investing in US real estate from Israel, I want to talk a little bit about the Israeli market for real estate. How is it different from the US? You mentioned most are condos and not necessarily single-family houses, but other than that, how is real estate investing different there? What is the market like? Are there a lot of renters like there are here in the US, as well as homeowners? What is that process like?

Rafi Mizrahi (07:32):

Well, if you go outside of Tel Aviv, which is like New York, so it’s more of owner-occupied, but in Israel, it’s very expensive, and you don’t have enough new construction. You have new construction, but not enough for all the new people that want to buy houses. So it’s very expensive here. That’s one. Second, I think Americans are very lucky that they have a lot of information available. I can log in. I can look at a website, and know if a sell market, how much is the rent growth over there? How much is the median income, the crime, all of that? In Israel, you don’t have that. So Americans are very lucky about that.

Rafi Mizrahi (08:19):

Another thing is that, in Israel, when you want to buy a house, when you sign a contract, it’s all ready. You have done all the due diligence. You don’t have a due diligence spirit. You do the diligence before. You can come, you go with your contractor, you talk with your owner, you can work with a realtor, but once you sign a contract, there is no due diligence. Also, you don’t close in 60 days, you can get a loan. You put like the earnest money, and then you can pay like in six months with a lender, with a bank. So that’s kind of the difference. It’s not really different. You still need to buy below market value. You make money when you buy, it’s still the same. It’s still real estate.

Robert Leonard (09:03):

How do the loan products and mortgages differ from, other than just what you just mentioned, is it still 30 years? Are they fixed rates? Do you have different terms, rates? How does that all work?

Rafi Mizrahi (09:15):

Well, fixed-rate, you have the same. The only thing is the amortization in Israel, it’s for 30 years, but you can pay the loan for 30 years. In America, you have 30 years, and the loan term is going to be 10 years. In Israel, it’s got to be the same. If you’re taking a loan for 30 years, so the loan term is 30 years, the amortization is 30 years.

Robert Leonard (09:37):

And so, are they commercial products only? Or is that for home buyers too?

Rafi Mizrahi (09:42):

Homebuyers too.

Robert Leonard (09:43):

So yeah. I mean, in the US that’s what you see, usually. You see 30 years. You see both sides, amortization, and the loan term matching, but when you get into the commercial stuff, that’s where you see the amortization schedule and the loan term differing. How about the laws? When it comes to landlord and tenant laws, in the US, depending on what state you’re in, tenants have more rights, landlords might have more rights. How does that work in Israel?

Rafi Mizrahi (10:09):

Great, great country. Listen, again, Americans are so lucky. I know some countries, you don’t have it, but in Israel, it’s very hard to evict somebody. It can take half a year. Everywhere, it’s the same country. You don’t have states in Israel. So it’s very hard to evict someone. And also, it’s a good point you direct me to. It’s that the screening process in America is much more clear than in Israel. For example, I cannot check. It’s not an easy process to check a crime. Let’s say I will take a tenant, I need to meet him and see how he looks, but I cannot check his crime, his eviction. I can check only how much he earns for his last job. That’s it. So it’s easier to screen a tenant in America than in Israel.

Robert Leonard (11:04):

Are there credit scores and things like that in Israel, like there is in the US?

Rafi Mizrahi (11:08):

There is, but it’s only for the banks. It’s not like I can check what your credit score is.

Robert Leonard (11:15):

But that’s still used when you’re applying for a mortgage, right?

Rafi Mizrahi (11:20):

No.

Robert Leonard (11:21):

No. So how is it used?

Rafi Mizrahi (11:23):

It’s internal. They will check your track record of taking loans. They will check how much you owe liabilities, your net worth, same, but you don’t have like a credit score.

Robert Leonard (11:35):

Interesting. I mentioned it before, longtime listeners of the show know that I’m a big fan of long-distance investing. And I highly recommend it. I invest from New England, in the US, mostly in the Boston area to Texas, but you’ve actually taken it even a step further than me, and you invest from Israel into the US. Talk to us about why you decided to invest in the US instead of continuing in Israel.

Rafi Mizrahi (12:03):

I said before, the pricing here in Israel skyrocketed, it’s very hard to get a good deal. And second, you have a lot of taxes. Not a lot of Americans knows that, but in Israel, you have a tax when you buy, you have a tax when you sell, you have tax on rent, you have taxes everywhere, and you have, for example, even on commodity, you buy a car in America for 30,000, in Israel, you will buy it for 70 to 80,000, more than double. It’s very expensive here.

Rafi Mizrahi (12:37):

Once you understand that, you are looking for other opportunities. So I actually looked in Europe, in Greece, in even in England, but I feel that in America, you have more houses, you have more real estate. It’s a big country. That’s one. The information is very accessible. You have so many different kinds of investment niches in America. You can be a hard money lender. And once I heard about that, it made me very eager to know more when I studied that. So that’s why I decided to go in and invest in America. And also America is an empire. It’s strong, and it has a strong economy. Even when it crashes, the time it takes to recover is actually fast, between half a year to one and a half. If you go on all the other cycles, the recovery was fast.

Robert Leonard (13:36):

What would you compare the prices in Israel to in the US? Is it more like San Francisco, New York? Is it Chicago, Austin, that type of thing? Or is it a little bit smaller?

Rafi Mizrahi (13:48):

Yes. You buy a three-bedroom in Tel Aviv, in Tel Aviv, you can buy in [inaudible 00:13:56] market. Think about [inaudible 00:13:57] market in Cleveland. In Cleveland, and you will buy a house, let’s say for 100 today, I was buying for 50 and 40 and 30. Let’s say 100 to 150, same house in a [inaudible 00:14:11] market in Israel, you will buy for at least, I think, half a million. That’s a lot.

Robert Leonard (14:18):

A lot of people I know that are focused only on the US, they’ll try to buy deals and they might get outbid. And then they wonder, they’ll say to themselves, “I ran these numbers and they only make sense at this purchase price or at what I’m offering.” And they wonder, like, “How can somebody pay more than what I’m paying, and still get a good deal?” And I think you illustrate a good point is that you’re not only competing with US-based investors.

Robert Leonard (14:45):

So somebody might come from international, such as yourself, where they have X cap rate over there, and then they come here, and the cap rate is much higher than what they can get over where you are, even though it seems low in the US, it makes sense for an international investor, whether it’s Israel, could be Canada, it could be China, it could be any country, but we see this happen a lot, and investors wonder why they can’t compete. And sometimes it’s because people come from other countries. And even though the cap rate seems low here, it’s actually pretty attractive for international investors. Is that kind of what you’re seeing as well?

Rafi Mizrahi (15:17):

Well, not today. I think less today. Today, I think the competition comes more from, from what I’ve seen, the multi-family space, and even in the single-family space, because I’m a top vendor in Israel, I teach people how to buy houses. So I know about a lot of markets. And a lot of funds today buy houses, American funds buy houses, and the money is so cheap from America, not just from out of state. I think before, between 2012 to 2016-17, that was true. But I think, in the last two years, even in the single-family space, everywhere, the funds in America have the most buyers. Not the out-of-state. [That’s] my belief.

Robert Leonard (16:05):

You mentioned that the taxes in Israel are a bit different than here in the US, and that actually reminds me of a good point in question I’d like to chat with you about, because I have a lot of people that are international, that listen to the show, that reach out to me and say, “Hey, I want to buy US real estate. And should I do that?” And I’m like, “I don’t know, because I’ve never done it. I’m not internationally investing here in the US, so I can’t really speak to that. Because one of the biggest things that we get as US real estate investors is tax benefits. So if you don’t have that pillar for you as an international investor, I don’t know if real estate necessarily might be the best asset class for you.”

Robert Leonard (16:38):

So for somebody who’s international, that’s investing in the US, how are taxes a benefit, or maybe a hindrance to them as investors?

Rafi Mizrahi (16:47):

So I think, a few years ago, where they returned the cash on cash, or it’s not cash on cash, because we were buying cash, but the return on investment on houses were double-digit. Today, you can’t get double-digit. So double-digit, instead of gaining 5% in Israel, in the [inaudible 00:17:08] market, you can still pay taxes, I think 15% from the, how do you say, not from the NOI, even from the top, still makes sense.

Rafi Mizrahi (17:21):

Now, I think buying for cash flow as an out-of-state investor, houses don’t make sense anymore, because again, the return investment is not that great. I think doing fix and flip today is a better approach than buying for cash flow, because you have a lot of buyers and you can flip, you can wholesale, or you can be a lender, today, is a better return on investment than buying a house or buying whole.

Robert Leonard (17:54):

I hear a lot of people that they’re nervous, or they’re scared to go long-distance, even within the United States. So how did you get comfortable with investing, not only long-distance, but also internationally? How did you know that you were ready?

Rafi Mizrahi (18:09):

I figured this out, that there are people who live out of state, because America is very big, that buy not in their own state, not in their backyard. So I said, “If they can do it, what is the difference?” If somebody from California buying in Cleveland, or buying in Florida and someplace, in, let’s say, Fort Lauderdale at the time, or in Orlando, they still need to fly for every property, three-five hours, so they don’t do it. They don’t fly for every property. So what do they do? They build a team and a process.

Rafi Mizrahi (18:41):

So I figured that I need to build a process, knowledge, and a process, and I will be able to do it. So it’s all about, every time you want to achieve something, you got to find somebody that’s done it, and then you feel more comfortable that you can do it too. You just need the knowledge now.

Rafi Mizrahi (18:59):

So that’s what I did. I reached out to people and asked them how they do it. You have bigger pockets. Again, America, you are so fortunate to have forms and information. You can ask people, and people, you will always find somebody to help you with knowledge. When it comes to real estate, especially I think, you will find somebody who will help you, give you some answers. How do you do it? We’ll tell you. Maybe not all the secrets, but in general, for sure.

Rafi Mizrahi (19:32):

So I got comfortable by asking people, and I knew what I was looking for, I was looking to know that I’m buying in a good neighborhood. How do I know that I’m buying in a good neighborhood? That’s one. How do I know what the value of the property [is]? Because I want to buy below value. How do I know how much I need to renovate? That was another. And how do I know, which is the most important, that I will be the owner, and I’m not going to go into, or buy into something that’s going to be a fraud, right?

Rafi Mizrahi (20:03):

That’s the question, the main question I needed to get answered. Now, when you buy below market value, even if you budget for renovation, and the renovation will be higher, you still have room for mistakes. So I knew that in Israel, even in Israel, in your backyard, the contractor, a contractor probably learns the same thing all over the world. You start with a bid and eventually, the actual will be different than the first bid. There are surprises. So I knew that. So I always buy below market value so I have enough room. So that’s what I needed to figure this out.

Rafi Mizrahi (20:42):

I got to admit the first deal, I got very scared, but you need, as an entrepreneur, to learn [that it] is this fear stopping you from doing it, or should you put it aside and continue?

Robert Leonard (20:57):

When you did decide you were going to come to the US and invest, how did you decide which strategy you wanted to follow? And then how did you decide on a specific location?

Rafi Mizrahi (21:07):

So I didn’t want to do fix and flips at the beginning. And remember, I came in, I didn’t fly to buy properties. The first properties, I didn’t fly. I bought them without flying at all. So I was buying in 2010-2011. When I was doing that, the market was at the bottom, so I didn’t want to do fix and flips. I said, “Nobody will buy my property.” So I was buying for cash flow. That’s what I was to do. And I was not looking for properties that need a lot of rehab. I didn’t look in for properties with 100,000 rehab. I was looking for about 10 to 15, because I said,”If 10-15 cosmetic, what would go wrong? And if I’m buying a house, which is a 2005, at that time, a 2005 build, what can go wrong?”

Rafi Mizrahi (22:02):

You’re not going to have foundation issues. You’re not going to have roof issues. You aren’t going to have plumbing issues. So I was looking for buy and hold, distressed properties, meaning buy foreclosures. So that was that time. Today, it’s a different approach. When I teach people, they need to go and look for the renovation, because that’s where the money is right now.

Robert Leonard (22:23):

And what made you get into the larger multifamily deals?

Rafi Mizrahi (22:27):

Well, I got, I don’t want to say burned, but I didn’t have the desire anymore to do fix and flip. The scaling, I could have done it, open a new market and keep doing it, but I had a dream to do big projects, but I was afraid. And I thought it’s only for the rich people. And I wasn’t rich enough. I did money, but I wasn’t rich enough. And I heard about syndication one day, and that there are mentors and people that can teach you how to do it. And I said, “Okay. So maybe I got it wrong.” I saw other people like me doing it. And I said, “If they can do it, I can do it.”

Robert Leonard (23:07):

I know a lot of people will wonder exactly what you were just saying. They wonder whether they’re ready to jump from small deals into those larger multi-family deals. When do you think someone is ready for that transition and how can they know for sure that they’re ready?

Rafi Mizrahi (23:21):

I think it’s more about what they really dream of. I think the larger deals let you step to go even bigger. If you want, I don’t know, you want some income and extra income. I don’t think you got to go to the big deals, because at the beginning when you do the syndication, you split with a lot of people. So you’re not making huge money. You’re making good money, but it’s not like you, as a syndicator, are making a lot of cash flow, because the way the structure of the syndication, on the bigger deal, you have a pref for the investors, and above that, 70% goes to the investor, and 30% goes to the entrepreneurs.

Rafi Mizrahi (24:05):

So usually on the cash flow, it’s not enough cash flow for the syndicators. And when they split, it’s not enough cash flow. When you sell, you probably make the most money. No problem. You do make the most money. So what I’m saying is only if you dream big, and at the beginning, you will do [it] with more people, then you can do it with less people, or you can go to even bigger projects. So only if you dream really big.

Robert Leonard (24:33):

For someone listening to the show, who’s interested in long-distance investing, but might be skeptical or is nervous to get started, what advice can you give them that will help ease their nerves, or even potentially maybe tell them that their nerves are right and they shouldn’t consider long-distance investing? What advice would you give them?

Rafi Mizrahi (24:52):

First, they’re right to be concerned, because there are a lot of tough roads, and people can take advantage of them because they’re far away. So they need to do two things. One is to find a group, find a community where other people are doing it, not in their backyard, it doesn’t have people from England. There can be people in California who invest in Phoenix, find those communities, and also educate yourself. And don’t do anything until you are educated, and you saw enough proof, and you understand the process before doing it. So that’s how you can do it.

Robert Leonard (25:33):

Now, I want to move into a segment that I call the action plan, which is where I ask the guests three questions that create an action plan for listeners of the show, for when they’re done this episode. The first question gives listeners something to implement in their life. The second question gives them a resource to go learn from. And the third one gives them a specific action item to take right now. So the first question is, which habit or principle do you follow in your life that has had a big impact on your success, that not enough people do, but should?

Rafi Mizrahi (26:04):

It’s a good question. Well, I learned it a few years ago. So when I start the day after I take the kids to school, I take out half an hour, 15 to 30 minutes where, I don’t call it meditate, but thinking about and reminding myself where I really want to go. What I really want to achieve. The big thing that I want to achieve in five-10 years. The real thing that I want to get, then I think about the person, the moment I achieved that, I imagine myself achieving that, and now that I achieved, what kind of person I am, then I go back and talk to myself, and tell myself, “Future me, what should I do this week, or in the near future, or today in order to go there?” It’s a kind of meditation. It’s a version of planning. That’s how I think.

Rafi Mizrahi (27:04):

So instead of just writing down what I want to do today, it’s like a reverse engineering kind of process. Try to do it every day. But some days I will do it shorter than other days, it depends on the meetings, and you don’t need to remind yourself every day, imagine yourself in the future. It’s putting yourself in the right, how to say, the right focus with a plan. That’s kind of the thing I do. It’s a habit that I do.

Rafi Mizrahi (27:33):

And then I do an exercise. I do kind of a sport. It can be lifting weights. It could be running. Anything that will help me give myself some energy because working out takes your blood all over the body and you get energy. It’s good. So I’m working on my mental [health] this way. I’m working on my physical [health], and I’m planning the food for the day because we need to eat right. So those are the habits I have that helped me be successful because I’m focused this way.

Robert Leonard (28:08):

What has been the most influential book in your life? And it doesn’t necessarily have to be your favorite book, but more so which book has had the most impact on you.

Rafi Mizrahi (28:18):

So I’m not really a guy who reads books. And no, I lose concentration. I like videos. I like movies a lot. So movies. But as a book, Rich Dad, Poor Dad was the one I think, and I think at the beginning also, I read the Art of The Deal with Donald Trump. And that was, I think, the way he did the first buildings and everything. I didn’t understand how he did it. Now I do. But I see how [the] impact was, that was the start. I started to think big. So I think those two books, I think movies are very inspirational for me. I can give a few movies that I’ve seen that really give me…inspiration like the McDonald movie. This one, and another movie is Forrest Gump. It’s very inspirational.

Rafi Mizrahi (29:18):

And one scene in Forrest Gump is very inspirational for me. It’s the one where he’s going for the shrimp with a soldier. I forgot his name. And they’re trying to get a shrimp, and they don’t get anything. And then there is a storm. They go every day. There are no shrimps, no shrimps, no shrimps, and then there is the storm, and the guy screams, “Where is your God of yours?” And then there is like thunder, and they got a lot of shrimps.

Rafi Mizrahi (29:49):

The reason this inspired me…because the way I work every day, I know I’m close. Something will happen eventually, and you will succeed [in] what you want to achieve. [You] just need to keep pushing. That’s why I’m very inspired by that particular scene in the movie.

Robert Leonard (30:05):

When this episode is over, before the listener quickly jumps to the next podcast that they have queued up in their podcast app, what is one action they should take that can help improve their life, career, or business?

Rafi Mizrahi (30:19):

I think they need to work on three things. One, their mentality. So they need to work on motivation, go to Tony Robbins, [inaudible 00:30:31] whatever. Whatever they feel like. And work on education, on what they want to achieve in real estate. Single-family homes, if they want to do wholesaling, multi-family, whatever. Physical, everything, consider the physical. So work on that.

Robert Leonard (30:47):

So before we give a handoff to where people can find you, I like to wrap up the show by turning the tables and letting the guests ask me a question. So Rafi, what question do you have for me?

Rafi Mizrahi (30:59):

So you interview a lot of people, give the audience and me, one thing you heard, learned a lesson, a tip, a quote that really impacts you.

Robert Leonard (31:10):

If I had to pick just one thing, I would probably say it’s a quote where the individual has said, “Live where you want to live, and invest where the numbers make sense.” I think intuitively that just makes so much sense, but it’s really had a big impact on how I approach real estate investing. And I think if you had heard it earlier, it probably would have had an impact on you as well, given your strategy, and how you invest as well. So for me, it just makes so much sense. Invest where the numbers make sense, live where you want to live, and approach business that way.

Rafi Mizrahi (31:38):

Nice. I like it.

Robert Leonard (31:40):

Rafi, where can the audience go to connect with you, find you on the internet, look up what you’re doing, and see what you’re working on?

Rafi Mizrahi (31:47):

Sure. Sure. Well, most of my mentorship is in Israel, so it’s in Hebrew, but what I do in real estate in multi-family, they can follow me in proudcommunities.com, and the website is going to launch again in the next week or so. So they can find me there, or they can find me on rafi@proudcommunities.com, can send me an email. I like helping people. So whoever wants to approach me, I would love to help him.

Robert Leonard (32:15):

I’ll be sure to put a link to that resource in the show notes below, and any other resources that we talked about throughout the show will be in the show notes below, for anybody that’s interested in checking those out. Rafi, thanks so much for joining me.

Rafi Mizrahi (32:26):

Thank you. Thank you very much, Robert.

Robert Leonard (32:29):

All right, guys, that’s all I had for this week’s episode of Real Estate Investing. I’ll see you again next week.

Outro (32:34):

Thank you for listening to TIP. Make sure to subscribe to We Study Billionaires by The Investor’s Podcast Network. Every Wednesday, we teach you about Bitcoin, and every Saturday, we study billionaires and the financial markets. To access our show notes, transcripts, or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permission must be granted before syndication or rebroadcasting.