International real estate investing has shown us that there are no geographical limits to investing in real estate. But how exactly do you manage a business across the globe? Rafi Mizrahi is the owner of Proud Communities, a real estate company focused on acquiring value add multifamily real estate investments and turning them into communities here in the States. The catch? He’s doing it all the way from Israel. Learn all about how he’s created a successful business and team by tuning in!
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The Ins And Outs Of International Real Estate Investing With Rafi Mizrahi
Rafi Mizrahi used his system to develop and syndicate over 766 units, and that’s over six properties. He’s working on deals constantly from the other side of the world, which is a fascinating guest to bring on. He was born and raised in Israel. He lives there and does deals here in the United States. I’ve got a lot to learn from him. Welcome to the show.
Thank you very much. It’s nice to meet you. I’m happy to be on your show. It’s an honor for me.
The pleasure is mine. Here are the same three questions I ask everybody who comes on the show. Can you very quickly tell us where did you start, where you are now, and how did you get there?
I started years ago. I was in IT. I was a Java programmer. One day, I’ve got fired with all the group. I was looking for a job and reached through that, and that’s how I started the journey. I started buying here in Israel, and then after a few years, I started buying houses in the States. I did over 300 transactions. I did fix and flip, wholesaling, buying whole, and finding deals for Israeli investors. I always had a secret dream to do big things but I thought it was only for rich people. I found out about the multifamily syndication and I said, “That’s genius. I’ve got to do it.”
I started the journey at the end of 2017. Time passes so fast. I did 6 deals, and that’s 766 units. We sold a few this 2021. We are about to sell the rest and buy more. I’m under contract. I can’t say a lot right now but I’m under contract. I’m working on a lot of market deals. I have a team. We underwrite between 2 to 3 deals a day. We make over 1 to 2 LOIs a week but not in November and December. It’s a slow time but in general, we will be back to that speed. Doing that, that’s how I create my deal pipeline.
There are a lot of moving parts in managing 300 fix and flips and wholesale deals on the other side of the world. How far into that process did you figure out that, “I can do this on the other side of the world,” or was there a time when you were flying back and forth? What did that look like?
It was engineered from the beginning. I thought to myself, “I’ve got to do it this way.” I live in Israel, so I said, “I’ve got to build the process and the right team to do it from Israel.” I thought about the big companies where the owner isn’t involved in every part of the process. That’s my thinking on how I wanted to approach that. Every time I do something or a new niche, I’m looking at how I can do it without flying over for every deal. It doesn’t mean I don’t fly. I fly a lot but I focus more on the process, going into details, and understanding how to do it from far away by building the right team in place from the beginning.
That’s smart but also probably a little bit daunting out of the gate. It’s how you are bringing on team members, especially when you are like, “We are going to design the system from the beginning. I don’t have a track record, and I don’t have necessarily anything to offer now but I want to talk to team members and build those team members out so that we can hit the ground running.” What was that process like?
In the multifamily spaces, it’s a little bit different than in the single-family space. When you start in the single-family space, it’s an easy start. When I say easy, it’s doesn’t mean easy but you don’t have to have 1,000 units to start or have a track record for an owner. When you submit an LOI on an offer in a house, the owner doesn’t check your track record for multifamily. Building the team is about finding the right people. In the single-family space, I was looking for an agent who had the experience doing the fix and flip while I had the experience with the buy and hold, and he’s right at the point that he is not exploded with the number of investors, so he doesn’t have a lot of money yet.
He is right at the point where he has the experience but he’s not doing it for so long because if you will try and work with an agent who has been doing it for 30 years, he has a lot of experience but he will not help you. He’s not going to run for every property. You need to find the right person that has the right experience and motivation to help and work with you.
It’s about finding the right person but also, you have to know what you are looking for, showing the vision where you want to go, and having good communication with that teammate. That’s what I did in the single-family space. In the multifamily space, you start working with others who have experience and have a role in that first acquisition, and the second one is trying to get more roles. While you do that, you get your experience in the track record.
Talk to us about how you selected markets, and then what it was like to get your first deal done raising capital across multiple countries and the complications that are around that.
Are you talking about single-family or multifamily?
Multifamily.
Building a team is about finding the right person.
We live in Israel, so we are going to check things that a local person probably will not check. For example, when an agent is bringing on a local, you will not look for the right agent. You will go and see the house and try to do that. You know the neighborhoods because you live there but when I live here, I need to use the internet to find information about this neighborhood. The way I do it is I always do research online, and then research with local people.
I don’t know if you know but there is a website called JusticeMap.org. On this website, there is a button called Income. You press that button and it will show how much is the median income in that neighborhood. If you see that the median income is $20,000 for a house, you will understand that this neighborhood is a low-income neighborhood. It’s good and bad but you can do that. It doesn’t mean I will only trust the internet because then I will talk with management companies and other investors.
I always say that you Americans are so lucky because you have BiggerPockets, Facebook groups for CDs, for real estate, and events. There’s so much networking. You can find people and talk with them that have done deals, and they will tell you, “Don’t stay away from this neighborhood.” It’s all about the research from the internet and research by talking with people. If I need to in multifamily, I will also drive every deal under contract or accept that I will fly and get the feeling on the neighborhood. Usually, the market research with the people who invested with a management company will understand if it’s a bad neighborhood or not.
That’s hard to do. It’s hard for a lot of us to have the capability to go get on the ground and put our own hands in the mix. You don’t have that option, so you’ve got to build the systems on the back end that allow you to do what you do from a distance. What has it been like working with investors? I feel like Israelis are more attuned to investing in the US and the real estate markets. Maybe I’m wrong but what has it been like working with investors saying, “Let’s invest in a foreign country. Give me your money?”
First, in Israel, the returns are so low. A lot of Israelis who are already looking for alternatives are looking to invest outside of Israel, so it’s common in Israel now. I remember when I started in 2010, there weren’t a lot of investors buying in the States. There were but it wasn’t common. They weren’t in Facebook groups, and now they are. It’s not uncommon to invest in real estate in America. People are starting to learn more and more about how it is to invest in the United States, multifamily, some of them will take the time.
When you do the PPM, there is accredited and you have the sophisticated. The sophisticated are people who have experience in investing in real estate and understand the risks. Not all people will do that but I’m a guy who will raise funds and work with investors who have experience and understand the risks. I don’t want to work with people who don’t understand that. I learned a long time ago that you prefer working with people or customers that you want to work with. That’s why Israeli investors are looking forward to investing in the United States. I will only work with people who understand the risk of investing in the United States.
I haven’t said it but I’m also the top mentor in Israel. I teach people how to buy houses. I have more than 1,300 students. I have a good reputation. I help a lot of people to buy by themselves. My main goal is to help people buy real estate by themselves in the United States, so they buy, fix and flip, and do wholesaling. Once in a while, I offer them also to join me in the multifamily space. I said like, “Only the people who understand that, don’t want to do it by themselves because I prefer that they will do it by themselves. They will have control but if they have enough money, want to do it by themselves, and understand the risk and the sophisticated, then we can work together on a deal.”
You had single-family experience here, and maybe you already knew the market but what were the asset classes where you said, “We are going to jump into this particular asset class that makes sense for us in multifamily,” and how did you end up selecting that, especially remotely?
First, I learned a long time ago that you better work in C Class to B Class. You can work on the A Class, there is less risk but the price per unit is so high. I might do it eventually but A Class is a higher price, so you probably need to raise more funds and work with private equity funds. You’ve got to structure it differently. I decided to work on B Class and C Class, and no D, meaning I will not go to an area, where the median income is below around $35,000 to $60,000. That’s around the C Class. That’s the range. We will look for $75,000 to $90,000 probably at the high end.
What is important for me is to find proven value add deals. When I say proven, I don’t want to assume, and I have seen that a lot. People assume that they can push the rent better than the other comps. They are like, “I’m going to renovate it better,” but no. I like to do reverse engineering. I have done it in the fix and flip space. I prefer saying that if he gets $1,100 on a two-bedroom, I will get $1,075 with the same level of renovation to be competitive or to be around the same comps. I always look for that to see a proven concept in that neighborhood.
That’s strategic. I like that. You said, “We are going to buy in this asset class.” You already had your cities picked out. Did you switch from single-family straight into multifamily in the same cities you were already in?
I didn’t. I was buying in Cleveland back then. I wanted to buy a multifamily in Cleveland but what was available was more of 40 or 50 units. There wasn’t a lot of 100 or 200 at that time. Now, you have more available. At the time, I didn’t like 3, 5 or 6 floors. I wanted the sunrise multifamily, so I was looking for a different market. I landed in Atlanta, Georgia. I’m working in Atlanta and tertiary markets in Georgia.
What have been some mistakes or things that if you could do them over that you would say, “Here something I would do differently?”
There are a lot. Not everybody will say that but there are. If I’m not making a mistake on a deal, it means I’m not honest for sure. It’s impossible. You always make mistakes. If you try, you make mistakes. One mistake is raising less working capital for their renovation because it takes time. You renovate units outside, and it takes time until the bank inspection comes, then do the reimbursement. It can slow you down. Sometimes, you will need to turn a unit to keep it at classic because you don’t want to finish all your funds so quickly.
If you’re not making a mistake on a deal, it means you’re not honest. It’s impossible. If you try, you make mistakes.
I prefer to push them to the premium instead of doing the light renovation or, let’s say, the turnaround renovation to put a tenant in the same way. That’s what we needed to do because we didn’t have enough working capital, and we knew we’ve got to be on speed. I prefer putting a tenant in and then waiting. That’s one of the mistakes.
I’m now working with a better team, which means I have a construction manager that is in the company. He’s doing the supervising the construction. That’s one. Also, I have an asset manager, which is doing it. I learned a lot by doing it by myself but it’s something that a professional guy should do, so I have hired an asset manager in place. I’m thinking like a business, and every one of us wants to get the first deal. That’s everybody’s focus. It takes a while, and then you realize you’ve got to build the team, too.
This has been great. You have shared a lot of things that I wish I had talked to you about earlier, to help us employ and think more strategically. You saved me a lot of heartaches, that’s for sure. You have shared a lot of great stuff with us on doing deals overseas, building your team, picking markets, what you think about in the class of assets you are buying, and how to strategically build. This has been good, and I certainly appreciate you taking the time to pull back the curtains on your business. Let’s jump here into the final four questions. The first one is this. What is one tool or resource that you find you can’t live without?
It’s me being consistent and the resource of working on your mentality. I’m a guy who likes to have things yesterday. I’m a guy that if there is a task, I will do it today but it takes time until I do it. I need to work on myself every time to be patient and wait for that, then push and be consistent. The thing doesn’t always work the way you want, so you’ve got to be consistent to make it. The resource I always rely on and couldn’t do without is my resource. It’s my personality.
That’s a great answer. I love that. The next question is, if you could help our audience avoid one mistake in real estate, what would it be, and how would you avoid it?
Due diligence on people. Back in 2012 or 2013, a management company I was working with in the single-family space got bankrupt. They stopped answering the phone calls and emails. It was a one-stop shop where we bought the properties from them, and they were renovating everything. I did the due diligence but I should have done it better. I learned about it. Due diligence on people is a mistake but we’ve got to embrace that we will make mistakes every time and learn from them.
That’s critical. I love that. When it comes to investing in the world, what’s one thing you are doing now to make the world a place?
The name of the company is called Proud Communities. The reason is that I have the vision to make the communities a better place for tenants. I feel like now, everybody else has this mentality of, “We want the community to be a better place,” but is it just by renovating the units and the exterior? Is that making the community a better place? Yes and no. It’s not enough. I want to find a way to make this a better place for them. I have some ideas I’m working out, and I’m doing research for that. I want to find how to make communities a better place for them to live.
If our audience wants to get in touch with you or learn more about you, what is the best way to do that?
They can reach out to me at ProudCommunities.com. There is contact info there. They can reach out to me. I like to help people, so whoever you are, reach out to me. I will gladly help.
Thank you so much for your time. I do appreciate it.
It’s my pleasure. Thank you.
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About Rafi Mizrahi
I used my system I developed and syndicated 766 units over 6 properties and now I am working on 250 units value add deal in Atlanta.
