Mar 13, 2022
Is there a crash coming? What should real estate investors do if it does come?
Dani Beit-Or will answer these questions and provide more tips to survive an economic crash. To be more specific, he will share the behind-the-scenes in how he accumulated 5,000 residential properties throughout his 20-year real estate career and why he’s almost always in “buy mode.”
Dani is the Chief Executive Officer of Simply Do It Real Estate Investments, which he founded after surviving the 2008 economic crash. An immigrant from Israel, he was able to devise new investment strategies and value systems that have helped him become one of the top industry leaders in the United States today.
[00:01 - 04:42] Opening Segment
- Dani Beit-Or shares his journey from Israel to the United States
- The important role that Dani’s team plays in the US real estate market
[04:43 - 09:20] Surviving a Market Crash
- This is the reason Dani has decided to migrate and invest in the US real estate market
- Dani said he probably has over 10,000 conversations with real estate investors
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- Here’s what he learned from these conversations
- Dani’s thoughts about the potential crash that’s been going around real estate circles
[09:21 - 15:30] Cash Flow Over Quality
- What kind of properties should you buy for the long term?
- The beauty of buying for cash flow instead of equity
- Dani reveals why he prefers the interest rates to be going up
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- …and if possible, going up faster
[15:31 - 17:08] Creative Ways to Pay Off Mortgages
- Dani prefers 30-year data over 15 years, and here’s why
- Here’s a creative way to finish paying off your mortgage earlier
[17:09 - 19:38] Closing Segment
- A real estate mistake you want our listeners to avoid
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- Going into real estate with no plans
- Set your expectations first before starting investing
- Reach out to Dani
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- See links below
- Final words
Tweetable Quotes
“I think that a lot of people just jump in and start asking for properties and start asking for assistance…and they don't even take five minutes to set their own expectations.” - Dani Beit-Or
“Hopefully, if the interest rate goes up, more buyers will say we're not buying. That will make it easier for us to buy.” - Dani Beit-Or
“I tell my clients [to] just write what [their] either ideal day looks like or [their] threshold deal looks like, and then when [they] have that, [I ask them] ‘What is your value in terms of the deal you're looking for?’” - Dani Beit-Or
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Email dani@simplydoit.net to connect with Dani or follow him on LinkedIn, Facebook, Twitter, Instagram, and YouTube. Remotely invest in rental properties by visiting Simply Do It Real Estate Investments.
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Want to read the full show notes of the episode? Check it out below:
Dani Beit-Or 00:00
If you're buying now, and you're listening to this, and you say, Oh, he said, this quality long term, and exactly in 10 years you thought you will sell and that's when the crash it, guess what, just be patient, you know, people get, easier said than done. I can vouch for myself, I was patient because it was not a pleasant feeling to know that a property that you paid 194 is not worth 84,500. That's not a pleasant feeling. But at the same time that I was seeing this, I also realized that the rent is improving. I told myself, be patient, when you buy well, good place, good location, all those things that I keep telling others. Absolutely.
Intro 00:36
Welcome to the How to Scale Commercial Real Estate Show. Whether you are an active or passive investor, we will teach you how to scale your real estate investing business into something big.
Sam Wilson 00:48
Dani Beit-Or is a residential real estate investor and mentor with experience in more than 5,000 units in the past 20 years. Dani, welcome to the show.
Dani Beit-Or 00:57
Thank you for having me. Thank you. Pleasure.
Sam Wilson 01:00
That's a lot of residential property. 5,000 units, maybe we'll get to where that number comes from here a little bit later in the show. There are three questions though, ask every guest. Where did you start? Where are you now? And how did you get there? In 90 seconds or less.
Dani Beit-Or 01:15
Yes. So I'm originally from Israel grew up in Israel served in the Israeli Special Forces. I realized early on after getting my engineering degree that working for corporate Israel is not the way I want to go. It's not the way it's gonna advance me financially. So I started looking into different investments, I caught Wiley Tel Aviv, found out, discovered the US residential investment, fell in love with it, moved in 2004, after doing two or three small investments to this country, continued investing in residential real estate and their started working with investor helping them do pretty much the same what I'm doing was doing, putting trucks for myself and letting others ride those tracks invest in different us Metro. So I'm now in Southern California have been 10 years in Northern California 18 years in this country, 100% of my time when I'm not with my family and friends is devoted to working on investment properties, helping others invest in residential properties throughout different us metros.
Sam Wilson 02:22
That's really, really intriguing. So when you say that, that brings up a lot of questions, which I'm just going to maybe ask it simply and say how…
Dani Beit-Or 02:31
How what?
Sam Wilson 02:32
How are you helping other people invest in metros?
Dani Beit-Or 02:34
Yeah, so what I found over the years is a lot of people, especially my, most of my clients are people who live in the West Coast, and majority of them I in Europe, in East Coast, but the majority is anywhere from Seattle to San Diego, a lot of them come to the realization that real estate is very beneficial. They understand that that's the starting point, the idea, right, the vision, then the next thing they do, and I've been doing it for 18 years, there's they look around and say, wait, this million-dollar home rents were 3,000 or you know, or at $750,000 home rents versus 2500. You know, the math doesn't work, right? I heard that, you know, in other parts of the country, it's not that expensive, and it works better. And then they come to the realization, where should I go? How should I buy? Who should I work with? How can I trust, you know, who can I trust? How can I overcome all the challenges of lending and management. And that's where we come in, we come in to close the I call it the knowledge gap to handle people in the process of making those decisions, from idea to actually exit, full execution of ownership. And then we also close the operational gap. Maybe I should put it here and saying okay, we vet teams of property managers very carefully. We vet realtors, and we train them very carefully. We handpick vendors, we handpick lenders, so we closed that operational gap. So we're not just knowledge and advisors, like go invest in real estate, we say, we're going to help you with the knowledge and fear and concerns and issues before you start, during the process of buying, and post-purchase. But also we have the teams the properties that will take you all the way through, you know, I would say ultimate to ownership, but many of my clients have been with me for so many years. They're coming back, you know, to do a 1031 exchange, to sell, to grow further. So it's kind of it always continues. This is a long-term relationship. People tend to accumulate houses over the years and not buy all at once and they don't kind of stop that's just, yeah,
Sam Wilson 04:37
That's really intriguing. Why did you decide to go that route as opposed to just building a portfolio yourself?
Dani Beit-Or 04:43
I've started by building a portfolio to myself, and I'm still you know, it never stops. But for me, I fell in love with real estate, the US real estate, I found that I'm good at, you know, operational or good at you know, working with people I'm good with helping people in advising them. And I just felt that this is my in a way my I don't have to call it my calling, but like I have had probably well over 10,000, one, one conversation with actual investors and potential investors, I'm just talking about the initial conversation, not the ongoing well over 10,000 for those 18 years, in IRM, you know, the next call that is later that was maybe held on Friday, I feel fresh, but for me, the fact that I've had conversations like this one for more than 10,000 times similar conversation, and I'm not completely like off, not again, on the contrary, I'm excited. I'm energetic, that kind of tells me I'm in the right spot with myself, first of all, and then I think that projected, you know, to the people that I speak with, right. Full disclosure, not all 10,000 became clients.
Sam Wilson 05:50
You'd be selling a different book, if that were the case.
Dani Beit-Or 05:53
Oh, my God.
Sam Wilson 05:54
Let's talk about this. I mean, some of the questions, you know, that we hear in commercial real estate and residential real estate, is there a crash coming? Is there a price decline? I think because residential real estate and commercial are tied, you know, and one declines probably both do in their own different ways. But talk to us about what you see coming and what you're telling people when that topic comes up.
Dani Beit-Or 06:16
So I’ll divided into two. First of all, I want to emphasize I'm in the real estate of the residential kind of category. Right? So I'll tell you in a second, what I think about what's coming, but I want to tell you first how I mitigate because these, there's one thing I can tell you and the people who are listening to this, I have no idea if we're going into a crash, when we're going into a crash. I only know this, you know, I've started investing in 2002. So 20 years right now, it's when I started, I really picked up the pace in 2004. And guess what, I went into the crash of 2008 personally with multiple properties. But with clients even more, right, when I say clients, it wasn't my property, but I was there with my clients in the trenches, helping them out of problems issues, speaking to banks, loan mitigation, you know, shorts, and all of that I've done years of just dealing with that fun part right of the industry. So and that taught me a lot a lot. So for me, the crash of 2008 was a significant, that was my PhD in a way I came in with experience not a lot of experience, but some experience not complete beginner. And that was my PhD in real estate, but that taught me a lot things that you know, that I never thought I would know. But I have learned or I've seen and research it, I read it myself that in this country normally every 10 years we have a slowdown right every 10 years or so, right now we are late into the slowdown you know, because it's been 12, 13 years so it should be coming. So I am after the crash one of the things that I started to kind of you know, in my mind conceptually doing is saying the next one is coming right this is something I started with my DNA in 2009, ‘10, starting is that if the next one is coming and I don't know when let's prepare for it, how do I prepare for it? Well, I buy in growing markets, I buy quality real estate not crappy real estate, I buy in in growth you know growth of population and jobs or indication of this is where happening I buy with the numbers make sense. So I do a lot of decisions along the way I call it medium-sized important decisions, not small, not insignificant, and not everything is critical in the process of you know kind of picking up the areas the properties, the due diligence, the valuation from macro to micro etc. And all those decisions are putting me on a path that if I buy quality in a potentially resilient market or potentially has more sturdy you know, potential for resilience when the next one is coming, and I'm holding it long-term, there's a very good chances I will survive well the next crash or the next downturn, no guarantees, but I am not in the guaranteeing or promising business. I am in the risk management, mitigation, reducing risk kind of a business in I am putting myself and my clients on a task and saying let's buy quality. Let's you know analyze well, let's evaluate correctly in good markets. We are probably going to be okay even when the next downturn hits. Now, as someone who's been through that point right, the bottom, I can tell you that what I have seen is that while my house you know example one of my house that was purchased for close to $200,000 in Orlando, that was the almost the purchase price went all the way to 84,500, 84,500. So less than half not a pleasant day, right day era period, but rents kept going up vacancy kept going down in that house over time, being patient. It was bought well in a good metro in a good location in the metro in a good community, not a luxury home. Not anything fancy. Just nice middle class home in a good area. And slowly it came back and exceeded REITs. I was patient. So quality time, right? That works very well. I think those are the most mitigating factors we can help in resilient markets. And you got to be patient, real estate, especially bought with a mortgage last time be patient. And if you're buying now, and you're listening to this, and you say, oh, he said, this quality long term, and exactly 10 years you thought you will sell and that's when the crash it, guess what, just be patient, you know, people get, easier said than done. I can vouch for myself, I was patient, because it was not a pleasant feeling to know that the property that you paid 194 is now worth 84,500. That's not a pleasant feeling. But at the same time that I was seeing this, I also realized that the rent is improving. And I asked myself, are you in rush? Is there any rush? Do you need to spell? Okay, I told myself, be patient, ready to buy well, good place, good location, all those things that I keep telling others. Absolutely. Right. The house is obviously, you know, much, much higher than this right now. And I think that's why real estate was a good fit for me. Because in stocks, you get nervous. What do you do? Click right, right? In real estate, you get nervous, you do click and nothing happens. You need to wait 30 days, 45 days, 60 days, if at all for something to materialize, you have to be patient. Right?
Sam Wilson 11:24
That's it. Yeah. And I think that's the beauty of buying for cash flow is that we don't really care. I mean, I do care what the valuation is. But I don't really care as long as it's making money every month, like, okay, so you say it's worth 200,000? Or toward at 84,500? Is it still making money every month? All right, like just that allows you to sleep at night. Talk to me about Is now a good time to buy? I mean, what do you think?
Dani Beit-Or 11:49
I got to tell you, 18 years in this country, there was never a time within buy, never, not a single period of time. 18 years of a buyer. I've been buying properties, working with my clients, 18 years. I think it's more about discipline analysis, evaluation, doing the work properly. I can tell you right now, five minutes before you and I started this conversation, I wrapped up a call with one of my international buyers for the first time, we just went over the inspection report that took place. Was it yesterday or the day before it can’t remember maybe yesterday. And he's nervous, right? Because he's not familiar with the construction, with the material, with the, you know, and I told him, we went over the report, I told him what I think we called the inspector together. We just this is 10, 15, 20 minutes ago, where the conference go with the inspector, we went over the report, I told him my opinion. And then I said, I want you to know something, if you feel nervous, stressed a lot of uncertainty, no problem. Walk away from this house. No problem at all. I can tell you, I have buyers that will take it because I know my buyers list, but he's maybe too nervous. The houses by the way the house is 1976. The report was very good relatively today. It was good objectively, and it was good even for this age of a house. But still, you know, he's nervous. So I told him, You know, it's okay. You don't have to buy this house. Yeah, nothing wrong with the house, by the way. I mean, this cosmetics and stuff in there, as you would expect. But for him, it's the first one. So a little bit, you know, nervous.
Sam Wilson 13:19
What are you telling people to do on debt right now?
Dani Beit-Or 13:24
Excellent question. So let me tell you, first of all, what I wish for, I want interest rate to continue going up and if possible, faster. And I'll tell you why. Because people think this is counterintuitive. It is. But it's not. And this is why. So we are in a period where there's a lot of demand and a lot of shortage, right? So there's, you know, supply and demand is really the challenge here. Many buyers not enough properties, a lot of competition in the residential, almost every metro around the country almost everywhere. Very tough to be buyer, right? Like I told you earlier, I am a buyer all the time, like I am 95% buyer 5% seller, right or maybe 90-10. So I want to continue buying, I want easier time for myself and my investors to buy. So I tell them, if I hope that interest rates will go up, it will maybe move away some buyers because they're saying oh my god, this is going from a year ago to 3%. Now it's 4% Oh my god, it's a no, no, no, no. Well, in my mind, 4% is cheap. In my mind, in my experience. 5% is still you know, maybe not as cheap but not that expensive. You know what? Hopefully, if the interest rate goes up, more buyers will say we're not buying. That will make it easier for us to buy and I tell my investors so let's assume it's 5% and we are buying a property at 5%, oh my god the cash flow is tight. Yes, hang in there. Most likely within 3, 4, 5, 6, 7 years something will happen and you will refinance to lower rate but let's lock down the property, the quality one, hang in there. Be patient again with a patient, and we will probably read, you know, reposition or improve your finances, you know. So you may start with few years of more tight cash flow. And over time, hopefully, you know, the rent will go up, creep up like it usually does. And the rate at some point will go down, and you lock yourself into a good out. So it's gonna be a little bit tougher on the capital, guess. So what be patient long-term quality easy? People don't get that right. So simple. Still not hard to execute.
Sam Wilson 15:31
Yeah, absolutely. Do you prefer a 15 or 30-year data? Or what are you looking at right now? What do you like?
Dani Beit-Or 15:36
I'm 30. If I could do 40, or 50, I'll take that too. When we're talking, I'm, before I was born in Israel, right? When you come to this country, and you see those amazing mortgages, they do not exist in many other countries, that, unindexed, right. So we borrow now, in our principle is not indexed to the cost of living. This is crazy, right? What does it mean? There's erosion of the principle, right. So that's why I rather take with a cheap rate, even 4%, I see it as cheap. So 30 years, you know, it is a little bit higher rate. But you know, typically, but the cash flow is going to suffer less because you are more to the amortization schedule, and the payments are lower. You are, there's a longer-term erosion of the principle, also a benefit. Plus, if you really want to pay your mortgage or 30 mortgage in 25 years or 20 years, you want to be flexible, easy, it's super difficult to pay your 15-year mortgage in 20. Right. I love the flexibility. I love the more payments for the cash flow. You know, I love the fact that what it does for my principal, it's gonna so, and by the way, let's face it, most of us would not hang on to the mortgage for 30 years.
Sam Wilson 16:48
No, certainly not. Dani, I've really enjoyed this. Yeah, certainly, thanks, taking for the time to break down your business, why you do what you do. And kind of what you see, you know, it's you said it over and over the right time to buy real estate right now. You're always in buy mode. Yeah, I like the conviction that you have behind that. So that's loads of fun. Thanks for coming on today. Let's jump here into the final three questions. We will do three questions today. Here's the first one what is one mistake you can help us avoid? And how would you avoid it?
Dani Beit-Or 17:16
Well, I think that a lot of people just jump in and start asking for properties and start asking for assistance, which, joining mailing list, and they don't even take five minutes to kind of set set their own expectations. What's my budget? What am I looking for bedrooms, bathrooms, and you know, kind of write down that. I tell my clients just write what your either ideal day looks like or your threshold deal looks like. And then when you have your, you know, who says it has to be residential? Who says it has to be my, you know, out of state? What is your values in terms of the deal you're looking for? You're more in cash flow, you want appreciation, yes, mortgage normal, kind of outline those 10, 15, 20 questions with yourself for five minutes with your coffee in the morning or a cup of you know, like a wine in the evening. Then sign up on the rights, you know, databases or everything that comes your way, compare it, here's a property I'm looking, here's my data set, compare it, if it's irrelevant, shove it away, if it's relevant, explore further. Absolutely. But you know, just running all over usually ends up with doing very little or getting lost.
Sam Wilson 18:26
Right, and then if our listeners want to get in touch with you or learn more about you, what is the best way to do that?
Dani Beit-Or 18:31
So my web identity everywhere is, my company's name, which is Simply Do It. So Facebook, we’re Simply Do It. YouTube, Simply Do It, web, Twitter, all of those areas. I'm not necessarily very popular or actively in all the social media, but Simply Do It, just as a catchy name is where you would normally find us, our website is shockingly, simplydoit.net. So that's very easy. On Facebook, you'll find us to get in touch with the website through one of the social media easily Simply Do It.
Sam Wilson 19:08
Dani, thank you for your time today. I do appreciate it.
Dani Beit-Or 19:10
My pleasure. Thank you for having me. Thank you for excellent questions.
Sam Wilson 19:13
Hey, thanks for listening to the How to Scale Commercial Real Estate Podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen, if you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners, as well as rank higher on those directories. So I appreciate you listening. Thanks so much and hope to catch you on the next episode.