JF2404: Applying The Lesson of 2008’ Market Crash To Current Real Estate Investments With Dani Beit-Or

Dani has been in the real estate market for over 16 years. He started investing back when he lived in Israel and continued with it after moving to the USA in 2004. He started building his portfolio by working closely with Silicone Valley residents who were looking to invest in real estate outside their zip code. 

Addressing the knowledge gaps that his potential investors had helped him gain their trust and secure the investment. Dani is still keen on educating and sharing his knowledge. In this episode, he offers some expert advice that the 2008 market crash has taught him that are still true today.  

Dani Beit-Or  Real Estate Background:

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“I’m not investing for the cash flow, but I want to have that buffer” – Dani Beit-Or.

TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to The Best Real Estate Investing Advice Ever Show. I’m Joe Fairless. This is the world’s longest-running daily real estate investing podcast where we only talk about the best advice ever. We don’t get into any of that fluffy stuff. With us today, Dani Beit-Or. How are you doing Dani?

Dani Beit-Or: I’m doing good, Joe, thank you for having me. How are you?

Joe Fairless: I’m glad to hear that and I’m looking forward to this conversation. I’m looking to be educated and looking forward to learning more. Dani is the CEO of Simply Do It Real Estate Investments, a real estate investment boutique. He’s got 16 years of real estate investing experience. He’s invested in and guided others in the purchase of over 5,000 rentals. He is based in Irvine, California. So with that being said, Dani, do you want to give the Best Ever listeners a little bit more about your background and your current focus?

Dani Beit-Or: Yeah, absolutely. Like you said, I’ve been personally investing for 18 years or so. I started doing it more professionally about 16 years ago. I’m originally from Tel Aviv, Israel. I started investing in the US while being a high-tech employee living in Tel Aviv, and I moved to the States in 2004. I continued investing more for myself and working with others, helping them execute exactly the same concept of buying rental properties in different U.S. metros, primarily nice middle-class single-family homes in places like Kansas City, Nashville, Phoenix, Tampa, Orlando, Dallas Houston, and quite a few more.

Joe Fairless: I’m just doing some quick math… 5,000+ rentals in 16 years. That’s 312.5 rentals a year. That’s almost a house a day. Can you tell us where does that volume comes from?

Dani Beit-Or: First of all, I’d like to be corrected… Somewhere between 4,500 to 5,000. So to be more corrected about it, so maybe 300 a year or so. A lot of it comes from during the 2004, ’05, ’06, ’07, ’08, I would say up until that – that was really hectic years of a lot of purchases. Right now, we’re probably doing less than 300 a year and it’s coming from investors.

I put up a concept, I put up a turnkey operation. A lot of people in this niche, people wake up one morning, usually, I see them when they’re somewhere between 30 to 45, maybe a first kid, maybe a few kids, working… They wake up one morning, a lot of them live in the expensive metros of the West Coast. Not all of them, but other metros around the country. And they’re like, “Wait, what’s going on here? I live in Silicon Valley. I work for one of the more known names in the industry, less-known names in the industry, I make good money, maybe between me and my wife, we’re making four or five, maybe $600,000 a year from Silicon Valley.” It sounds a lot, a big salary, but it’s not going to be super wealthy with that kind of salary in Silicon Valley, with the cost of living. And they’re saying “What do I have? I have my own home, maybe some stocks and retirement accounts. I want to do more. I want to make sure I have something left for myself, or for my kids, some sort of more accelerated retirement plan… Real Estate. A-ha!” They have an aha moment. They heard from a friend, they talked about it…

Everybody talks real estate pretty much all the time. I say everybody, but I see it in a coffee shop, when we were doing that, I walk on the street, and somewhere like going in with my son, I always pick up on those conversations where people talk about some aspect of real estate, almost every time I’m out. So it’s kind of bugging or something that a lot of people talk about. And then they’ll wake up and say, and kind of have an aha moment “I live in Silicon Valley. Real estate around me is 2 million dollars; it’s a reasonable piece of real estate, it rents for $5,000 or $6,000.” Those are crappy numbers. Both the down payment that we need, the cash flow… What cash flow? Horrible cash flow.

The next question is “Okay, I’ve heard about people doing it remotely in other parts of the country, where the numbers are more attractive. How am I going to go about executing this? Where should I go? Who can I trust? I have tons of questions. I have done real estate/I have never done real estate.” So we come in and we try to close that gap of knowledge by helping them address all those questions and concerns, all of them. But they have sometimes they don’t even know the questions or concerns that they have; they will just come up a little bit later. We provide them the mechanism or the infrastructure to invest in such types of properties in different parts of the country.

We don’t just close the knowledge gap and understanding gap, we also help with the execution. Like here’s the team that we’ve set up in Kansas City, or in St. Louis, Missouri, Nashville; vet the teams, we train them carefully, we vet them carefully, they are good with finding properties, they know what we’re looking for, they have clear criteria, we have clear criteria, which market around the country qualifies, which areas within a metro qualify, how to analyze, how to evaluate, all of those – every aspect of the transaction in order to provide them with “Here’s a property you can safely invest in.” And you know what? I have to tell you, Joe, that I didn’t mention it in the introduction… I was here doing real estate on a large scale in the previous crash of 2008. That was before, during, and after. I gained a lot of knowledge and experience in that crash. I always felt I came into the 2008 crash somewhat experienced and I came out super-experienced, or more than I was wishing for, let’s just put it this way.

Joe Fairless: What did you learn specifically? What are a couple of takeaways?

Dani Beit-Or: First of all, the biggest two takeaways that I have are always have cash flow, even if it’s a small one, $100, $150, $250 a month. Cash flow is the buffer. Before I was investing with a potential appreciation and I didn’t care that there was a negative cash flow, because everything was appreciating like crazy, so who cares about $3,000 or $4,000 a year in negative cash flow before taxes when the house is appreciating $15,000 a year. It seems like nickel and dime. Wrong. When everything collapses and you need to — they used to call it “feed the alligator” with money that’s coming into my life from my job and from my work, was covering those negative cash flows every month… And all of a sudden, when the crash came, my income suffered. So those houses that I was feeding, I was having a hard time continuing feeding them, meaning contributing from my own pocket into those houses on a monthly basis. It’s easy when you have one house and it’s $200 a month, no big deal. If you have 20 to 30 of those houses, each one is three, four, maybe $500 a month, or even $200 – it really adds up.

So number one, on my end, I always like to invest with some sort of a buffer cashflow. I’m not investing for the cash flow, I’m investing for the long term, but I want to have that buffer when things happen. So that’s number one.

Number two, the level of analysis on evaluation I do now, meaning now in the past 10 plus years after the crash – it’s a much higher level of detailing from all aspects than before.

I will tell you that before the crash, “The numbers seem okay, the location seems okay.” It was almost like Oh, it looks okay.” Today, I have developed for the past eight years an Excel that I use and everybody in my system use, all the investors, all the realtors. It’s a very comprehensive Excel, easy to use, but comprehensive in the performance, how to financially analyze a property. That’s something that we dive into very carefully. The one thing I realized, since the COVID started, is for the past 10 plus years, since the crash of 2008, I came out of that crash deciding that I need to rebuild my business all over from scratch. Everything has to be questioned. So I really build everything from scratch, including the analysis, systems, processes. Everything.

One of the major conceptual components I’ve used, or the foundation of what I do, is I’ve been planning for the next crash since 2008 or ’09. I’ve been getting ready for it. That means all the decisions about areas, locations, houses, numbers – so many decisions on so many hundreds if not thousands of houses in those years, were based on the idea that the next crash is coming. I feel like always when I say it’s like the next earthquake is coming. The next crash is coming. When? I don’t know.

So I call it the investment formula, the main fundamental is Resilient – resilient metro, resilient houses, resilient areas, etc. That minimizes the noise and the risk of the investment. I’ve been waiting for a time like this to come for more than 10 years. When it hits, I’m talking about March, April, May, when that happened, I started calling all the property managers that I work with, one by one, to say “What’s going on? Tell me what’s going on. What are you seeing?” I started calling in mid-April. Mid-April is the time, all the April rents are coming in and the issues will reveal themselves by mid-April, because sometimes those guys need a few more days to analyze all the rents. And one by one, since mid-April, “Listen. Everything is good. We have one problem here, one problem there. We’re dealing with it, we’ll probably solve it.” “Okay, but May is going to be catastrophic, be ready for May.” “No problem. I’m getting ready for May.” In Mid-may 2020 I called all the property managers. “Tell me what’s going on. I want to talk to the head of the company. I want him to tell me the details.” One by one. “Listen. One more house. Two more houses. Yes, we have some issues. We’re dealing with it. But honestly, we’re really surprised it’s not much more catastrophic.” But wait, June, mid-June, same thing. So month after month. I stopped after July.

Yes. In my world of real estate, with my clients and with all the number of properties that we have, I’ve been planning on resilience for many years. And when the tough time arrived, my decision of resilient showed its strength. Am I lucky? Maybe. But there’s always a lot of decisions starting at 10 plus years ago, planning for this day, the doomsday, so to speak.

I wasn’t thinking of the worst-case scenario all the time. But I was always like “Okay, how is this metro going to survive the next downturn?” That was always my question, always in the back of my mind. We’re now in December of 2020. We are eight or nine months into this situation. Still, do we have properties that are suffering from the COVID situation? Absolutely. The number is so small, it’s almost zero, relative to the amount of properties in our system. It’s not zero, it’s not fun to the one person who has one or two properties in that situation, it’s not fun at all. By the way, I’m one of those people. But it’s all being managed. I really have maybe two or three properties that really suffered for longer periods, two or three months of a tenant staying in without being able to evict. But even those eventually got addressed and taken care of.

I have to admit that from my perspective, planning for this horrific day to come for 10 years, when I have a formula that I follow and this day is coming, and it’s showing that it’s working… And I don’t know if it’s going to hold its ground for a long time; it all depends on what the economy will do.  But I’m speaking to friends, colleagues, peers, and people in the industry that I know, and some of them are doing different types of real estate than I do… And I asked them “How are you’re doing with collections?” Some of them at the beginning say “We’re at 70% collection. We’re so happy with the collection.” Then another one says, “You know what? This month, we’re 80% collection.” I shut my mouth, because we are somewhere between 93% to 94% collection. You never have 100%; you will always be on 95% or 96%, and we are 93% or 94% collection. I’m like okay, “I guess we’re doing much better than the other ones.”

Joe Fairless: I’m going to jump in. Sorry. I have to jump in, because we have just a little bit of time left. This has been helpful to know how you’ve performed during the pandemic, and the reason why is because of the lessons you learned from the crash, those two lessons that you talked about and how you’re analyzing it differently now, or have been over the last decade or so. But I have a couple of questions that I want to fit in before our time is up.

The first question is your client base is most likely accredited investors, based on how you describe them, and that is a client base that is a lot of people’s target audience. So something that would be interesting for, I know, a lot of the listeners, would be how do you attract your new customers? And that is referrals – I’m sure you get referrals so let’s put that aside for a moment. What are other ways that you attract new customers for your turnkey operation?

Dani Beit-Or: I will say that most of my clients could qualify as accredited, but they’re not necessarily accredited investors, but they are well to do in life in terms of their financial standing. They’re not necessarily rich or millionaires, but they’re well to do. Many of them will be able to qualify as accredited.

Now, to answer your question… Remember when I told you that I started my business from scratch? I told myself, one thing I’m going to be bad, horrible at – I’m a horrible salesperson. I am not good with sweet-talking, upselling, and cross-selling. I’m really bad at that. When I came to the States I saw that when you become an expert, you become a knowledgeable person, and you share the information, and you put yourself on a stage and share, people will be attracted to you if you are an authentic and genuine person. I started just doing a lot of events, meetups, I had a club I was doing years back once a month… And I went on stage, and either I have a guest, or I spoke myself, or both… And I just said, “Listen, anybody that comes to one of my evenings as a potential client, even if it’s a free event or a paid event (which I’ve done both), they’re paying with their time at a minimum.” So I’m not going to have someone walk out of that room and say, “Oh my God, what a waste of time. What a sales pitch.” That’s just not me.

I always put up information, and I always try to say, “As a foreigner to this country, I am not attracted to the classical salespeople that are always sugarcoating and going around the bushes, and they’re not direct.” I said, “I’m Israeli. Israeli style is going to be direct. I’m going to be direct.” I’m going to be telling as I see it, and I’m going to be answering without being all vague about the answers. I just put that kind of an attitude out there. Very quickly, I realized people look and say, “Okay, this guy is knowledgeable. He’s genuine. He knows  to answer “I don’t know the answer” and that happens too”, and they start engaging. So that’s kind of how everything rolled.

I still follow the same mechanism, except today it’s more online, different avenues, less physical in the room and some hotel… But I always make sure when I speak, hopefully here as well, I put information, I try to be honest about it, I try to be authentic about it, and give real answers. Because people want answers; they don’t want stories around and around and around and like “What did I learn here?” So that’s the same attitude today, just different vehicles; now more digital vehicles.

Joe Fairless: What are some digital vehicles that you’ve found to be effective in attracting investors?

Dani Beit-Or: I used to do it, now I kind of slowed down a little bit – a weekly Facebook Live session; I haven’t done it for two months for various reasons. So that’s something I ran with for the past two years, every week, on Friday.

Joe Fairless: What time on Friday?

Dani Beit-Or: I used to do it at 10 AM every Friday.

Joe Fairless: 10 AM California time?

Dani Beit-Or: California time. I actually told myself this week that I need to resume it. I have a podcast in Hebrew. The podcast is rated number one. When you’re search in Hebrew for “investment”, it shows up first, so that brings a lot of traffic in. I do have a database that I keep growing. I tried to do YouTube videos, just to put the message out there. Every time I do a Facebook Live session, I record it and immediately I syndicate it myself to all my other channels. It’s the same session being distributed in multiple channels. In the past two years, primarily, probably 80% are referrals.

Joe Fairless: Those tactics are really helpful. I appreciate you talking about that. Taking a step back, what’s your best real estate investing advice ever?

Dani Beit-Or: Right now, I would say ask specific questions and not philosophical questions. A philosophical question for me, and I hear it all the time, “Is this a good time to invest?” That’s for me a philosophical discussion. I don’t know. “Is it a good time to buy this house in Kansas City, or that house in New York, or San Francisco?” That’s specific for me. That for me is something I can tackle. The philosophical people like to speak in philosophical concepts, and that stays on a philosophical level. What is the answer? Who knows..? Try to be more specific. Yes, no rental, yes, flip, this house, that market. Try to be more specific, and then get a specific answer.

If there is a great house and a great opportunity for a flip in Kansas City and the numbers are amazing, would you say no just because it’s not a good time to invest? Well, this one is a good investment opportunity right now. It may not be a good one a year from now.

Joe Fairless: Yeah, thank you for that. I love that advice. If you want a better result, then ask a better question.

Dani Beit-Or: Exactly.

Joe Fairless: We’re going to do a lightning round. Are you ready for the Best Ever lightning round?

Dani Beit-Or: Absolutely.

Joe Fairless: Alright. First, a quick word from our Best Ever partners.

Break: [00:20:25] – [00:20:46]

Joe Fairless: Alright, Best Ever book you’ve recently read.

Dani Beit-Or: I am less of a reader in past years, more on podcasts. So podcasts… I like to find the experts in their field and not the general ones. Just got listening to someone –I can’t remember her name– on notes. Every session is a case study. So that’s kind of very detailed, into the nitty-gritty. Podcasts are really beneficial, in my opinion, especially when you work out and it’s with you.

Joe Fairless: Best Ever way you like to give back to the community.

Dani Beit-Or: Okay, I made a promise to myself a few years back and I still hold that promise… When someone calls me and they’re down on their lucks, something is happening in a negative way in their life real estate wise, I reach out and I try to help. I don’t know if I will be able to help, but in most cases, just sometimes it can be just moral support, sometimes it can be “Listen, to talk to this person; it will help you to talk to this person.”

So for me, the best way to really giving out is reaching out to someone who’s in a bad spot and trying to help that person. I have been in that situation myself and people have reached out. So that’s something that I never expected and was just proof; it was repaid. The karma of the world was repaying me. So that would be my main thing as a good deed. Then the other thing is I really try to put information and knowledge out there for people too, on YouTube and whatever; authentic, real, from the trenches, information, and knowledge.

Joe Fairless: How can the Best Ever listeners learn more about what you’re doing and your company?

Dani Beit-Or: “My alter ego” online. I call it my alter ego, but it’s my online presence, which is Simply Do It. So if you do Dani and “simply do it”, or “simply do it investing.” My website is simplydoit.net. You’ll be able to find me on YouTube, on Facebook, on websites. So the easiest way to remember, Simply Do It, which is my online presence.

Joe Fairless: Awesome. That’s simplydoit.net, as a reminder. Dani, thank you for being on the show and talking to us about your lessons learned from the 2008 crash, how you’ve applied that to your approach now, and how you communicated that decade-long new approach to those you work with… As well as talking about how you attract investors for your turnkey operation business. Some of them may be accredited, some of them may not be accredited, but just how you approach that. Thanks for being on the show. I hope you have a Best Ever day and we’ll talk to you again soon.

Dani Beit-Or: Thank you very much.

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