Rx Investor Podcast
On the Rx Investor Podcast we interview healthcare professionals and business owners who have inspiring wealth-building stories. Our goal is to lift the veil on the most effective strategies in entrepreneurship, business growth, real estate, and investing so that YOU can add new streams of income and grow your wealth exponentially. Join our podcast hosts, Claude Condo and Jeff Stark, as they interview prominent individuals and investors, have some laughs along the way, and help the audience achieve financial independence.
Rx Investor Podcast
From Flipper to Lender and Lessons Learned Along the Way with Yoav Gilad
Being able to pivot in the real estate investing business is a valuable key to success. Our guest, Yoav Gilad, did that as he transitioned from flipper to lender. It hasn’t been an easy journey for him. He faced many challenges and made mistakes along the way that might have cost him much, but the lessons learned are valuable to him and everyone who hears and learns from his story.
Key Points from This Episode:
- How did Yoav and his wife learn about house hacking and what were their initial steps?
- What did they gain from enrolling in a $40,000 real estate course?
- What challenges did they encounter in remotely buying houses through county tax auctions?
- How did he discover lending? What path led him from being a flipper to a lender?
- Did they have to get another training to start their lending business? What was their first step?
- How long have they been in the private lending business and how did they scale from their first deal to becoming full-time lenders in 44 states?
- As private lenders, who do they like to partner with? Do they prefer a specific niche to help finance?
- What are the kind of deals that they don’t like to fund?
- The story of a deal that went wrong.
- Given the current market trend and rising interest rates, what are his insights and advice as a private lender to other investors?
Tweetables:
“It takes a lifetime to build your name but a minute to destroy it.” [00:24:01]
“You do have to protect your reputation and ensure you're doing right by everybody as much as you can even if it means passing on deals to do so.” [00:24:12]
“Abundant caution is the rule of the day.” [00:31:00]
Links Mentioned:
About Yoav Gilad
Yoav began investing in real estate in 2007, just in time for his first rental purchase to lose half its value. Fortunately, he hadn’t quit his day job just yet. After the recovery, Yoav and his wife and partner, Marcia, flipped houses, wrote land-contract deals, and BRRR’d other homes. When someone coincidentally approached the Gilads for a loan, they incorporated Green Block and wrote their first loan. They are now full-time private lenders in 44 states, with investors across the country. Additionally, they have participated in multiple syndications and were key partners in their first deal, a 98-unit, last year. Yes, the rate is locked (at 4.25%) and the property is performing well.
Connect with us!
The main sponsor of our podcast is Rx Real Estate Investment. They make everything we do possible, and our conversations and interviews would not be available without their support. If you want to diversify your retirement portfolio and get into commercial real estate investing, working with Rx Real Estate Investment may be a great match for you. Check out the website at www.rxrei.com.
Connect with us!
Jeff Stark
Claude Condo
Newsletter
Jeff Stark (RxREI.com):
Hello friends! Hello family! Welcome to another episode of the Rx investor podcast. We are happy to have you with us today. Uh, my name is Jeff Stark, your host as usual. We also have my cohost Claude Condo. What's up? How are you, man?
claude condo:
Good, good. I couldn't wait to jump on this podcast. I'm in Alabama for a conference, but I couldn't wait to have this interview. I bet our friends and family will enjoy this one.
Jeff Stark (RxREI.com):
Yeah, this is going to be a great one before we introduce our guest today. Uh, want to remind you guys to like and follow. We've got our podcast available on Apple, Spotify, Amazon, Google. We've also got a YouTube channel where we're posting the video from this conversation every Tuesday. Uh, so make sure you go to YouTube and subscribe there and leave a comment on what you learned. Um, and if you guys do that, you automatically. legendary status. So thank you for doing that. So our guest today is in the lending business. We are very excited to have him, especially based on what is going on in the market and the economy. Yoav Galad, welcome to the show. How are you?
Yoav Gilad:
Thank you very much. I'm doing well, Jeff. Thank you for having me on, Claude. Yeah, I feel really lucky to be on the show. Thank you.
Jeff Stark (RxREI.com):
Yeah, we're excited
claude condo:
Sure.
Jeff Stark (RxREI.com):
to have you and excited for this conversation and excited to hear some of the insights that you're going to bring. So introduce yourselves if you don't mind, introduce yourselves to our audience. Just tell us and them a little bit about who you are, where you grew up and how you got into the business that you're in today.
Yoav Gilad:
Cool, it's a very straight path, I assure you.
claude condo:
Thanks for watching!
Yoav Gilad:
No, in all seriousness, I grew up outside Washington, D.C., a while back, and lived there my whole life, in and around D.C., always wanted to be a car designer, and actually wound up moving to Los Angeles to chase that dream, following some medical issues that allowed me that freedom. get into that later. But yeah, became a car designer, happened to graduate when the industry collapsed. And so I was kind of left looking for a job and kind of wondering what I was going to do. I remember around that time that I was reading Forbes, sort of, I think, because I picked one up. I don't remember where I was, but it was like the top 500 wealthiest Americans. And I happened to do real estate. And that kind of piqued my interest. And so I wound up buying a house, of course, with a no-doc loan at the time. It was like 2005 or 2006. And bought a house and wound up house hacking before it was even really a thing. Rented two bedrooms to other classmates, lived in one, they were paying the mortgage. It was a lot of fun, but wound up getting that, although it was a passive job at the time because I was trying to be a car designer and to move the story along, met my wife and she had a great job that she loved but it was kind of a boys club and it was there was limited room for her to grow and she said from one day to the next like I want to start flipping houses and so she quit her job took a year off and actually started our company and she was flipping houses were remotely. We were living in Los Angeles. She started buying houses through county tax sales in Michigan, coincidentally, because I live here now. And yeah, from one day to the next, left the job and started working with her on flipping houses.
Jeff Stark (RxREI.com):
Wow, incredible. So did, you know, I'm always curious about like the first couple deals that you did as a real estate investor. Like what were the tough things that you were learning and going through with those first few deals? Especially it sounds like she was doing it remotely.
Yoav Gilad:
Yeah.
Jeff Stark (RxREI.com):
So what were those challenges early on in your first couple deals? And I assume it was all residential real estate, is that right?
Yoav Gilad:
Yes. Yeah.
Jeff Stark (RxREI.com):
Okay.
Yoav Gilad:
So we started buying houses through county tax auctions, as I mentioned. I think the biggest hurdle at the time was really believing that we were getting what we thought we were getting, what we saw on the website and through the auction companies and stuff like that. It was just, I mean, it was kind of great because we didn't know what we didn't know at the time. like risk a lot more than she does. You know, she had done the due diligence and the numbers penciled out and were live online. And you know, the numbers are going up and up and up. And so I was like, well, do the numbers still look good? And she's like, yeah, I'm like, well, put in a bid. And she did and it was the top bid and the holy cow. All of a sudden we now own a house in Michigan, 2000 miles away. But we, it wasn't just kind of like let's see what happens. We had talked to a lot of people beforehand and started kind of getting a team in place so that
Jeff Stark (RxREI.com):
Hmm.
Yoav Gilad:
if we did win, we would be ready to go. It wasn't just like, let's figure it out as it happens from one success to another, let's be proactive and figure it out in advance.
claude condo:
So, man, thanks for your story. I couldn't wait to kind of talk to you because you are bringing so much and you are saying so casual, right? But it's not that easy.
Yoav Gilad:
Not at all
claude condo:
It's not that easy to invest in, I mean, 2000 miles away. It's not that easy to trust that even those people that you did find, that team that you're trying to create, can actually carry out your dreams, actions and how do you hold them accountable? But before we jump into that, just speak to us about how did you even start, or your wife, think about flipping, like from one day to the next? Like what did it go through your mindset? How did you prepare yourself to go to this huge, risky industry and even doing auction?
Yoav Gilad:
Okay. Okay.
claude condo:
Like you know, just walk us through, actually, let's back down But let's walk us through, like you mentioned about house hacking when you're a student, when you're going to college.
Yoav Gilad:
Yes.
claude condo:
What's house hacking and what was going through your mind first of all? Because we have students in our audience that are in pharmacy school, they're still trying to finish their school and you did that while making money, while learning about real estate that will serve you a couple years later. So speak to us about that as a student.
Yoav Gilad:
Yeah. Yeah. So, as I said, I saw this article and it talked about real estate and I noticed that all these people had made tons of money in real estate. I basically wanted to copy it. I wanted to find a way to do it. And so money was so easy and cheap back in 05, 06, 07 that I was like, well, I'll try to get a loan and see what I can buy, see what I can afford. turned out I probably could have borrowed a lot more than I actually did. But the whole plan was basically, and for those who don't know, house hacking is basically buying a property and living there with other tenants, ideally, as I understand it, while you live there, so that they help you build the equity. So that if you put 20% down and you're charging them rent, then your mortgage is being paid down by them so that you go from 20 to 30 to 40 as quickly as possible. While also covering other fees like taxes, insurance. And so that's what I did. I bought a two-bedroom condo first. I sold that, then bought a house, three-bedroom, was paying that off, and I also happened to borrow enough on the house so I could buy a second property, a second to the house, where I wanted to live, which was Venice Beach, while I did an internship. And then when I moved back to the first house, the Venice Beach property entirely. So I went from a single condo to a house and a townhouse in a matter of two years, again, because money was pretty easy to get, but it was just kind of, I wasn't scared of failing because I figured that I would be able to figure something out if things were going sideways. With
Jeff Stark (RxREI.com):
Hmm.
Yoav Gilad:
a fixed rate mortgage, you know what you're getting into, the terms aren't even if they're high, they're low, whatever, you know what your payments are going to be. As long as you can manage that, then you're good to go. So when we decided to get into flipping, it was really my wife's doing.
claude condo:
Hmm.
Yoav Gilad:
As I said, she wanted to leave her job. I actually still had the condo in Venice Beach that we were then talking about selling. And she was like, hey, what if I redo it, I flip it, and we see how it goes? And so I was like, cool, you know, what's the worst that can happen? Maybe the paint doesn't look great or whatever. So she did it. She did really well. She made, I think like 15% on the sale and this was during the downturn. And
claude condo:
Wow.
Yoav Gilad:
so, you know, it was better than I could hope for certainly. So that's what launched us and following that she actually signed up for a real estate course, which was very, very, very expensive. The positive of that, however, was that we invested so much money in that course for flipping that there was no question about whether we were going to do it afterwards or not.
Jeff Stark (RxREI.com):
Hmm.
Yoav Gilad:
It was this massive sunk cost, and so we had no choice but to try to do it. And that's when we got into the remote stuff.
claude condo:
Wow. OK. So it seems like you learn the skills and you're comfortable with the risk.
Yoav Gilad:
Yeah.
claude condo:
So that's why I think that's a message that you're telling us, all of us, that, hey, if you know what you want, go get the skills, go learn, pay. It's a delayed gratification. I'm going to use my hard-earned money to go learn the skills. But I know that After I learn this, I can apply it and even get my return investment maybe five times, ten times, hundred times. That's your story, right?
Yoav Gilad:
Yeah, pretty much. And I think that there are other ways to do it. I think it really depends on the kind of person you are individually, because I think we could have gotten the same success had we read a hundred books. But I think it would have taken a lot longer. And I think it would have been easy to say, well, let me read one more. else out. Because the investment was so large, it was impossible for us to kind of say, well, we'll try this in six months. We had to do it. It was like there is no other option.
claude condo:
Okay.
Jeff Stark (RxREI.com):
Yeah, you were committed at that point.
Yoav Gilad:
Yeah, totally. It was $40,000. And that was 2015, I believe. Yeah.
claude condo:
It's probably like 60 to 70 thousand today's money.
Yoav Gilad:
Probably, yeah, something like that.
claude condo:
That's a significant amount.
Yoav Gilad:
Yeah, yeah, and we were, we were, sorry….
Jeff Stark (RxREI.com):
oh Go ahead, I'll let you finish your thought
Yoav Gilad:
I was just going to say we were both W2 employees at the time. We had day jobs. It was a significant part of our savings at the time. So yeah, it was not an easy decision. But.
Jeff Stark (RxREI.com):
Putting myself in your shoes, I guess you guys did you guys or the advantage that you might have had at the time for that investment was that I think you said that she was from the area that you started investing in in Michigan or was that you
Yoav Gilad:
No, actually neither of us.
Jeff Stark (RxREI.com):
Oh.
Yoav Gilad:
She had coincidentally gone to University of Michigan Business School, but we never bought a house in Ann Arbor until we actually lived in Ann Arbor. So we were investing in like Eastern Michigan right by the Canadian border, Western Michigan, like Kalamazoo and Portage, just all over the place, except where she had actually lived. And I think I had driven through Michigan once, like 20 years ago. something that was the extent of my knowledge.
Jeff Stark (RxREI.com):
Wow. Okay. So I was, I was thinking that you guys might've had like a little bit of a, an advantage, um, knowing
claude condo:
Thank you.
Jeff Stark (RxREI.com):
the
claude condo:
Good night.
Jeff Stark (RxREI.com):
geography of this place, but you might not
Yoav Gilad:
Go.
Jeff Stark (RxREI.com):
have even had that. And you, you, you know, you, what it comes down to is you took the course, you invested in yourself, you found an area of the country that you felt comfortable with and you, you dove in headfirst.
Yoav Gilad:
Yeah? Totally.
claude condo:
Yeah.
Jeff Stark (RxREI.com):
Incredible. Um,
claude condo:
It
Jeff Stark (RxREI.com):
so
claude condo:
is.
Jeff Stark (RxREI.com):
how did, um, Claude, did you have a question?
claude condo:
Yeah, I'm just going to point to that because I feel like it's so, to me, it's really reflective of my... You know, sometimes I feel that way, I'll complain instead of taking actions, right? I will say, hey, I don't like this place I am right now. I don't like this job. I don't like this hospital I'm working in. I don't like this chain. And then what am I doing? Am I taking action
Yoav Gilad:
Thanks for watching!
claude condo:
to change the outcome of my complaint? and complain over and over. I just want to point
Jeff Stark (RxREI.com):
you
claude condo:
that out to our audience as well. So I know you say your wife didn't feel like she was getting a fair amount of what she feels like her potential should be. So she like, okay, let me
Yoav Gilad:
Thanks for watching!
claude condo:
pivot, let me change this. And then because she took actions,
Yoav Gilad:
you
claude condo:
she's like, I don't like where I am right now. Let me go out and find something else that will propel my family and eventually move, investing 2,000 miles away from where you are and not knowing the area, which is crazy to me.
Yoav Gilad:
Yeah, I mean, we definitely researched a lot and studied a lot and learned as much as we could. But, but yeah, being able to pivot has been a very central theme to our story. Not only in the way my wife was like, okay, I've done this for five years, it's time to figure something else out. But then later on, when we were flipping. flipping on a regular basis. I mean, we were doing it full time to lending on a full time basis in a period of about six months. Just complete change of our business model.
claude condo:
Wah, wah.
Jeff Stark (RxREI.com):
Let's dive into that a little bit.
Yoav Gilad:
Yeah.
Jeff Stark (RxREI.com):
So tell us a little bit about, so actually just recap really quickly, how long you did flips, how many you did, and then that transition period, how did, what was that path to getting the lending and how did you discover that? So, I'm gonna go ahead and start with the first one. So, I'm gonna go ahead and start with the first one. So, I'm gonna go ahead and start with the first one. So, I'm gonna go ahead and start with the first one. So, I'm gonna go ahead and start with the first one. So, I'm gonna go ahead and start with the first one.
Yoav Gilad:
So one thing that that sorry, I'll answer your questions first. We were active flippers only about three years. I don't remember the exact number that we did. It was 10s. I wish it was hundreds, but we never and this is what I was going to say. We never had like a full time team of our own because our properties were just spread all over the state. So there was never any consistency. And that's one thing that I. focused a little harder in one area because we were always having to reinvent the wheel. That's
claude condo:
No.
Yoav Gilad:
probably what made shifting into lending a little bit easier because, well, I'll get into it in a moment, but one day, coincidentally, someone approached us for a loan in Michigan. This was once we had moved here. They asked us for a loan because they knew that we were cash buyers and we were actively looking for investments. And we didn't even know if it was legal, or not?
claude condo:
Hmm.
Yoav Gilad:
We were like, isn't that like loan sharking or something like that? What do you mean? Can we lend you money? So we went and talked to a couple of lawyers and found out it was legal, first of all. And second of all, it was not terribly difficult to do with the right legal team behind you and the right documents and all that. And so we wrote our first And it was also non-secured, which we later learned the hard way was not the way to do it. But yeah, we wrote a loan for 10,000, then we wrote another loan and another one. And a couple months later, we actually had a substantial to us at the time book of notes that we had originated. And it was like, this is better than flipping because it's the same underwriting, but if show up, you're not the one swinging the hammer.
claude condo:
Mm-hmm.
Jeff Stark (RxREI.com):
Wow.
Yoav Gilad:
And that was basically the decision that made us go from flipping to lending. And the returns are different. And the risks are a little bit different. But for us, it matched our styles a little bit better. And it was easy to be doing business, to do business around the state without necessarily having people everywhere, which is obviously
Jeff Stark (RxREI.com):
Thanks for watching!
Yoav Gilad:
a requirement if you're flipping.
claude condo:
enough
Yoav Gilad:
So that was the key really.
Jeff Stark (RxREI.com):
Thank you. Thank you.
claude condo:
Yeah, I wish I wish your life we could have like one podcast, you know, solely about flipping and then another one, then because both of them are really, it's a huge subject, right?
Yoav Gilad:
Yeah.
claude condo:
Because we need to find out like, how do you create a team for your flipping? You are 2000 miles away. How do you create
Jeff Stark (RxREI.com):
Yeah.
claude condo:
property management? How do you create accountability to those teams? So this just mind blowing to me. And then you decide, let me go to landing. How did you learn about lending? How do you trust someone who will pay you back? How do you protect yourself, right? How do you make sure that your investment will get? So there's so many questions for me to ask. But I wanna just focus on, how did you know that, I know you say lending was something that you feel comfortable, your wife and you, you feel like, oh, this is less risky to you. And then you decide that this without hiring a bunch of team, having contractors. Did you have to go to a training again? Did you pay 70,000 for learning how to do it? How did you? How
Yoav Gilad:
700.
claude condo:
did you? 70,000. Sorry. 70,000.
Yoav Gilad:
No, it was, we didn't actually go to another training. At this time, we actually lawyer, and he wrote us the documents for the first one. The first loan that we wrote, as I mentioned, it was non-secured.
claude condo:
Hmm.
Yoav Gilad:
It was to do Airbnb arbitrage, which was a terrible loan for us to write in hindsight. So the client approached us, or the soon-to-be client approached us, and she said, I want to rent this apartment and then put it on Airbnb. and make money off of the difference. So I'll pay the rent and then the Airbnb clients will pay me the fee and I'll be making money on this brand. Okay, cool. And so she said, but I don't have any money. I need furniture, I need first month's deposit, you know, et cetera, et cetera. How much do you need? Okay, $10,000, great. It seemed great. She offered us 33% a year, which I mean, if you're flipping and you make 33%, I mean, you're killing it. So
claude condo:
Yeah.
Yoav Gilad:
it sounded great. We agreed. And, you know, it wasn't so great because we wound up she paid for about a year and a third, and then just stopped making payments. And that was it. And because it wasn't secured, we couldn't foreclose on the property. It just we got burned.
Jeff Stark (RxREI.com):
Hmm.
Yoav Gilad:
But we learned a lot. And we just kept going. We wrote it off. We made a lot of a lot of the principle back on interest. But, oh, and with regard to the 33%, it turned out that rate was illegal because it was usurious here in Michigan. And so we actually
claude condo:
Mm.
Yoav Gilad:
had to lower it to 25% to make it legal. We never,
Jeff Stark (RxREI.com):
Wow.
Yoav Gilad:
as I'm sure you guys don't ever wanna operate outside the law. So,
claude condo:
Yes.
Yoav Gilad:
yeah, so that was
Jeff Stark (RxREI.com):
Yeah,
Yoav Gilad:
a no-brainer,
Jeff Stark (RxREI.com):
you know,
Yoav Gilad:
but.
Jeff Stark (RxREI.com):
this like stories like this are the real gems in the conversation because
claude condo:
Yep.
Jeff Stark (RxREI.com):
I always learn something hearing you talk about something that you learn the hard way. And like that, like, like, honestly, this part of the conversation is like, there's always a ton of value. And I,
Yoav Gilad:
Yeah.
Jeff Stark (RxREI.com):
you know, it's rough that you had to go through that experience, but you came out on top, you're, you've got a full fledged lending business. now and it was your first foray but you learned a valuable lesson. So from here or from there, we kind of talked about your flipping side or your flipping business and how you were able to scale that and grow that. Take us through how you've done that in the lending business.
Yoav Gilad:
Yeah, so it's primarily, well, it's entirely been word of mouth. We actually don't spend any money on marketing. All the marketing that we do, I just, I'm on Facebook, I'm on LinkedIn, just talking about what we do and trying to help people turn houses faster, better, with less of their own cash, so that the ROI is better, the cash on cash is better. All the percentages are better. and there's less risk to their own personal capital.
claude condo:
on.
Jeff Stark (RxREI.com):
So how long have you been doing lending and like
claude condo:
you
Jeff Stark (RxREI.com):
approximately how many deals have you partnered on?
Yoav Gilad:
So we've been our first loan was written December 30th 2017. So we're in our sixth year now We've written about a hundred fifty hundred sixty loans Two-thirds of those have just been in the last two years. We've really ramped up
claude condo:
Mm.
Yoav Gilad:
and Sorry, what was the last part of the question?
Jeff Stark (RxREI.com):
Uh, no, I think you answered it.
Yoav Gilad:
Oh.
Jeff Stark (RxREI.com):
I think, I think, I think the follow-up part of the question for me would be like you're like the niche that you're trying to carve out for yourself, um, and who, like who you look to partner with and like who needs you the most.
Yoav Gilad:
So we like to partner with flippers mostly that are doing not like basic workers housing, blue collar, we like slightly fancier stuff that's for professionals, things like that. We like to play in the kind of 400 to $500,000 space ideally. But if a deal makes sense and we can help somebody, write it if it's a hundred thousand dollar property. The dollar amount doesn't really matter to us as long as it's above a certain threshold, but that threshold is fairly low. Given that we're here in Michigan, property values here are not like downtown Manhattan, as I'm sure you guys know. Yeah, so you can still buy houses in Michigan for $10,000.
claude condo:
I'm moving to Michigan. I'm just kidding.
Yoav Gilad:
Oh yeah.
claude condo:
So I want you if you can speak to us about how you build your business, because we have pharmacists, we have doctors, we have nurses that are trying to build their business. You mentioned something that you don't spend on marketing, you only on referrals. And I can speak to that because I get to know you through a referral
Yoav Gilad:
Right.
claude condo:
from my business coach. And who I think he never used you, but he heard from another person. I was talking about how great you are. So can you speak to us about how do you uphold your values, your culture, so that you can build your business only on referrals, which is to me is the best way, sustainable way, cheaper way, but, and then you have so much return on, yeah.
Yoav Gilad:
Right. Right. Right. Right. Right. Right.
Jeff Stark (RxREI.com):
you
Yoav Gilad:
Right. Right. Right. Right. Right. Right. Right. to is to do business more than once with everybody we come in contact with and There are a million cliches about your reputation and
Jeff Stark (RxREI.com):
Thank you.
Yoav Gilad:
your name
Jeff Stark (RxREI.com):
Thank you.
Yoav Gilad:
and things like that
claude condo:
Yeah.
Yoav Gilad:
But they're all they're all true. I mean, you know, what is it? It takes a lifetime to build your name but a minute to destroy it and So we we we act as if people are always paying attention to us I don't know. Maybe that makes me an egomaniac It's true though, like you do have to protect your reputation and ensure you're doing right by everybody as much as you can.
Jeff Stark (RxREI.com):
Thank you. Thank you.
Yoav Gilad:
And even if it means passing on deals to do so, we have looked at many, many deals where we know we would have made money, but our clients wouldn't have. And those are deals we pass on. In order for us to lend, it always has to be win-win.
Jeff Stark (RxREI.com):
Hmm.
Yoav Gilad:
But if we think it's not going to work for us or the client, we will pass.
Jeff Stark (RxREI.com):
Thanks for watching!
claude condo:
Wow, that's so cool.
Yoav Gilad:
Yeah.
Jeff Stark (RxREI.com):
Can you take us through that hard conversation a little bit? Like if, when you start to partner with somebody and you see that a deal isn't like, maybe it's penciling out for them, but like your, I guess, partner perspective, like how do you have those difficult conversations and say, hey, there's a little bit of a red flag here, this might not work for you, it could still work for me, potentially, But like, let's talk about these, you know, scenario x, y, z.
Yoav Gilad:
Yeah, so the nice thing about being a lender, whether it's me or Bank of America, is that unless the house gets burned down pretty much, you're always going to get something back. out to protect some of our capital. But for our investors, especially for newer ones, if you're looking at a deal and it looks like it might work and you're really excited, and I'll give you a specific example in a moment, you really have to calm down and listen to people around you. So we were trying to fund a six unit property for a borrower here in Michigan. And he was really excited about it. And he had a couple of rentals already but this was his first multifamily. And multifamily, for those who don't know, is five plus, commercial multifamily, five plus units. It can be five units, it can be 500, that's commercial multifamily. When we looked at it, we were like, hey, you know, this price is too high, like you will have a little bit of cash flow, but the price is too high, you need to buy it for 10% less. And so he went back and negotiated with the seller and got it down, I don't know, five, six percent, and came back to us and said, okay, will you lend on this? And this was going to be a short-term loan to rehab the property. And we looked at it again, and the margin was going to be something like a $20,000 value add after six months. And he was an engineer and an auto manufacturer, and he was making six figures and doing it. And it's like, Would you work for that much in your day job? Because you're probably
Jeff Stark (RxREI.com):
Yeah.
Yoav Gilad:
going to have to work harder over these six months for that little value add. Like, it just doesn't make sense to us. And
Jeff Stark (RxREI.com):
Mm.
Yoav Gilad:
so we told them very frankly and honestly, just like this, like, it just doesn't make sense. If you buy this, it will not be worth your time. He went against us and decided
Jeff Stark (RxREI.com):
Mm.
Yoav Gilad:
to buy it anyway with a different borrower that would lend on it at a higher rate. did the deal and actually once he got it rehabbed, came back to us to lend on it for long term, 30 year loan on this property. And at that point, the cash flow was so thin that it didn't pencil as a long term loan either.
Jeff Stark (RxREI.com):
Wow.
Yoav Gilad:
It was just, he basically killed the deal. And unfortunately, it happened to coincide with the rise in interest rates that is currently occurring. fall of 22 and so I mean he kind of missed the boat he wasn't able to refi into a cheaper long-term loan and now he's stuck paying 15% and having to sell it because numbers don't make sense so he lost the deal or he's losing the deal because he bought it and now he has to sell it
claude condo:
Wow, man. Well, that's why you need to do your diligence. And sometimes God, to me, I say, God bring people in your life to give you advice. And if you don't listen, then, you know, you know, that's that's that's it. But I wanted to kind of go to a different point. You mentioned about rising interest rates. Can you speak to us about this current environment of banking, lending? deals people should be looking at and bring it to you, for example. Like what do you see since you are right there in the market? Like what's your take on that?
Yoav Gilad:
Yeah, I mean, every single investment has gotten a lot more expensive over the last year.
claude condo:
Yes.
Yoav Gilad:
Rates have effectively doubled. It's a really tough environment. year and making everybody look like a genius is just not happening anymore.
claude condo:
Yes.
Yoav Gilad:
It's much tougher today to get a good deal in quotes. I'd say if you're investing for yourself and it still makes sense with current rates, then go ahead and buy it because it'll certainly look great if rates get even worse. If rates do drop in a year or two or whatever, then you'll look good. I look like a genius again.
claude condo:
Yeah.
Yoav Gilad:
I have a theory about kind of the overall cost to own, which
claude condo:
Mm.
Yoav Gilad:
is that, you know, when rates are really low, prices climb very quickly, which is what we saw over the last 10 years.
claude condo:
Yeah.
Yoav Gilad:
Now that rates are climbing, I think we're going to see price come down a little bit, but you're going to have to pay more on the financing. So the overall cost to own, whether it's your cash your cash plus the financing are going to equal out a little bit. You're still going to be paying the same prices because the actual price of the property will be lower. It's just you're paying more for financing.
claude condo:
and
Yoav Gilad:
But
Jeff Stark (RxREI.com):
Thank you.
Yoav Gilad:
since we're at the beginning of that cycle, I think it hasn't
claude condo:
Yeah.
Yoav Gilad:
happened yet.
claude condo:
OK. OK.
Jeff Stark (RxREI.com):
Kind of to piggyback on that, on Claude's question, as well, you've been a flipper and you're partnering with a lot of flippers. So what, I guess, over the next six months, over the next year, over the next 18 months, flipping in particular is one area that I hear a lot of people saying, be extremely cautious.
Yoav Gilad:
Yeah.
Jeff Stark (RxREI.com):
If it's not, a lock
Yoav Gilad:
you
Jeff Stark (RxREI.com):
then think twice think three times that like really get consulting on on the decisions that you're making so with the the flippers that you're partnering on or the flip the flippers that you're partnering with how are you advising them any differently now is it really just to be super cautious and there are you
Yoav Gilad:
Yeah.
Jeff Stark (RxREI.com):
not lending as much on certain types of flips or or what's what's happening there
Yoav Gilad:
Yeah, so I mean, the conventional wisdom a year ago or even six months ago was basically, as long as it works out at 70% of the after repair value, the ARV, you're going to do well.
claude condo:
Mm-hmm.
Jeff Stark (RxREI.com):
you
Yoav Gilad:
I don't think you can go off of that anymore because prices are flat pretty much everywhere, if not dropping. And so you've got to be looking for really screaming deals. Yes, abundant caution is the rule of the day. If you've got your own team and you're paying them to work, then you have a little bit of an easier time. But if you're like, you know, an HGTV watcher who's like thinking about doing this because it looks fun, and maybe you'll make a million dollars, I think you really, really have to rethink that strategy because there is an even chance that you will buy a property for XML, 30% of X amount and sell it for X amount. I do not think that is impossible today so
claude condo:
Yeah. Well, thank you. Just
Yoav Gilad:
No.
claude condo:
want to ask you while we're about to wrap up, because when I respect your time as well, if you look back at your life, it's been so rich with experiences and mistakes and learning process and learning lessons. What would you tell yourself knowing what you know now? If you look back, what would you do different? One or two things.
Yoav Gilad:
Um...
claude condo:
speak to your younger self.
Yoav Gilad:
I would buy many, many more houses in 2017.
claude condo:
Okay.
Jeff Stark (RxREI.com):
Hmm.
Yoav Gilad:
No, I think I would be more patient. I think that everybody wants to do everything as fast as possible and we all wanna get one property, 10 properties, 100 properties as fast as we can. But it's tough to rush the process, and it's really tough to fight the marketplace, especially into the environment that we're entering right now.
claude condo:
So if I go a little bit deeper, would you advise people to be patient and to wait until what, the second quarter, third quarter, fourth quarter, next year? If you have a magic.
Yoav Gilad:
I don't know what the future holds. I can't tell people to wait until whenever. I would say wait until you find a perfect deal.
claude condo:
Hmm
Yoav Gilad:
And there's no such thing as perfect, but wait for a deal that really, really, really makes sense that you cannot pass on. Because it's really easy to make bad deals and lose a lot of money. Just
claude condo:
Yeah,
Yoav Gilad:
don't
claude condo:
yeah.
Yoav Gilad:
get knocked out.
claude condo:
That's the best advice.
Jeff Stark (RxREI.com):
Yoav, I don't think we've mentioned your company yet, Greenblock, but
Yoav Gilad:
Yes, sir.
Jeff Stark (RxREI.com):
I wanted to ask you at the end, well, what's next for you and the company? Where are you headed? And if you want to plug your company, feel free.
Yoav Gilad:
Sure, yeah, so we started in Michigan and over the last couple of years, slowly we've been lending in other states. Recently we closed a deal in West Virginia, we've closed a few in Illinois and Florida, but we can actually lend in 44 states now and we would love to. Yeah, I think growing it and doing more deals is what's on order and learning as much as we can, If you're interested in having a conversation with me personally, please call me 734-210-2828. And to learn more, just go to our website, greenblockinc.com. Again, greenblockinc.com.
claude condo:
Yeah, I'll tell the audience, you know, Yoav is such a great person to connect with,
Yoav Gilad:
Thank you.
claude condo:
great person, great spirit. And then if he can help you, he cannot help you, he'll let you know.
Yoav Gilad:
Yep.
claude condo:
If he does, he will help you. So, and something that he didn't wanna mention, I'm gonna plug you, man.
Yoav Gilad:
Oh
claude condo:
So, there's not too many layers of decision-making, right?
Yoav Gilad:
Yep.
claude condo:
It's just you and your wife and you make the decision, if you make sense, doesn't make sense. So we don't have to wait for red tapes from the bank, from the commercial,
Yoav Gilad:
Yep.
claude condo:
commercial real estate, a person, and to go to the vice president, to go to the president, to go to the committee, to make the decision on your loan. It's just you and your wife
Yoav Gilad:
That's
claude condo:
and,
Yoav Gilad:
right.
claude condo:
and which is great. Yeah. So.
Yoav Gilad:
Yeah, we're here for anybody that needs money for real estate investments quickly.
claude condo:
Yes. Yes.
Jeff Stark (RxREI.com):
And he even gave his phone number.
claude condo:
Sim, que nunca tivemos antes.
Jeff Stark (RxREI.com):
Ladies and gentlemen, a pre-
Yoav Gilad:
There are rings
Jeff Stark (RxREI.com):
Appreciate
Yoav Gilad:
right
Jeff Stark (RxREI.com):
that.
Yoav Gilad:
here.
claude condo:
Thanks for watching!
Jeff Stark (RxREI.com):
Amazing. All right, Yoav, thank you for joining us today. This was an awesome conversation. Love your insights. Thank you for being real and telling us about some of the tougher learning experiences that you went through. For me, that was incredibly valuable. And I know that there are a bunch of people in this audience that are going to reach out to you, even just to follow along in your journey. So we'll make sure that we get that phone number website added to the show notes and I'm sure people will connect with you but thanks again for being on the show it was awesome
Yoav Gilad:
Thank you guys very much, I really appreciate it. It was great talking with you, thank you.
claude condo:
Yeah, thank you so much.
Jeff Stark (RxREI.com):
That's a pod!
