Becoming the Ultimate Passive Investor with Litan Yahav

Litan Yahav: [0:00] At the end of the maturity of that deal, four or five years or six, seven years, doesn't matter, they'll sell the property and then they'll split the profit with the LP as well. So these deals typically before this crisis or interest rates and all that, the return to LPs usually over between, I'd say, 15 to 20% IRR. Obviously, there are some deals that are less, some deals that are more, but and for me, that's freaking amazing as an LP not doing anything, you get 20% IRR and also getting ongoing cash flow distribution.

Speaker 2: [0:32] Welcome to the Collecting Keys Real Estate Investing Podcast with your host, Mike DeHaan and Dan Austin. From wins, losses, horror stories, and tactics for optimizing your business, Mike and Dan take a real uncensored deep dive into the ins and outs of running a full time real estate investment and wholesaling business.

Mike DeHaan: [0:56] What's going on, guys? On this episode of the collecting keys real estate investing podcast, we have Latanya Hov, who is one of the ultimate passive investors that I think I've ever met. So, you know, a lot of people when they get into this game, their goal is passive income and passive investment opportunities, which for most of us is a farce or a lie, and not really doable. It's not really doable on a large scale, but he has figured out how to make it his full time investment to priority and portfolio. And not only that, but he's also working on a startup platform. Yeah. Yeah. An app and a platform to manage the actual, like, paperwork side of it, which is really where it starts to

Dan Austin: [1:37] be less passive. That's what I love about him is he, the thing is he's so passive, that he's doing passive investments, that he needs to make it even more passive by adding in an app that can help him track his passive investments, because he doesn't even want to track it. Yeah. And he's like, and that to me is important. And he kind of towards the end there, he talks about it compares it to personal capital, and it picks up where personal capital just can't do it, because in for you all that don't know, personal capital is like a personal finance tracking app that you can have on your phone, make accounts, all that. His is like that, except for you can also add in your real estate investments, your real estate portfolio, your private equity investments, so on and so forth, and adapt it to however you want. So you can have

Mike DeHaan: [2:16] your own family office. Exactly. So once you outgrow kind of the more mainstream personal finance apps out there, the one he's working on called Vyser, v y z e r dot c o. So gonna be able to pick other pieces for you. And overall, it's super interesting guy. He gets into how he made his money originally, which was by launching a startup and selling a startup that was for creating digital models for analyzing diamonds. And he gets into It was super cool. Gets into how it was like literally, you know, walking a beat, like knocking on doors trying to sell these things in the street of India.

Dan Austin: [2:49] Straight up door knocking in India. That doesn't get any more harder than that. Yeah. I think that's awesome.

Mike DeHaan: [2:54] Yeah. Yeah. Just super fascinating guy. And, you know, he's worked hard. And now he just wants to invest passively and make real money without having to work anymore. So lots of interesting stuff to be said there. But anyways, guys, if you enjoy the show, or you enjoy our podcast, or you just wanna, you know, support Dan and myself, go and subscribe to this podcast anywhere that you listen to your podcast and leave us a five star review. Also share with anyone who might find it interesting. Aside from that, you can follow us on Instagram at Mike underscore invest. I am at investor man Dan. What is that background noise? I'm so glad that wasn't quite a while before.

Dan Austin: [3:28] I have a contractor out there building a building for me outside of my house.

Litan Yahav: [3:33] Sorry, it's a sock.

Mike DeHaan: [3:34] Okay. So if you're hearing this intro, and you're like, what is that? Don't worry. It was not a problem during the recording. Anyway, anyways, guys, enjoy this episode. Subscribe and see y'all next week,

Dan Austin: [3:46] man.

Mike DeHaan: [3:46] Let's adore that. Yeah, we'll see y'all next week. I don't know. Enjoy the episode. Thanks so much, guys. So, Luton, welcome to the show, man. And glad they're glad you're on.

Litan Yahav: [3:56] Thanks, guys. It's amazing to be here.

Mike DeHaan: [3:57] Appreciate it. So I'd love to start sort of like where you came from, especially because, you know, you were able to start pursuing these passive investments. I mean, main thing I will preface for people is if you don't have money, you can't really be a passive investor because you you need money to make money. You started in the tech space and that's sort of where you got this nest egg to start being a passive investor.

Litan Yahav: [4:18] Right. Yeah. So I was lucky enough to build a good company, a good startup, and a very weird industry, but it went well. And that's sort of like when we made our first money to take that, make some mistakes investing actively and then decided just to go full passive on it.

Dan Austin: [4:33] There we go.

Mike DeHaan: [4:34] Perfect. So so so it's a weird industry. So what does that mean? Like you were it was like the ultimate like, a foot pick selling website or like that's what I just assumed that

Litan Yahav: [4:44] it's even weirder than that, I guess. Yeah. So background wise, I was in the Navy for six years and I went went to school, so in Israel, I mean, I I went to college when I was 24 years old and finished that when I was 28, 29, and then started a company in the diamond industry. So like what we did, we found there was a bunch of inefficiencies in the way diamonds are traded around the world. People actually travel the world with diamonds in weird places or ship them with these shipping companies for inspectors. Like, you can have a manufacturer dealer in India selling a diamond to a store in New York, and they'll be shipping the diamonds for inspection, and then they'll be shipping it back because they didn't like it. So it's like this crazy industry of trade or b to b. We said that doesn't make any sense. When you can buy a Porsche on eBay, why can't you buy a diamond online? Just seeing everything. We built a machine, photographing diamonds in three d, enabling training them physically, like, virtually before shipping them around the world, and that went well. We scaled that up, sold the company in 2015, stayed on board for a few more years to manage and scale it even more. And in 2018, meanwhile, my co founders moved on. Now, just to put things into context, like we sold the company was a cool exit, we didn't make 10s of millions of dollars, but we made enough money that at that point decided, alright, obviously we're approached by a bunch of like wealth managers and financial advisors to say, hey, give us your money and we'll manage it for you. We're like, no, I don't wanna do that.

Litan Yahav: [6:07] I'm gonna I think I'll do alright. And I don't believe in day trading, but I do love real estate and I do love private equity and these like more alternative assets. And the cool thing in Israel that is that every second person here invests in real estate. Really? Because just like high level, in Israel, the equivalent to a four zero one k is mandatory. So you don't have a choice when you work the employer and you have to allocate money that goes into a retirement account. And so essentially, every excess amount of cash you have, you look for ways to invest it. And the real estate market here is really, really too, like, too high. It's like only investing in Manhattan, for example. So what happens is a lot of Israelis have become real estate entrepreneurs in The US and in Europe. And so they'll go find opportunities, many multi multi family value add type deals or your ground up development type deals, and then raise money from their friends here in Israel to do those deals. And so we know a lot of people that do that. And they know a lot of people that do that. And that's how we just say, why don't we take the money we have and start to find people we can trust and invest with them. Anyway, that was like, we can segue into that now if you guys want or down the road, but that was my diamond industry.

Dan Austin: [7:21] Yeah.

Mike DeHaan: [7:22] Experience. That's super cool. So I mean, first off, I'm super curious, how did you even get into that as your startup? Like the diamond industry? Like that's so niche, you must have had some sort of family connection or something, I would guess.

Litan Yahav: [7:35] No, dude. So we so me and my co founder, so it's a both of us were in the military for six years. And we were in this entrepreneurship program in college that's funded by Sam Zelle, by the way. But but sort of at that point, the beginning of this year long course, you're like, let's find a business to build or find an inefficiency, you know, in the industry. And a friend of a friend introduced us to the diamond industry, and we walked around this insane like, you go to this building in Israel, which Israel is a hub for diamond trade, not meant no one knows it, but it's a hub for diamond trade. And you go into this building, which you've never seen this amount of security before in your life. Like, TSA is a joke. So you get into this like highly sophisticated securitized building, and then you get fifty years sent back into the past, into this building that you have hallways with doors and people walking down with suitcases filled with diamonds, and on these doors notes saying, I'm looking to buy this and this diamond, I'm looking to sell these and these types of diamonds, handwritten stuff, and these brokers with suitcases knocking on doors. It's like insane. It's like, you know, it's totally surreal.

Litan Yahav: [8:42] And so like, this is like, we're like, wait, hold on. This is how things work in this multi billion dollar industry? No way. Let's find a way to make it more efficient. And then, obviously, when you come to an industry you know nothing about, then the sky's the limit. Like, you you don't limit yourself to anything.

Mike DeHaan: [8:56] That is a really valid point. When you don't know anything about an industry, you don't know what you don't know. No bookends. And that's why you have, like, Elon Musk was able to come in and disrupt the auto industry. Right? He's like, I don't know how to freaking build a car. But all I know is this is what I want. And so we didn't follow the same general guidelines that every other car startup or manufacturers

Litan Yahav: [9:15] or the social media industry, right? Or whatever totally,

Dan Austin: [9:18] you know, we're finding that out.

Mike DeHaan: [9:19] Yeah, exactly. Yeah. Now. Yeah. Now to you'll see how that goes. That's really interesting, though. So like, yeah, I I mean, I guess that makes sense. You just basically sought the opportunity in a variety of different ways and that's how you found it just through.

Litan Yahav: [9:33] Yeah. Mean, it's like one of those things that because everyone that's in the industry is like so used to accustomed the way things operate. And it's these are family run businesses. So all the kids are used to what their parents did and what their grandparents didn't. So it's like, when you come with a fresh pair of eyes, you're like, what that doesn't make any sense. And timing also for us was everything because we were just in that phase where the next generation was coming in. And this next generation was born with iPhones, so they want they want tech. They don't wanna fly to really disgusting places and walk around. Anyway, they they don't wanna do that. They want they do wanna travel sometimes, but they wanna choose when they travel. Anyway, so for sure, We were lucky. Yeah. Have an amazing team and an amazing timing, and we managed to build a piece of technology that was really unique and enabled the trade of these tiny beautiful objects online. So it went well. Again, we sold the company didn't make 10s of millions of dollars, but we made enough at that point. Yeah.

Mike DeHaan: [10:34] Awesome. Perfect. That's great. I mean, yeah, you did the first step, made the money and you got, you know, increased the velocity of your wealth just that way. And that's sort of what we always teach to we have a mastermind called the instant investor program. And with that, one of the biggest things we always emphasize for people is the first thing you need to do if you're going to get into seriously building an investment business, you have to have capital. Whether you know, you raise that, you do like some wholesale deals where you get quick assignments, things like that, you know, you do some flips and get some large money coming in. If you don't do that, you're never really gonna be able to invest and create real wealth. You know, not in any appropriate amount of time. If you wanna wait ten, fifteen years, that's fine. But, you know, realistically, most of us, you know, we wanna do things quicker than that.

Dan Austin: [11:16] Absolutely. You've got to build that foundation. Makes it so much easier when you have a good strong foundation. Doesn't mean you work any less for it. Like you built a company, I'm sure you had a lot of late nights building that company, and then you get this exit. Yeah. And a lot of people might back way and say, I don't want to, but your story continues on, and you decided to take that foundation and build something else. So I'm curious to hear about the first and only active real estate investments. You said something you did in Ohio maybe, is that where they were at?

Litan Yahav: [11:44] Yeah, so we have this money and we talk with a bunch of people around us that do real estate, and at some point you just need to jump in the water, like overanalyzing stuff. At some point you get into stagnate mode and you said, screw that. Let's just do it. And so we have this guy, this company here in Israel that does sort of fine single family homes, does full turnkey. So you just buy this property. They connect you with a property management firm and totally remote. Like, I I we did not see so me and my co founder go and he's buy these two single family homes in the suburbs of Cleveland, Ohio. Mhmm. Like cheap, probably, like $260,000 homes. No leverage because whereas in Israel, no one's gonna give us a loan. That's obviously, it would have been better maybe to leverage because I personally love cheap debt even though today it's really really hard to find, but back then was really easy. So anyway, so we buy these two single family homes, and and from the get go, it was just a shit show. Like, we we had really bad I mean, had sort of, like, just didn't pay. We had to evict them, and and then some some of the new tenants come in, same process. Some of them ruined the properties.

Litan Yahav: [12:50] Like and at some point, the municipality came in and started to demand things that we fix on the municipality sort of area of the houses, like the sidewalks and driveways and things that were usually not in our district, like not under our responsibility because but because there were so many investors coming in and buying properties in these neighborhood, the municipality took advantage of that and tried to sort of leverage their holdings to fix things that would value add to the neighborhood itself. So it was just like a a continuation of really bad luck, bad decisions as well probably, and a lot of work. Like, even though we had a property manager, we never visited a property, we still dealt with this on a weekly basis on these properties, and we're like, wait. And while doing so, obviously, you know, we still had more money to invest, and we were exposed to this whole world of real estate syndication, where you put in money and you don't do anything. Yeah. And potential returns are probably a little less than best case scenario with single family short or long term rentals, but the amount of involvement is exponentially lower. And so we just heard heard to see that and say, wait. Why the hell are we doing this stuff? Yep. Where we could take the same amount of money, put it into a a fund or a syndication, and just not do anything.

Litan Yahav: [14:17] And just, like Yeah. Account the the checks to come in every quarter.

Dan Austin: [14:20] Let somebody else do all the work.

Litan Yahav: [14:22] Yeah. Exactly. Yeah. Don't get me wrong. There are a lot of problems and difficulties investing Sure. In indications, but they're all one time problems. What I mean is like Yeah. Finding the operator that you can trust, that one will not screw you over to knows what the fuck they're doing. Right?

Dan Austin: [14:42] So that those are right.

Litan Yahav: [14:43] It's really hard to find these people. Once you do, then it's just a matter of, well, do I want to get into this deal? Or don't I want to get into this deal? And then it's easier. So we've gathered over the past seven years, like, I'd say 10 of these different operators that we've been investing with. We only sold those two single family homes like a year ago. And we lost money on really see kept them. It's at that point where you don't know, wait, should we continue to rent them? I mean, will the market go up at some point, like really hot, really fast, and we'll make a profit or at some point, let's just cut our losses and get rid of these.

Dan Austin: [15:15] Yep. Okay. Get them out of here. Wow. I think you said something that I would like to point out to that you thought because you hired a property manager that you wouldn't have to do anything, but you're still dealing with the properties every week. That's just the nature of it. That's what you do. Like Mhmm. You know, we have I have two property managers that I work with, and at least one of them a week, I'm managing them, wondering like, hey, where's this? Where's that? Is this working? Are they doing this? Or are they not doing that? Are they following up on your request? Because inherently, they just, for some reason, aren't that great at it. It doesn't matter who who they are, the property manager. So you still have to manage property managers. And it's your property and the well-being of your property that you're caring about so much, because you have all your money tied up in a single property, so you really wanted to manage it well, as compared to when you're selecting an operator like you're saying, and actually identifying the best operator possible and investing with them. And it's not all of your money into one asset. It's your money and other people involved with one larger asset typically.

Litan Yahav: [16:17] Yeah. And also, one of the things we we sort of identified is that you buy a single family home, you're basically exposed to one door. Yep. And if that door is empty, you're screwed. But you you can't take obviously the same money and buy a multifamily complex with 200 doors, but but essentially, imagine diversification. When you do that, if you get into a syndication that buys that complex, then first of all, for us, you take advantage of leverage. Right? Because they're leveraged and you're just a small capital in it. Two, they're doing all the work. And three, it's like there's there's so many doors. The worst case, a few of them are empty, it's not the end of the world. You so anyway, so that was for us a game changer at that point.

Dan Austin: [17:00] Gotcha.

Mike DeHaan: [17:00] Yeah. Absolutely. So, yeah, I'd love to go back to what you said before too about looking at the different operators that you have to connect with. So I feel like that's such a big thing, especially when people are sort of getting into investing in syndications and that whole process. I mean, especially for all of us in GoBundance, we could we all know a 100 plus people that are trying to save money right now. You know? But it's like, do you actually determine which ones know what they're doing, which ones actually have good deals? Especially over the last couple years where cap rates have gotten so compressed. I mean, that was even a strategy people were doing was they were getting the job like 90 of the way there, and then trying to find someone else to offload it to, so there was a little bit of meat left on the bottom. Yep. You know, and it basically just everyone kept taking a smaller and smaller bite until finally someone gets stuck with just a bone at the end of it. Right? So how exactly do you analyze that? Like, what's your process?

Litan Yahav: [17:52] So it's not such a sophisticated process on my side, to be honest. So first of all, like I said, my first deals were with friends of mine in Israel or friends of friends. Just people I trusted are not gonna screw me over. That was for me the most important aspect of it. And as we moved forward, we sort of identified more aspects that were important for us, but that was the first most important one, just trust. Right? Mhmm. That the numbers they're saying are are that they're legit, that they they're not gonna lie to me that they're trans everything just is there and there's integrity, and that they've been doing this for a certain amount of time. But then at some point, we sort of exhausted the people we could trust here, and then finding others that you can trust becomes a real complex situation. How do you find operators that you can trust? And that's one of the reasons I joined GoBundance by the way. So I I felt that there was a high level. First of all, there's a barrier to entry and so usually very high quality people join the group. And then once you're in, they're very much keen to protecting their reputation, so they're not gonna screw you over. At least my my take on it, I might be totally wrong.

Litan Yahav: [18:59] That's valid. That's very valid. And then I ended up investing with a few guys in GoBundance that are our operators. And now down the road, this is a span, I think, three or four years and or even five years into our investing experience, and at that point, you know which questions to ask the operators and what answers make sense and what don't. And for us, our strategy has also also been, I prefer to invest with smaller operators. First of all, even what the like, an operator most people don't even know what they will they're gonna say there's there's there's three main terms in this world of indications. Right? There's a sponsor, the operator, and the syndicator. And then there's some other other GPs and LPs and and capital raisers and all that. But at the end of the day, we didn't even understand that we're invest sometimes we've invested with people that aren't actually doing the deal. They're the fundraiser for the deal, which is fine, but when you know that they're these different players in that industry, for us, it was important to understand it. Second, sort of when you invest with these people, we've always preferred, if you have access to and usually many times people don't have access directly to operators, and then usually a fundraiser is great because they vet that operator for you, but just to know who you're speaking with is important. Yeah.

Mike DeHaan: [20:17] Do you think you could give like a really quick breakdown just for people what the difference is between a sponsor and operator and the syndicator?

Litan Yahav: [20:23] Yeah. So essentially, every deal requires capital from investors, financing from the bank or from a lender, finding a property, and then operating that property or the property management firm that operates the building.

Mike DeHaan: [20:39] Uh-huh.

Litan Yahav: [20:40] And so, essentially, there are within that, usually, a sponsor or a syndicator is in charge for fundraising. And then the operator is in charge for operating finding the property, operating the operate the property management firm and all that. Now sometimes the operator is also the syndicator and the sponsor. Meaning, the operator is also one who raises the money directly from investors. Also, the one that finds a deal, also when the operator is the owner. For us, the reputation that matters usually is the operator. The person that finds a deal that communicates with a property management firm, and hopefully that raises the money, but many times when they become bigger, many times the operators don't deal with raising funds. They want to out that to someone else who raises funds for them. Or early stage operators that are smaller, they'll find a deal, but they don't have access to money until they'll collaborate with a sponsor or a syndicator, go and raise money to invest in that operator. Now that's like the real estate terminology of syndications. But then there's the more financial terminology, which is basically there's a general partner to the deal, and a limited partner to the deal. Is this is this like the right direction? Or am I dumbing it down to?

Mike DeHaan: [21:51] You're good. Yeah. You're the first person we've had on that's like really dove into this stuff. So it'll be

Litan Yahav: [21:56] This is really good. Very valuable. So so the GP, which is the general partner, many times is the operator. And the LP, which is the limited partner, is the person like me who invests into this syndication. Alright? But and this is how they're like how it becomes even more intertwined. Many times there are co GPs, meaning that term that we gave to the sponsor syndicate that that's a fundraiser can get a co GP, meaning they're gonna have a cooperation with that operator on the general partnership level, which essentially just means they get a cut from the fees and from the profit. It's also its terminology is important. So but let's just the simplest structure, there's a general partner, there's the limited partner, the limited partner gets the money into it. The general partner might also contribute money into the deal. But they're the one that's liable for the financing. They're the one that sign all the documents with the seller. They're the one to do the active stuff, the stuff that I don't wanna do. And they take a fee for that. It might be a closing fee, a management fee. Then they take a fee, they take a cut from the profits. And then this is a whole like a whole world that we can talk in a whole episode of Bish about how profits are distributed and all that. But, I mean, essentially, like the most common deals are you'll invest usually, the minimums are around $50,000 as an LP. I've heard deals that are down to 10,000 if you're a first time LP, but usually 50 or 100,000 is a minimum. And then you'll invest that into the deal.

Litan Yahav: [23:31] Let's say it's a multifamily value add type deal, meaning the operator buys a multifamily complex, plans on renovating it, increasing the rent. And then after a few four or five years, after everything has been renovated, then they sell it. Now ongoing throughout that period of time, they have cash flow and they have profits. They'll distribute that to the LPs. Usually, like 7% on what you've invested as an LP, you'll receive ongoing as a cash on cash return from those distributions. And then at the end of the sort of the maturity of that deal, four or five years or six, seven years, doesn't matter, they'll sell the property and then they'll split profit with the LP as well. So these deals typically before this crisis or interest rates and all that, the profit the return to LPs usually over between, I'd say, 15 to 20% IRR. Obviously, there are some deals that are less, some deals that are more, but and for me, that's that's freaking amazing as an LP not doing anything, get 15 to 20% IRR, and also getting ongoing cash flow distribution. So that sort of, I I don't know, that's like seven minute overview of like syndication, I hope it was out to you guys. Yeah, it was amazing.

Mike DeHaan: [24:45] That's great. That's great. Like I said, you're the first person that's come on and actually does this seriously, I guess. We've had people that come on and like dabble in syndications. This is your full time gig. And I hopefully people could take away from this as well that, you know, people that come in and spout about the complete acid nature of syndications, like, yes, it's true once the deal is done, as you're sort of, you know, presenting here, there is thought that has going behind it, there is research that has to go into it. And you kinda need to understand what you're signing up for. Because one thing I found, especially with people that sort of come into money for the first time, they start looking at these deals, and they're ready to just like jump on anything, because they wanna be a part of like a big boy deal. They don't even know what the hell to look for, or like what to even expect. And, you know, you've you've been around long enough that you do that. So when you say one thing that I me personally, that I've never quite understood is IRR. Right? Can you like, what exactly does that mean? Like, I understand how to calculate it numerically, like, I've looked up the formulas how to make it in Excel, but at base level, what what is an IRR?

Litan Yahav: [25:44] Yeah. I I think that's a that's a great question because many people have no clue. I've had operators report the IRR and it's not even IRR. I get that. Yeah, right. Alright, everyone, if you put, if I give you a $100 and after five years you give you back a 150, I made $50 profit, which is 50% return on investment, right? That's the ROI, right? And that's sort of like, most people know what ROI means, right? So give you a 100, you give me a 150 back, 50% profit, 50% ROI, Or 1.5 multiple on the money, right? Same thing. But now if you want to calculate that on an annual basis, you can just say, all it was five years, divide the 50% to five, so it's 10% annualized return, right? All right, now a different scenario where I give you a $100, every year you give me a 100 back, you give me 10 back, And after five years, you give me a 110 back. Over the course of those five years, the end game is the same ROI. But both in both situations, I get a 100 I give you a 100 and you give me a 150 back. Right? And it's both situations, the ROI is 50%. Does that make sense? Yep. But the second deal is a lot better than the first one. Yeah. Yeah. Because I got cash early on. I didn't have to wait for five years. I got cash after on year one, and the only formula that sort of takes that into account is IRR. So the IRR just takes the cash flow into account and creates a situation where you can then compare apples to apples between investment and not just say ROI.

Litan Yahav: [27:32] And when you're

Dan Austin: [27:33] saying cash flows and what you were saying is the timing of cash flows are taken into account because money today is worth more money, generally speaking, than the same amount of money tomorrow.

Litan Yahav: [27:42] Yes. That's one aspect. But the second aspect is that when I get that 10 back, I can reinvest it Yep. Into something else. And that money will now be deployed Again. And working for me to generate more money. Right? So so so anyway, so it so it's IRR is is super important, and then there's sort of the the the Excel or the more specific one, which is x IRR, which if you look in Excel, there's no IRR. Anyway, it's a we won't dive into that.

Dan Austin: [28:10] So the good question then I guess from here would be, I don't know how many syndicator emails you guys get, but I get quite a few of people spouting off their fund that they're starting, And they will give ROI, a ROI, annualized ROI, and IRR. Not all of them necessarily will be presented, but sometimes it'll just be like, here's the annualized ROI. So would you from your point of view, what are you gonna review? If they if they pitch you annualized ROI, does that matter to

Litan Yahav: [28:40] you or are you gonna ask directly what the r IRR is? So a ROI sometimes is the correct name of that is AAR, average annualized return. And that's what most syndicators will use for that average. But it doesn't mean shit. Like what matters is that I have

Dan Austin: [28:58] Because they can send maybe a higher AAR annualized. I can't even say it. Average. Average annual return.

Litan Yahav: [29:07] Right.

Dan Austin: [29:08] Yeah, sorry. I'm good. So they'll show you that. And I'm just trying to pick up this to see if I'm accurate, because that number might look better. It might lure you in. It might be a better graphic, and not show you

Litan Yahav: [29:18] the IRR right away. It's like telling you, listen, you're gonna make 5000% on your money.

Mike DeHaan: [29:23] Okay.

Litan Yahav: [29:24] But it's only gonna happen a hundred years from now.

Dan Austin: [29:25] Doesn't yeah. Exactly. It doesn't account for when.

Litan Yahav: [29:27] Well, that's the AAR. Right? That that Yep. Helps. But then when do I get the money back? Only in a hundred Or years from do I also get it ongoing? And it really matters, right? Because it doesn't help me if I'm not only to see profit in another ten, fifteen years, I want to understand what's going to happen ongoing. Or at least to compare deals. Cause the other way is there's no real way to compare deals. Like, if you think about it, like when you look at those multifamily value add type deals, or ground up development type deals, like usually a ground up development type deal will not have, the IRR won't really matter because usually all the upside is at the end. Because you you invest, and then they go and they build a property, and then they sell it after two years or three years. Right? Usually, won't have the IRR won't really matter in that point, unless they they they have capital calls, and they don't call for all the money up front, only like on as they move progress the project. But usually, you put a 100 in, only after two or three years you can get the money back as opposed to those cash flow assets where you have ongoing distribution.

Mike DeHaan: [30:28] Yeah. Interesting. So I guess, you know, main thing you look at is the operators and then the IRR. So I guess people have context, what is, like, considered a strong IRR in your opinion, you know, assuming that all the operators are good?

Litan Yahav: [30:40] Yeah. No. So again, this was pre crisis. So also many times the IRR or the performance of these assets and these investments include not just the cash flow from the profit of the property, but many times these operators will go and they'll refinance the property, meaning they'll take another loan from the bank in order to pay back investors so they get money back earlier. And then also, by the way, improves the IRR, so they're incentivized to do that for you. But you also get cash out of the deal while still holding equity, meaning you'll still be part of the upside at the end and get ongoing cash flow. But that assumes that interest rates are low because as interest rates rise, it it makes less sense to refi a property. Right? And so Right. Definitely. But based on historically, what's happened over the past few years, good returns have been. So I had a property do 35% IRR, an LP as an LP. Right? That's amazing. So that's the best thing that I mean, that's the best I've seen, but on average, it's around 16%.

Dan Austin: [31:50] Gotcha. So some of these could be home runs while others you're just expecting that good return around 15%. But you never know, could pop off a home run if if, say, interest rates go down or, you know, cap rates compress more than unexpected, you get a nice maybe grand slam. 35% IRR is pretty amazing.

Litan Yahav: [32:09] But I also wanna say full disclosure. Right? So I invest with small operators. So like one two man shows or woman shows just because usually the smaller operators, you know, do one or two deals a year, and they're super hungry to get these amazing deals. And they're gonna be hungry to make sure they go through and won't dare to lose any money or, I mean, it's high risk because they don't have as much experience as the huge guys. But on the other hand and I'm not saying this is right or wrong. I'm just saying for me, the way it is, I prefer those because the bigger guys have a lot of experience, but also for me that they have really nice offices, they have huge teams, they have a lot of limited partners like me, so they have hundreds of thousands of people like me. So they need a lot of deal flow, and they'll send a deal every other week or every other month. And it's like, it's a numbers game. Some of these deals will be amazing, and some of these deals will be subpar or even fail. And for me, I I prefer to find the people I can trust that do those that that, like, lay work to find the best deals and invest with them, but this tends to be higher risk, and they're also gonna share more of the profit with me. So so my returns might also be thanks to the fact that I do invest with people that that I'm also closer to the table. I get bigger chunk of the cake at the end

Dan Austin: [33:26] of the day. When you say smaller, like, what size of properties or investments are these smaller operators making? Are we talking 2,000,000, 10,000,000?

Litan Yahav: [33:36] They can buy 200, 300 door complexes Just they'll just do one of those or two of those a Okay. As opposed to others, they do one of those a week maybe or or every other week. Gotcha. So yeah. And some of these also do, like, flips since some of these do ground up, and some of some of these are storage units, and so it depends. But now I'm more interested in other types of asset classes, but doesn't really matter which as what the asset class is, as long as I'm invested with people I can trust.

Mike DeHaan: [34:02] Yeah. Awesome. I love it. And now since this has been your full time gig for a while, your full time investment for what? I'd like to say about ten years?

Litan Yahav: [34:10] Seven years. Yep.

Mike DeHaan: [34:11] Seven years. Okay. Seven years with 10 different people, Now, you obviously, I have figure out how to manage all of those, how you manage your performance, your cash flows, everything like that. And that's where your next startup that you're building has come from.

Litan Yahav: [34:25] Yeah. So I mean, if you think about investing, so when you invest in one of these deals, let's just say you put a 100,000 to a deal, they're supposed to distribute 8% cash on cash return every year, but it's distributed every quarter. So let's say $2,000 every quarter. And after five years, supposed to exit, you know, it's supposed to make a 150, whatever. So when you invest in one of these deals, it's really easy to track everything. You get a statement every quarter from the operator saying this is the performance, this is the distribution, and then a week or two later, you're gonna get the money in your bank account. Fine, easy. When you have 10 or 15 of these, good problems to have, but it's it's hard. Like, I'll get an email from an operator, he'll say, is the performance. I don't even remember what I invested, how much, what were my expectations. And even if I do a week or two later, I'm gonna get money in my bank account, I'm not gonna remember what is this associated to.

Dan Austin: [35:14] Right.

Litan Yahav: [35:16] Add that on the addition to everything else in my life from a financial standpoint, I didn't sign up for that. I don't wanna work in managing my money. So you said it's a full time job, it's not I don't wanna do, don't want

Dan Austin: [35:25] it to be

Litan Yahav: [35:26] a full time job, I wanna build startups, that's my that's my passion, right? Yeah. And so two and a half years ago, me and my co founder said, I mean, this, let's just build ourselves a piece of software to automate the tracking process. Yeah. A place that I could just forward those emails, upload documents to, and it analyzes them. Link in all my bank accounts, and and it'll automatically track those transactions and link transactions to specific investments so that they'll just let me know, hey, this operator is doing better than expected performing or whatever, this even missed the distribution. Right. Or let me know when there's there's an exit of it coming up because, I mean, at some point, these are gonna end, then you wanna be prepared with more, okay, the money too. And so, anyway, so we built that for us, and then while doing so, bunch of friends wanted it as well, and we're like, wait, There might be a lot of people like us in the world. Yeah. And so we started to research the hell out of the world and found that millions of people like us, especially in The US. Mhmm. People like us that have more complex portfolios, and at the end of the day, need to decide between building a crazy spreadsheet, processes and stuff around that, or paying someone tens or hundreds of thousands of dollars a year. And so that's why we built Pfizer, sort of to bring a solution to people like us, a software that sort of serves like a virtual family office, a place where you just throw everything at, link in all your bank accounts, and then it'll monitor everything for you, project forward to help you like make better decisions. But the cool part is we're also helping people to see what people like them are investing in, Creating more transparency in the private markets, understanding, wait, this is an operator that 50 people within in the adviser have invested with, you can communicate with them and see, like, actually who they've invested with.

Litan Yahav: [37:05] Because I've spoken with operators that I've never met before, and that there's no real way to vet them other than them telling you, hey, yeah, I'll connect you with these five people have invested with me. But how do they know that they're connecting with, like, people that were they're probably not connecting me with people that were in bad deals. Right? For sure.

Mike DeHaan: [37:21] Yeah. Right.

Dan Austin: [37:21] Exactly. So that's one one point I wanted a clarification. So this isn't just for real estate syndications. You said kind of like your own family office. So you can, I'm assuming, set it up so that it could be any other alternative investments that you bring in.

Litan Yahav: [37:36] Anything, not just alternatives. Yeah. You could it can be public markets, private markets, boats, cars, w two n guys. Anything. The idea is to have that one source of truth for your financial life. Mhmm. So I mean, in The US, they're, like the leaders like Mint and Personal Capital, which I'm sure you guys have heard of, but these companies, once you have a complex portfolio, they just don't cut it, right? So Yeah. That's great.

Mike DeHaan: [37:58] Yeah. And what's your basic, inVyzer,

Dan Austin: [38:00] is that what you Vyzer.

Mike DeHaan: [38:01] How do you spell that?

Litan Yahav: [38:02] Oh, it's Vyzer, it's v y z e r dot CO.

Mike DeHaan: [38:06] Z ER dot CO. Cool. I'm gonna go check it out right after this.

Dan Austin: [38:09] Come on, Mike. I thought you knew that.

Litan Yahav: [38:10] Definitely need it.

Mike DeHaan: [38:11] Well, no. I mean, I haven't looked at it at all, but like, that's definitely something I'm in that boat right now just with all the different rental properties. You know, I made my first private equity investments this year. You know, we have a we do hard money lending, you know, I own securities. Like everything right now is just

Dan Austin: [38:28] like It's hard to manage it.

Litan Yahav: [38:29] Yeah. And know where it's

Dan Austin: [38:30] at.

Mike DeHaan: [38:30] It's so hard to manage it. And like most of time, I don't even know how much money I'm making or not making because it's like Yes. All over the place.

Litan Yahav: [38:37] Oh, you're right. And this is fucked up. Right? You work so hard. Mean, you have no clue if you've been on the track to think I know.

Dan Austin: [38:43] Yeah.

Litan Yahav: [38:43] I've spoken with multi, multi millionaires about this, and they're like, yeah, my wife just asked me about this and so I just wrote a bunch of sticky notes and put them on the refrigerator for her to know where the money's at. I, what the fuck, you're worth $30,000,000 and that's what you're doing or? That's your method. Yeah. Anyway, yeah. Yeah. It's pretty crazy.

Mike DeHaan: [39:02] That's awesome. People listening are like, fuck these guys.

Litan Yahav: [39:04] Yeah. Exactly. So it's

Mike DeHaan: [39:08] think of it more as an inspiration, know, things to aspire to. Because even this morning, Dan and I, we were going over some of our deals that we're trying to figure out how to allocate resources for stuff. And Dan's like, so we're selling this property. He's like, we're only gonna be getting like a $130,000 back. And I was like, you know, we were like kind of bummed about that. But I was like, Dan, we used we had this same conversation two years ago, but we literally only had $40,000 to our names.

Litan Yahav: [39:34] Like Yeah. Now, 6 figures just doesn't cut it anymore.

Dan Austin: [39:37] Yeah. Exactly. No. I I really do like the idea to track this because if you nerd out, or you're just trying to fill out your damn one sheet for GoBundance, like, this would be super helpful, time saving. But also, it's so easy to lose track in performance. Like, when you're diving in and choosing to make an investment, you're a 100% focused on that. But then once you make the investment, like, you're just it's your mind's on to the next one, like, especially if you're like a deal junkie or whatever, like, you're on to the next one, you don't want to have to think about that, or follow-up on that to make sure or see where the money came from, or if your if your exits what you planned it to be, all that sort of stuff.

Litan Yahav: [40:12] You also don't want to be sitting on too much cash and too little cash. Now again, these are Sure. Wanna be in wealth creation mode, you wanna win it money to be deployed. I mean, again, that's alright to what happened over the past few years. I don't know what's gonna this upcoming situation, let's just call it 50. I don't know. I mean, interest rates going up. The zero risk interest rates might be to the extent where it might just make sense to put in the bank and just get the Maybe. Yeah. Right. APY. I don't know. I mean, I don't know what's gonna happen. But any so

Mike DeHaan: [40:43] Yeah. I mean, it's coming around weird. I saw the credit union that Dan and I use was advertising a 5.5% APY savings account rate.

Dan Austin: [40:52] I mean, that's on the

Litan Yahav: [40:53] other side. Zero risk. But I don't know if you guys sort of heard, like, the Fed just released the statement. Right? They they hiked it by another point seven. Right? Oh, did that is that today?

Dan Austin: [41:01] That was today. Yeah. That yeah.

Litan Yahav: [41:02] That was, like, a few hours ago. Yeah. It's like It's going up. God. That's crazy. So that credit that credit credit union might now be 6%. Honestly.

Mike DeHaan: [41:11] Yeah. Right? Yeah. At this point. Jeez. That's that's outrageous. Anyway. Alright. Well, to get towards the end here, I I love what you're doing. I feel like you're kind of doing stuff that I personally am striving to get to have enough capital to start having that made my primary investing. Because I mean, honestly, Dan knows, I'm a lazy man. I just wanna travel around and just make money and not have to worry about it. So, Well, to get in the end, I'd love to go into our sort of last round questions here. So first off is always a listener favorite. What is your craziest real estate investing story? And if you don't have a real estate investing story, since I know you've been mostly passive, you could also do what is your craziest business story. This could be good, bad, in the middle, I mean, the

Litan Yahav: [41:59] real estate crazy story. It's just that long episode with those two single family, which is like, we'll just really on repeat, just a sheer bad luck. But I mean, if I go into the diamond industry, one of the the funny stories is when we when we when we set out to build a product that would replace physical examination of diamonds, diamond deals, and we went to diamond deals and show them, hey, this is the result, what do you think? It's like a no. They tell us really like weird shit. They'd say, I wanna smell the diamond, like what the fuck? I wanna see the life of the diamond. And like when you're in, how do you replicate that feeling? So it's like, we got some really and people told us obviously, well, you're never gonna replicate the smell and life of a diamond through three d image. Obviously, we didn't listen to those.

Dan Austin: [42:47] Do diamonds smell? I never smelled white

Litan Yahav: [42:49] wine's ring. No. It's okay.

Dan Austin: [42:51] Full bullseye. It's just a thing. Okay. I was like, am I missing something? They don't.

Mike DeHaan: [42:55] I think if if you're greedy enough, they definitely can, man. It's Yeah. Like Yeah. It's like on, like, Blood Diamond when they, have the big one and they're like, you can feel, like, the heartbeat of African Yeah. Because they got

Dan Austin: [43:05] their arm attached to it.

Litan Yahav: [43:07] Yeah. Yeah. Probably. But

Mike DeHaan: [43:10] now that's that's interesting. So even having to come through that, yeah, that's I bet that had all sorts of crazy. Were there any, like, super crazy characters or people that you had to deal with on

Litan Yahav: [43:18] a regular basis? At some point in the business, we opened a subsidiary and office in India and Mumbai. No one not many people know, but Mumbai is responsible for 95% of polished diamonds in the world. Oh, wow. Really? Diamonds are mined in South Africa, in Canada, in Russia, whatever, and they're sent most vast majority of it through Dubai to India, and then they're polished and cut in India. And so there are these massive buildings. There's this diamond exchange complex with 29 buildings, like nine story buildings. And when when we founded the company, we needed to we opened an operation there. We we rented an apartment in Mumbai, we relocated a guy from Israel to live there. And me and my co founder were on off every other two weeks there. And all we did was knocked on doors every day, there's some funny, long buildings, nine floors each in six months. Wow. Really? And the funny thing is, when an Indian sees a white man, they're sure we're coming to buy diamonds. And so they'd open this sort of peek hole from their from their doors in the diamond machine to see me, like, a white dude wanting to come into their office, and they're like, open it up, serve me pea coffee, and then I'm gonna then I take out my iPad and I try to sell them stuff. And so the change in their face when you see that. Was just hilarious. Single time we do that, and so I was taking, I guess, advantage of that, but it was it was it was interesting. That's great.

Mike DeHaan: [44:42] No. That's awesome. And that's like the epitome of hustle. That's crazy.

Dan Austin: [44:45] That's crazy. That's it's not like you built this system and sat back and had somebody sell for you. You were literally beating the pavement. That is really crazy.

Litan Yahav: [44:52] I know. We we hustle the toll of the hustler. Love that.

Mike DeHaan: [44:56] That's awesome, man. Good for you. Alright, next question. What is a tip you would have? And I'll put this same thing you can do on the business side of the real estate, but a tip you would have for someone who is looking to get started as a real estate investor, or in their business, or has started their real estate investing in business is looking to take

Litan Yahav: [45:13] it to the next level. Listen to all your episodes.

Mike DeHaan: [45:17] Yeah, there we go. Yeah, there we go. Subscribe to collecting keys,

Dan Austin: [45:21] download them.

Litan Yahav: [45:21] I think so. I think like learning as much as possible and and absorbing it, but deciding at some point that you've learned enough and you should just start doing. Because like I said, I think we said during this episode, it's like, you can get into that situation where it's just this this repeat mode where you keep on wanna learn more and learn more, you don't take that leap. So Yeah. Isn't it? I think define an end goal, a milestone. When you reach that date and time, then that's when you move from learning to doing. And during that period, podcasts, books, just like meeting people and going to these events, there are a bunch of meetups and groups for people that wanna get involved, like your mastermind group and a bunch of others, so wanna get involved in in in real estate. So I I do that. Sweet. Yeah. And there's there's always so many mastermind junkies

Mike DeHaan: [46:14] out there that never seem to accomplish anything. Everyone knows those people. That was always a thing when I was in the corporate workplace for a while. Everywhere I went, there was like a certain age demographic. It was people like forties to fifties that loved Tony Robbins. Right? And they would read every Tony Robbins book. They would like take their PTO to go to his event, and they've come back so hyped on life and how they were gonna change it. And then 48 later, they would be just as miserable as they were. They didn't make any changes.

Litan Yahav: [46:42] Yeah. It's all about making decision upfront. Right? That's if you don't make the decision upfront, then it won't it usually won't follow follow through.

Mike DeHaan: [46:49] Absolutely. Exactly.

Litan Yahav: [46:50] And also, one more thing on that, like finding accountability group or partner. Yes. That's super helpful as well. Like, when you have that accountability, we have that go bonus a lot, right? I mean, if you have that accountability aspect of it, then it's super helpful as well.

Dan Austin: [47:03] You gotta have that huge.

Mike DeHaan: [47:04] I mean, and that's like masterminds too. Mean, that's one of the like the mastermind that Dan and I got started doing our business with that was the main core of it and still is we're still involved with that group. And then now with our instant investor program as well, you know, having people that are running the same style of business or going through the same challenges as you are trying to do the same things is so unbelievably Very helpful.

Litan Yahav: [47:23] Yeah.

Mike DeHaan: [47:24] So, try to be around that as much as you can. Awesome. Alright. So last question, Where can people find you, follow along, and reach out to you if they feel so inclined?

Litan Yahav: [47:34] Yeah. Sure. I mean, happy to wherever I can. You can reach out to me either my email, likan, l I t a n, advisor v y z e r dot c o, or Twitter, Facebook, LinkedIn. Pretty active on all of them.

Dan Austin: [47:50] Sweet. Right on.

Mike DeHaan: [47:51] Right on. And aside from that, guys, go and check out Vyser for sure and reach out to Latan. And any last words for you, Dan?

Dan Austin: [47:58] No. I'm excited to go check this out. I'm actually going to your webinar in a couple weeks. So

Mike DeHaan: [48:01] Awesome. Yeah. Well, thanks so much for coming on the show, Latan. We appreciate it. And thanks so much, everybody. We'll talk to you guys next week.

Litan Yahav: [48:07] Thanks a lot. See you.

Mike DeHaan: [48:08] Thanks for listening, everybody. Please make sure you subscribe and leave us a five star review wherever you listen to your podcast. Also, please make sure you go and you share this with other people within your network. We are really trying to grow this thing and the best way for us to do so is by you telling other people to come and check us out. Can also follow us on Instagram. I am at Mike underscore Invest. Dan is at investor man Dan. You can follow the podcast at collecting keys podcast. And if you wanna learn how to make real money as a real estate investor or you want to grow your already existing real estate investing business, please go and check out instantinvestorprogram.com and book a call with either Dan or myself, and we will see if you'll be a good fit. Thanks for listening, everybody, and talk to you next week.

Speaker 2: [48:51] Thanks for listening. Please leave us a review on iTunes or wherever you get your us out at collectingkeyspodcast.com for tips and guides on starting your own real estate investment and wholesaling business.