The Truth About Real Estate (Not What You Think)

Understand as a broker, you have different risks than the market in general. So, we're not really affected by the market going up or down. It doesn't really affect our day-to-day business. Yes, [music] we have clients who are losing buildings and losing properties because they have to give it back to the bank again, [music] that story that we talked about earlier. And losing equity, but our business model doesn't really change. We just need movement. >> You just need to make deals. >> transactions. >> Transactions. >> So, yes, does [music] my transaction size go down now because the value is less? Of course. Same property used to be [music] worth $30 million and I'm trading it out for 10. The size of the deal is is smaller, but the volume is there. And that's all I really need. As the broker, you just need the trades and put yourself in the intersection of where the trades are. That's the answer. That's the answer. Uh-huh. Welcome to the Middle Class Podcast, Rebyossi Cats. Why did I say Rebyossi? I don't know. Are you a rabbi? Uh we take you uh I always say about us brokers, we answer to whatever you call us. Ah, okay. See, I'm also kissing kissing up to Yossi today. Uh real estate, today's topic. I'm just going to call it real estate. But Yossi is the principal and founder of ARG Realty Group, that's Atlas Realty Group, commercial brokerage. Um and I really love this topic. I'm not so knowledgeable in it other than that I invest in real estate and I recommend clients to invest in real estate as part of their portfolios. But I'm eager to learn about how you built your business, and this is for the audience of those people um that are looking to build their careers in real estate as well as invest in real estate. And we're going to hear it from an expert, a very relatable expert, someone who built from scratch. Um and uh started Yeah, started from scratch a you know, a couple years ago. And we're going to really, really get into a deep dive of the topic of real estate, which is a popular Jewish business and that is an understatement and maybe you'll help me >> Understatement of the year. Understatement of the year. Oh, yes. That's good to know cuz I'm not so in the field. But, um, maybe you'll answer for us why it's such a popular uh, Jewish business. So, let's start with Yossi introducing yourself. Just a basic introduction so people know who you are and then I'll start asking some really uh, uh, deep questions. Uh, I'm looking forward to all the deep questions. >> [snorts] >> So, name's Yossi Katz or Yosif Katz as I go in the business. Born and raised in Montreal, Canada. One of 11 children. My parents are both in Hinukh. My dad's uh, Rosh Kollel today, still today. Wow, this is loaded. My mother is a uh, big speaker actually. Runs around actually uh, still gives Kollel classes, teaches all Kollels. What happened to you, Yossi? Where did you go wrong? >> A bunch of tapes out there. You guys can listen to them at a different time. So, born in Montreal, went through the Yeshiva system, went to Israel, came back after the Mir to Far Rockaway, joined Shaar Yashuv and Touro College. That was There was only two Yeshivas then who let you into college. So, it was either Shaar Yashuv or it was Chaim Berlin. So, came to Far Rockaway for that. Went to college. Was going to go to law school. That was the thought process I was going to do. Instead, needed something to do for a couple months and uh, joined the company commercial real estate. I remember closing my first deal seven months in. Closed my first deal. I made $60,000 at that time. Still remember the property. Thought I was the richest person in the world. Still remember that feeling. The best feeling of my life. Or one of. I shouldn't say the best. My kids might be uh, maybe on top of that. >> Good, good diplomacy over there. >> Exactly. Thought we made it. Um, and yeah, never looked back. Never looked back. So, that was 2005 when I started commercial real estate, opened my own firm with a couple of partners in 2019, right before COVID. That was Atlas Realty Group. And this is where we are today. So, a lot of stuff you just said, I know it sounds very uh basic. Correct. But, so you went through the Yeshiva system. First of all, you're an out-of-towner, which is great. Um, Montreal, that's out of town. Montreal's definitely out of town. Yeah, okay, good. Just make sure I don't want to get anyone insulted. Um, >> right, small-time out of town. Small-time out of town, okay. It's not like other places. Right. So, you went to we went through the Yeshiva system coming from um, uh, Yeshivish background, I guess you can say. >> For sure. Yeah, not afraid to say it, okay. >> to say it at all. Good. You see that this fits with John's podcast, how you don't have to conform. >> [snorts] >> A nonconformist. Um, Embrace Embrace the past. >> [laughter] >> Okay. >> [gasps] >> I don't want to get myself in hot water. >> [clears throat] >> Um, so okay, so you went from the Yeshiva system to real estate. Tell me a little bit, cuz that's where we, you know, where we're at with a lot of people is that they never had any college or educational background in in business at all and they're coming from Yeshivas. Right. And how did that happen? So, you were in were you in the Mir, you said? I was in the Mir. And then you went into real estate. So, what what was that process from the Mir to real estate? >> is a break. So, I am a college grad. I actually graduated Touro. Oh. Um, and do have a degree. In >> Not that I ever I have a BS in finance. Okay. >> So, I was in the middle, right? I wasn't sure what I wanted to do. I thought I was going to be a lawyer. That was the uh, I have two brothers who are attorneys. So, that was the thought process. Um, but again, the I don't use any of my college knowledge for what I do. I think that's Now again, how to learn and how to study maybe you maybe that you bring forward, but what I actually learned in college, you're not using for real estate. You did you you went through 4 years of college? It was 2 and 1/2. The land the the the land >> The land or the Torah special? The Torah special? >> it was Yeshiva in the morning and then we went to college in the afternoon and at night. Not John Hopkins or what else do they have today? Uh The the the degrees that you get from uh >> the online degrees, right? >> The online degrees. >> You know, the BTL is 90% of it and then they have 10% is uh We had a couple of credits then. I didn't think they had all that that processes they have now. I know my son's going through it now and he has all these credits he's getting from being while he learns in Eretz Yisrael. Yeah, we didn't have that. You don't want to talk about that. Uh so you went to college and um but you're saying important piece of information that you're saying that uh to get into your field you didn't need uh the education piece, so to speak. >> Correct. Okay. >> I do feel that there's a reason why a lot again a lot of young kids coming in and a lot of young kids in our office and we've seen throughout the time we've come in don't have college degrees. And that's that's not a problem. It's not a problem, it's not an issue. Sometimes it's even better. I like the Yeshiva kids coming in. They know how to think. They they're they're Not too formal. >> They're not too formal, which is a good thing in our field, but that's probably the reason why you see a lot of the young Jewish kids getting into real estate, why they get into health care as well. You don't need those big degrees. Mhm. Uh that's probably why they're uh they're they're so popular those two fields right now. >> it is? It's the easiest >> young Jewish crowd. >> Uh-huh. You don't need an education. Okay. Yeah. Sounds great. Um okay, so again back to the that question. So you were in the mirror, so you went to college and that's when you had a break. You weren't working. You were just studying full-time like learning in the morning >> No, I've working my whole life actually. I'm I was never not working again. Growing up in a family, we weren't I never want to say we were poor but we didn't have any extras. One of 11. We had what we needed. I never thought I was missing anything. It's interesting people ask me that question going back. I never felt like I was missing anything. Mhm. But we definitely didn't have any extras. So I worked my whole way through. Always working in the summer or working extras, working again. I've had more jobs. We talk about it sometimes with my brothers and my friends. You go back in his All the jobs I've done in this world, it's been a lot of them. I worked in a bakery at nights. Wow. Yeah. Yeah. >> And what did you need the money for? Just to save? >> Just to live. Just to live. I always paid my own bills. Even throughout Israel, I was always paying my own bills. >> When did you start paying your bills? Again, so we >> Like I got I'm curious to hear about this. >> 14, 15. I was Anything extra I wanted, I had to Uh-huh. >> actually have the money for. Mhm. It wasn't like you go to your parents and say, "Hey Dad, I need a 50. I need a 100." Or you wanted new clothes. No, that's not how it works. >> You wanted to go skiing, you had to pay for it. >> Correct. Ah. Correct. Wow. So you really a newspaper boy. Did you deliver newspapers? >> delivered newspapers. >> Oh, so that's a classic story. Deliver newspapers. >> I never actually did that. Um definitely had some fun ones. I hung custom drapes for a couple years. That was one of my jobs that throughout college. Um yeah, I worked in a bakery, worked in a fruit store. Oh, wow. It keeps going. Worked in a canteen for a couple summers. Right. Look like waiter in camp Waiter in camp. Yeah. So wow, that's a real that really talks to our audience because um their humble beginnings so to speak. People are looking to to build and grow and get better in their business. So you really were were Okay. Wow. So you really had humble humble beginnings. So again, so you were in school and you were what we what we were saying. You were you were at the in school and you had to work for >> Yeshiva college and working. Correct. [clears throat] Still working. Um what were you doing >> all three? What were you doing at the while you were in school? It was whatever I could keep busy with. I believe it was the the the drapes. I was doing some of that. Um and I think I was working at a bakery at night. Yeah. Working at bakery at night is what I did, decorating cakes. And and um at this point, how did you fund your your education? So we had scholarships to most of for education. How did you get scholarships? >> Most of it. Touro had all these different programs at that point to to fund it. My parents did help out a little bit with with school. Mhm. They definitely [clears throat] did help out what they were able to. Always grateful for that. Did you take out student loans? You took out student loans? We had some student loans, but nothing crazy. Touro wasn't that expensive. I remember once you had all the different programs, it wasn't that expensive. When we're talking about what? Like 2001? What are we talking about? 2001? >> This is 2001. So the Touro really only started in the '90s, I think, right? They were So they So you >> Okay. So the night program was a couple thousand dollars. Again, money, but nothing like today's today's challenges. That for sure not. Wow. Right. >> Okay, so you were you were So you were going to school for something you weren't sure about, and then >> [laughter] >> right, it's a classic example. You know, he was in school for dentistry, and he ended up building up a three billion dollar business. Right. Okay, you're developing that story as we go on. >> That's what people did. They went to school, right? You needed to figure out what you were doing in life. Uh be responsible. >> Be responsible, go to school, get a degree, and then figure it out, I guess. Right. But you didn't become a dentist or a lawyer. That's correct. Um I think you're happy about that, right? Couldn't be happier. Uh okay, good. Um but so then how did you get into the to the real estate field? So >> While you're in school, I guess, you know, or after. >> Yes, I was graduating, was going to go to law school. That was the game plan. Took my LSATs, and I needed something to do for 6 months. And it was a family friend who was in working at that first company, place called GFI. And he said, "Hey, why don't you come in and be a junior broker? See how you like it." And I'm like, "Sure, why not? Sounds fun, sounds interesting." Mhm. First real job. You know, I went into the city, downtown Manhattan, and we sat there. It was different times, different times. We did have computers. Oh. We did have computers, but I remember they gave us a book. It was called the owner's book, big blue owner's book. Some of the oldies will know about the big blue owner's book. And it had every single person who owned a property in New York City. And they gave us that and a phone and they said, "Call and see who wants to buy a building, maybe wants to sell a building." And that's what we did. Every day we came in and we just called people. One after one after another until we found someone who wanted to sell a building. So So you were in school. You were in school and you you took this job as >> Graduated. Right when I graduated >> you graduated. Sorry, yeah. Right when I graduated from Drexel. Right before law school, before going to law school, started at and loved it. Absolutely loved it. Loved the challenge. Really? It was the highs of it were just were were special. So okay, so let me let me understand cuz I want people to understand the basics of real estate. Maybe this is boring to other people, but I want So you enter a real estate firm. It's called GFI. Does that stand for anything? I don't even know. I'm not even sure what it stood for. I worked there for 15 years. You'd think I'd know, but >> I guess it doesn't even matter who you work for in this field. >> That's true. Right? You just do deals. >> You just do Yeah, yes. It doesn't matter if if if you work for GFI or FGI or FYI. Um so okay, so you're doing you go into a real estate firm Mhm. and your job is to make phone calls to do what? And how do you make money? I'm sorry, it's so basic, but Basic like great question. It's actually great question. Some people don't even know. It's a great question. >> this is and we had this with the mortgages like people have no ideas and ABC is so important. So you're you get into the real estate firm from graduation and you do what and how do you make money? >> So let's start. Definition of a broker. That's it. What is a broker? Okay. Yeah. A broker is the person who puts deals together, transactions together. So you're called the procuring cause is the actual work. And your job is to make an introduction from someone who wants to sell a property to someone who wants to buy a property. Mhm. [clears throat] And be the cause of the sale. What's it called a a Procuring cause. Procuring cause. >> That's the technical term for it. Uh-huh. Okay. And you get paid because you are the cause of this transaction. That's a simple terminology of what a broker is. So what does that mean? What does that mean? So it starts off as the the young person who doesn't know anything and he just starts calling people and says, "Hey, do you want to sell your building?" And it starts as simple as that and someone says, "Hey, I would sell my building." And then, "Okay, let's get the information to the building and put together what we call the rent roll. This is what you know, what everybody pays in a building and put together the expenses. And you take this sheet of paper that has all information on the building and you go to potential buyers. You say, "Hey, do you want to buy this building?" And it's literally that simple. Call people, find the building Right. to sell. Now the rent roll piece, who does all that financial stuff? Uh yeah. >> So it So again, on the simpler buildings you do it yourself and you learn how to do that. That's part of learning how to be a broker, how to analyze a deal and we'll talk about as we get on about why brokerage is the gateway to a lot of different businesses and you see a lot a lot of successful people in the industry not just who are brokers but whether they own or they manage or they insurance guys who all started as brokers. We'll talk about that a little later on. But this this simplicity is you bring it in, you'll put it together on a sheet. A lot of these buildings are pretty simple. They have 10 tenants who are paying rent. And the expenses he pays his real estate tax, and he pays his insurance, and he pays his maintenance. It's not that complicated. And how do how do you learn? You just learned that? So, I was taught. You were taught. You had a good Did you have a good mentor when you uh I have a great mentor. I I do like to say he's a famous guy, but I have I had a rebbe in the business. Um fellow by name of Aaron Youngrice. A lot of people know him. Um he taught me a lot of what I know. And not because he taught me, I watched him. I watched him. So, when I first started off, he actually used to pick me up. He used to go to the office at like 6:30 in the morning. That was I workaholic. I think he still does that. He used to pick me up on his way in for I used to get up and pick me up and drive me to the city. And that's how we started. And I used to listen to him on the phone as a way and I wasn't allowed talking to him on in the car cuz he was working already at 7:00 in the morning. >> Wow. Um >> Vayigash area. Vayigash area. And learned a lot from watching him. So, for sure. You definitely need someone who's going to teach you the business and learn from someone who's doing it. You need Okay. Point number one emphasis to get into real estate, you need a mentor. You need a mentor. You need a rebbe. But that's that's everything in life. Okay. I don't know if that's just real estate, but yes, you need a mentor. This there is such a vibe with real estate is that you're you're you know, wheeling and dealing. Right? But this is a >> Yes, wheeling dealing, but you have to know the processes, understand it. And without someone teaching you, you're never going to be successful. Mhm. Look at that. [clears throat] All right. We had people I always said the worst thing for someone to do, like we have these new guys who came in and you have a guy who shows up one day and he closes a big deal in 3 months in. And I always said that was the worst thing for people cuz then they thought they knew everything. It's the worst thing. The worst thing. They Those guys are hardly ever successful. You usually see the successful guys the guys who struggle at the beginning. Takes them a while to do their first deal. Cuz they appreciate they understand it's a process. It's not just, "Hey, I made one call and I made a second call and I made a deal." That's not how it works. So, would you say someone, and I see this in my business also in financial planning, people who come in to to get clients, they go after something which I I don't know the we this term boils my blood. I'm sorry to say it, but I don't know why really. They go after the big fish. The whales. Right. When you start in real estate, is that a good thing to do? Are you supposed to start on something small? There's nothing wrong with having the big fish. Nothing wrong with having the >> There's nothing in fact What do you go for? >> In fact, a lot of firms, what they do is they give out to the young guys, everyone gets their whales. And there's a lot of firms that do it. Well, they'll give you the five whales, keep that in your back pocket, and those are the people you should dream for. Dream for. That being said, your first deal is probably not going to be with the whale. You got to learn the business. Again, real estate is not something It's not one call and then you make another call. That's not what it is. It's about every showing up every day and consistency. So, it's how many calls did I make today? How many leads did I have today? How many showings did I have this week? So on and so forth. How many deals did I send out? It's all a numbers game. Yes, as you become more successful, your numbers and your efficiency will increase. But it's all about day in and day out showing up. You see, I'm telling you I'm telling you for my my I had a clean slate in my mind as far as what the real estate business is, and this is completely changing the picture that I had. Completely. Consistency, showing up to work, Right. making phone calls, organizing your data. Yeah, I'm glad we're >> [laughter] >> I'm glad we're we're putting that to bed. And right, everyone thinks, "Oh, you made one phone call and you made a you know, a crazy amount of money." Or right, or you could again, you your job is to go for that big $300 million acquisition or something like that. Um and again, there's no problem with it. Correct. >> It's okay to do a deal like that, you know, don't worry about it. I wouldn't complain, you know, but that's not how you build a business so to speak. You're supposed to be going for everything and anything, I guess. Um slowly but surely, right? >> Yeah, yeah, you're building a reputation. You're building a reputation. Um you're building a business. Uh we tell people again, we interview kids all the time who are young people who are coming into the business and looking to get into the business and I tell them all the time, this is a it's a lifestyle. It's a lifestyle, it's a profession. This isn't just a get-quick-rich scheme. That's not what we do. It's a profession, it's a way of life, and this is how you're going to build your business for the rest of your life. That's how you have to look at it. It's a profession. 1,000%. >> Real estate is a profession. Exactly. I'm just uh meditating on that for a second. Meditating. >> Cuz no one shows up in suits. If they take anything out of this interview, take it out of that. Real estate is a profession. >> It's worth it just for that. Just for that. Real estate is a profession. It's a business that you build. Um and it sounds like you you trained. Well, how many people are in your firm now, ARG? Right now, we're up to 14 total people. Of that is 12 of the brokers, two support staff. Mhm. Two support staff for you don't need that much. Do you need a lot of support staff in in uh real estate? >> ton. We have good support staff. You definitely need capable people. Remember, they're running all your marketing, they're running all your setups that we called, which is put together the property information, running all your social media, running the office. There's a lot of work to be done, but we Yeah, thank God we got we have great people. Okay, so again, back to the beginning, the humble beginnings. Yeah. So, you're you show up as a broker, a procuring cause, okay, got you. There you go. Um thank you. I've learned that. And um you know, putting things on a sheet and getting financials is something you pick up. It sounds like that was something that wasn't so difficult for you and you had a mentor. So, now you have a potential buyer and a potential seller, which comes about through just making good old phone calls, basically, right? Relationships. Relationships. Getting relationships, calling. You did cold calls, I'm assuming. I still cold called every day. You still today? Every Almost every I I want to say every day, but it's not every day, but almost every day I'll still cold call. Really? It's the most important skill in our business. You have to be able to cold call. If you can't cold call, you don't last. Even How many you're in this almost over 20 years? >> 2005, so 21 years. Yeah. And you still cold call? >> Still cold call. Okay. Okay. Love it. >> Okay, I want to talk about that in a second, but I'll get back to the one I'm forget what I was talking about. So, you you you have a buyer and a seller. Mhm. Okay, now how do you make money? You have a I don't give me numbers. It's What's a normal deal to expect when you're starting out and So, ARG's deal size we specialize in the market We're like two to 20 million dollar market size is where we currently broker. Two to 20. Um we do primarily multi-family. We can talk about that, which is the six-story elevator buildings. That's primarily what we sell. But we focus on New York. Focus on New York. We focus there. So, ARG right now is New York, New York, New York. It is across all asset classes, but we do specialize in multi-family. Okay, so there's a lot of terms there, but let's say again, to make money on a deal. Sure. It's a 20 million dollar deal, right? Right. So, you're the broker, how do you make money? You So, we find a seller. Go find someone who expressed interest in selling. Now, again, when you first started it was a little different, but now it's they'll usually hire you as your broker. So, they'll come to you and say, "Hey, Josef, I know you know how to sell these assets. I have a property I'm looking to sell for whatever reason." We can talk about why people sell. For whatever reason, I'm looking to sell it. Please handle the transaction for me. So, we'll just like you would sell a house, we'll take an exclusive listing, we'll sign it up. We'll put together a a sheet and a a marketing memo and we'll send it out. So, it starts off with our marketing. We have currently 50,000 people on our email blast. We have all the brokers are going to sit there and make all the phone calls, start the showings, bring the the potential investors to the property, and finally settle on the best buyer for this property and instruct attorneys to send out a contract. We'll sign the contract. The buyer will go get financing for the property, and then usually 90 days later, he closes the transaction, and then we we would receive our commission at that time. Okay. Which part Which part was was too much? No, this is I'm sorry. I hope this is not boring to our audience, but I I don't care cuz this is important information to get the ABCs of business. Even where I am also in my my field also, all these going back to the fundamentals. What is the plan? What's security? Yeah. But, um that's that's why it's so important that you have it 100% clear. So, you make a transaction what the term is the commission rate on such a transaction? >> So, exclusive when you're signed up as an exclusive broker, the transaction the fee is usually negotiated then at the time of the agreement. So, usually standard fees are right at about 3% of the total sales. So, you sell a $10 million deal, the total commission will be $300,000. Okay. $300,000. Okay. Now, that obviously that gets split, right? So, that gets split among the brokers. Whoever's part of that transaction, you'll have the originating broker we call, and then the sales broker. So, the person who originates the business, and then the one who finds the buy and buyer. Sometimes that could be the same person, obviously. And obviously the house takes a piece as well. So, that's how it gets split up. How's meaning your firm? >> The firm. The firm. Cuz your brand helps the deals. >> It's a brand and you also our firm most firms are the same but our firm pays all the expenses. Uh-huh. So we're paying obviously the rent, we're paying for all the programs, we're paying for the phones. Mhm. And [clears throat] then of course the brand. Okay, so I think we got from from A to Z in that in just the basic process. So you closed your first deal. How did that come How How was that? Do you remember how you you What did you do? >> Oh, vividly remember. First you always remember the first deals. I think everybody always remembers their first one. Yeah. >> Property was on Ithaca Street in Queens. Mhm. I was cold calling. And the fellow said, "Hey, I would perhaps sell it." And I said, "Sh- Great, send me a rent roll." And I He faxed over the rent roll. That's what people did those days, they faxed over rent rolls. Faxes what? Right? So it was a list of all the uh what each tenant paid. And at that time one of the senior brokers that I had took that paper and sold it to one of his clients. Probably sold it in a week and a half. That quickly. Wow. It took 90 days to close. That's usually how long it takes to close these transactions. So be ready for that. And so yeah, I got my first check uh 7 and 1/2 months after I first started. 7 and 1/2 months and I think it's a big piece to say like in all businesses there's something called the sales cycle. Right. So the sales cycle you're saying in other words from the origination of the sale or the origination of the deal until you get paid is typically how long? 90 days? So No. So that >> you expect as a new broker? >> So there you go. That's two good questions. Two good questions. Let's talk about the sales cycle and then we could talk about it as a new broker. It's It's a good question to have and we get that question all the time. So the the sales cycle the actual cycle that means from contract to to closing is anywhere between 60 to 90 days approximately. And I remember there's usually financing that's gotten on the property and that always takes time. So, that's the track. However, that's from when you sign the contract. Keep in mind from when we first get a listing, when we first have that first contact with a with some individual who says, "Hey Joseph, I would sell my building." Till we actually get it to contract, can take months. Can take years sometimes. Mhm. Until [clears throat] Remember, like someone comes and say, "Hey, I want $10 million for the property." And the property's only worth five, till I get him to where he needs to be and actually to effectuate a transaction, can take years. So, we had listings that sit on my desk for a couple years before we actually transact on it. Okay, so that's so crucial. So, you How long did that first deal take? You said it went pretty quickly. The That deal went pretty quickly. So, it's about 7 and 1/2 months, which is quick. 7 and 1/2 months. >> From when I started. First deal, Ithaca Street, made like I said, I think I said, made $60,000 on it. Yeah, thought I was a billionaire. Really? >> [laughter] >> Really did. Sounds like that song from the Thank You A Shawn Mendes song. There you go. >> [laughter] >> I don't know if anyone knows what I'm talking I'm sure they know. Yeah, anyways. So, 7 and 1/2 >> I'm sure your listeners all know. Hopefully. >> But what I tell younger brokers is you're looking you're going to college. And I have this conversation over and over again. I love to talk to them. You're coming in, it's a 2-year commitment. You're going back to college. Mhm. So, don't expect to make money year one, year two. Yes, you can expect to make something, but if you're going to make it, it's year three when you actually make it. That's when you really know. That being said, you learn so much in real estate. And this is the great part of the conversation. I think your listeners will love will This is what's for them at I think this is an important part of it. So, real estate and commercial brokerages especially, You learn all aspects of the business that you wouldn't learn in any other profession. So, day one, obviously, you learn how to cold call, right? You learn how to source deals. So important, right? If you know how to source the material and source the deals, you'll never starve in your entire life. But then you learn from the management side, you learn how to underwrite insurance, you learn how to do the financing and underwrite for financing part of it, how to raise money, cuz you see that side of the business as well. So, it's really the full life cycle of real estate that you learn as a broker. So, yeah, that's what you're saying. >> So, that's it. So, we had many people who came into the business who worked under us or worked alongside us and are no longer brokers, but are very, very successful. Because they take those skills and whether they go, "Hey, I'm buying my own property." or whether they're now running an insurance firm or they're running a management firm, there's so many different avenues to make money that brokerage should be It should be. For the young guys, it's a great place to start. You're saying to go into the field of real estate? >> Go If you want to be anywhere in the field of real estate, start as a broker. Start as a broker, cuz that's how you learn the profession. >> That's You'll learn You're right. You learn all aspects of it. You see all sides of the business. It's the only place you see all sides. Right? When you go work for someone who's just buying real estate, so yeah, a whole buy, let's call it an active buyer will buy five, 10 properties a year. Right? As a broker, you're seeing a hundred transactions a year. So, you see so much more. You're You're part of so much more. It really is the best place to learn. Gotcha. Okay, so I have a lot of questions on that, but let's go back to you. Sure. Um back in the So, you're you're >> You're going back to my Yeshivish background, is that right? >> Okay. I'm I'm Yeshivish background, we took care of it, got through the trauma. I'm sure you went to many years of therapy for that. There you go. Um yeah. >> [clears throat] [laughter] >> I'm joking. >> Not confirmed. Confidentiality. Um, again, it's all about vulnerability and people feel comfortable hearing others who've gone through it. Uh, you know, um, so we're past that part, but as a broker 7 and 1/2 months months later you've you've closed your first deal. Did you have financial responsibilities at that point in your life? Um, So, no financial responsibilities. I wasn't married at the time. I started when I was single. I got married >> were you then when you started? >> 23. Okay. I believe I was 23. Okay. 23, 24. Got married when I was 26. Okay. So, it took 2 years I was in the business for 2 years before I got married. So, did I have financial I had financial responsibilities I had to pay my rent. Um, I had to How did you pay your rent? Yeah, it's savings. We had some savings and I worked. I worked at night. I worked weekends. What did you do? >> Sunday. I was delivering You were doing jobs. Side hustles. Delivering packages. Any side hustle I could get my hands on. Any side hustle I could do. Whatever the limited amount of time we were doing. Um, for sure again. Rent had to be paid and I needed money for food. There was >> [laughter] >> There wasn't you weren't being supported. There wasn't an option. >> being supported in college. Exactly. All right. Okay. >> Exactly. It wasn't an option. Uh, well. So, it did take but once I got married so again, was I [clears throat] didn't have a lot of money. Um, was just making it. Again, it does take a it takes a couple years. Takes a couple years. You got to see it through. But those were the good times. And we could talk about the bad cycles and good cycles cuz it's it's a very interesting conversation and important conversation to have. What are you saying within uh, the the career? And within the career. Cuz Right. Cuz the broker's different. There's no weekly paycheck. So, that's exactly what I'm saying. So, you're you're you got married you with a cyclical business. How did you Again, this is a for the middle class. not only the middle class, but that's a big part of who's listening. How did you get by in those years? You had some savings. What were you doing to to help support? So, some savings. Uh my wife worked full-time. Well, she >> When we first got married, she worked full-time. So, she supported us as well. What was she doing? >> She was she came to She was a dental hygienist for a while. Oh, really? >> Yeah. It's my wife started. Okay. >> She She had a good job. She had a good job. It definitely helped. Uh-huh. It definitely definitely helped. But it's very interesting So, the brokerage business so called it's it's important. You got It's important thing to tell the young guys. So, remember the big checks that you make, but they don't come as often. And especially the younger guys, they really don't come out that often. So, and again, it's hard to drive it into their heads, but I see the young guys and he closes a big deal and the next morning he comes in with the watch. Oh. And I'm like, "No. No. That's not how you do it." Oh, man. That's not how you do it. But again, they need to do what Again, everyone has to do what drives them. So, some people need that to keep them motivated. So, you have to understand it. But again, I've been through enough cycles. So, there's times when you could go a full year without closing a deal. And especially during the down times 2008 and nine, I mean, there was I think I closed one transaction that year. Each year I think we did one deal. So, being able to stick through it is what makes this Again, that's that's what the business is about. Who can stick through and who could who could outlast. So, um and let's say 2008 2009, you're four five years in the business and you're in a tough cycle. Right. >> You're married at that point. >> Correct. And your wife is working and that's how you got by. Yeah, I saved money. That was I even I guess I was, you know, growing up without a lot, I learned how to save from a young age. Just about you being responsible with your >> That was the one I had. I never went and spent every dollar I had. That wasn't me. We saved it. We put it away. So, when the tough parts came, I was able to manage. Now, again, it was stressful. I remember being in that office and looking at guys around us. I'm like, "What are we doing?" What are we doing? But nothing was happening. >> Nothing was happening. Absolutely nothing was happening. But you adapt. You adapt. You pivot. So, for me, that was in 2009 and 10, what I started doing was calling the banks. I don't know if people remember the uh maybe a lot of the listeners don't remember that time. What 2008? >> You had the crash. 2008 was the crash. Yes. Right? The the Goldman the Bear Stearns crap. Bear Stearns Bear Stearns, yeah. Right? So, that everything dried up. No trans- zero transactions. There was no financing. Zero transactions. Nothing was happening. Right. What I started doing 2009 is I finally picked my head up and said, "Okay, where's the next transactions? Where's the next piece of business? Where's it going to come from?" And I started calling all the banks. That's what I did. I spent every day calling the different banks who had the mortgages on these properties. Saying, "Guys, you're not getting paid anymore cuz your borrower is not paying you. What are you doing?" And 2010 before the market picked up, that's what I did. I was selling a lot of debt for all these banks. That's what kept me busy. >> Explain that, yes. You selling debt. Selling debt. Interesting. Part of being a broker. But selling debt. So, what is debt? When you buy a property, let's say you buy a property for $5 million, you don't have $5 million. Right. >> But you go to the bank and you say, "Hey, lend me four and I'll put up a million dollars." That's how almost every transaction goes down. It's why people buy real estate cuz you can buy it without your money. You buy it with the bank's money. That helps your return, like you would know. Leveraging. You leveraging. Leverage. Leverage. It's why real estate is still a great vehicle for investing. And always will be. As long as the leverage is there, it's why people will be investing in real estate. Mhm. So, good cycles and when everyone's paying their mortgage, everything's great. What happens when the market crashes? What happens right now? Right? We'll talk about We'll get into New York City, what's happening. >> I was thinking, yeah. Right? With values just plummeting, what happens to the loans? So, again, if I buy a property for five and I take a $4 million mortgage, and now the property's worth $3 million. So, the investor lost all his money. It was worth five and now it's worth three. He's wiped out. He owes the bank four. What does the bank do? Right. So, they foreclose, right? Bank could foreclose, but banks are not in So, yeah, the easy answer is the bank forecloses. But now what? If you're the bank, you're Mr. Banker, you don't want the property. You don't know how to run the property. You wouldn't want know what to do with it. Right. >> It's not your business. So, what most banks do is they'll go and sell it. And they'll take this mortgage that they have. It's called debt. And they sell it. And they'll sell it to an investor who wants to buy it and go and own the property. So, they're going to buy the property with a $4 million mortgage on it. No. So, now, wait. It gets more interesting. Okay. >> If you're Mr. Investor, you see the property's only worth three. I'm not giving you have a $4 million mortgage, but the property's only worth three. I'm not paying you $4 million for for more more for debt that's only worth the property's only worth three. That means your bill your mortgage now is worth two. Right. Right. I still have to go get the building. Right. Right. I still have to foreclose. I have to go make a deal with the borrower still and the owner. Mhm. So, yeah, so banks take a hit. And they start selling it at discounts. It's the dirty word and banks don't like saying it, right? But that's what was happening 2009-10. That's what was going on. Banks were just liquidating their books just to recycle cash. Get back into properties or mortgages that were paying again, cuz that's where their money's made. Their money's made when mortgages When you pay your mortgage, that's how they make money. And that's what we did. That's what we did for about 2 years. That's all I did was sell these these loans. So, you found a buyer for the property For the mortgage. For the mortgage. To sell So, again, let me just understand that. You're going to sell the mortgage that's owed to the bank. We're going to sell the the bank's mortgage. The bank's mortgage. To an investor who's going to go then use that mortgage to get to the property, get to the deed. It's called Yeah, he's going to get ownership eventually Exactly. >> property by buying out that that mortgage. Listen, I'll tell you simply off hand, 2008, the big crash was because the banks were giving out mortgages like water on people that couldn't pay the mortgage. Yes. So, there was tons of uh what's it called again when a mortgage is the default defaulted on? There's a word for it. Um It's a defaulted mortgage. >> Defaulted, yeah. Whatever. They they weren't paying up their mortgage. Yeah. And um they was that's what really caused the crash. That they couldn't get banks didn't have the money. The word is it's it's an NPL or non-performing loan is what it's called, but it's a defaulted mortgage. It's the same. >> NPL. NPL is the term. Non-performing loan. Right. Mortgage-backed securities, that was the whole right? Cuz they pulled those mortgages into investment. >> a little more. They pulled them, right? Is what they were doing. And no one looked. No one looked. There was no regulation. What's a fascinating thing about the mortgage a little bit of a tangent. Fascinating thing about the mortgage industry, right? So, the people who write the mortgages which are the banks, right? Are incentivized Why How do they get paid? By how many loans they write. Right. So, no one's incentivized to look. That's the the real underlying problem with the mortgage industry in general. Is everybody's inside So, the the buyer of the property wants as big of a mortgage as he can get. The bank wants to give him as big a mortgage as he as they can. Cuz the more money they give him, the more money they make. So, no one's really incentivized to look. Right. So, when the market's great and everyone's doing amazing it's it's wonderful. But then the second you see something happen, and all of a sudden the crack starts and all of a sudden everyone starts looking and oh, why did you give this guy such a big mortgage? It didn't make any sense, right? Oh, well, no one was looking and I got paid a bonus because I gave out more money. So, the problem when the regulators are in on the game That's a little bit of a tangent is why you have these these crashes every, you know, 10 15 years. It's why they come out. So, that Can you just say simply on the ground level what happened after 2008 for the mortgage business as far as regulations involved and did that trickle down into doing real estate deals that have made it harder now that the 2008 had like are there things that are yeah. For sure, the regulations came into effect and how you were [clears throat] able to write loans and the oversight. There's definitely a lot more of it. More oversight, right? But but it's it it it rebounds very fast, right? Remember, everyone has to keep up. So, I always say that the real estate market is very interesting there cuz the rebound is so much quicker. I mean, the crash takes a couple years, but the rebound is almost instantaneous. Cuz the second the financing comes back and the pricing starts rising. We'll talk about today's market and why, you know, people should start re-looking at maybe that's we should probably go there. >> Mhm. But the rebound is way quicker than people realize. That's interesting. >> Cuz the second you see it, we're all we're a little we're sheep. We're sheep. Investors are sheep. And you hear that from a lot of big people. So, the second people start getting back into it and all of a sudden the banks are back and the equity is back and people want to start putting money back into it, now we're competing again and now there's bidding wars again and the price just skyrockets overnight. Funny cuz the stock market is sort of the opposite in a way. The stock market crashes quickly and builds back quickly. Right. When you have a recession, it's usually the next year or two where it rebounds. I mean, like with the when COVID happened, it was down 40% or so. By the end of that year, it was already back up. In 2008 as well, by 2009 it was up, and by 2010 it was already positive territory from the recession. So, very good point cuz now I want to talk about today's market, and that's really what's on my mind. So, first of all, your business is I don't want to lose the fundamentals. I'll maybe get back to it, but your business is in New York. Yes. >> Which all I hear about is the worst place to do real estate right now. I'm sorry if I'm an, you know, ignoramus, but that's number one, and the real estate market in general is has been always some people terrible. Terrible. So, how have you been managing this environment? So, it's a good question. Surprisingly, and then we'll talk about why it's terrible. Surprisingly, I've never been busier. So, currently in New York City, we're in our office we're closing about a deal a week. Always. We're a larger pace than we've ever done since I started ARG. So, which is very interesting and fascinating. People look at me like, "Well, what's going on, right? New York City real estate is down the tubes." And the answer is it's true. So, let's go back a little bit and let's understand why it's down the tubes. That's I think step one. So, we'll talk about rent stabilized in general, which is what I do a lot of. Um rent stabilized, you're familiar with rent stabilizers? Explain. So, rent stabilized New York City apartments have a limit to how much rent you can charge. So, New York City is made up of about $2 million apartment $2 million apartments. A million plus of them are rent stabilized, which is a designation given by the city. It was it's a back to a World War II re- law that was put in place to help the soldiers coming back It was rent control and rent stabilize. It's still here. Why? Doesn't make any sense, but it's here. So, the government limits what you can charge and how you could increase the rents on the apartment. So, for example, apartment beautiful apartment Upper Manhattan, Upper West Side, a two-bedroom apartment, it's probably the market is $4,000 for that apartment. You could only charge if whatever the legal rent is, let's say that legal rent could be $1,000. That's what you're allowed to charge. Okay. Pre-2019, there was a law that allowed you when the unit became vacant to renovate the apartment and then take that rent up to the legal allowable limit. So, the tenant moves out, you the landlord comes in, renovates this $1,000 apartment, puts in brand new appliances, brand new takes it down to the studs, puts in probably $150,000 into that unit to rehab it. Now, he gets to charge that $4,000. So, again, that only just means the legal limit is different than the stabilized limit, right? >> We call the legal is the stabilized numbers. That's usually It can be different, but we When we say legal, that's the rent stabilized allowable number. Okay. However, when he did these renovations and he put in this money, the law gave you the ability to raise the rent and destabilize this unit. It was called We call it destabilize the unit and now charge whatever you could get on the open market. Mhm. So, for a landlord, the business model was as long as when I first came to the business and for as long as most people know it, people didn't really care what you paid for these buildings because you were unlocking potential. And the owners didn't care. They said, "Hey, I'll get it in a year, 5 years, 10 years, 20 years. I'm going to get that extra rent. So, I'm playing the long game." And that was the business model. By renovating >> renovate apartment, raise the rent, fix up the units, take care of your building. Was there any rules in like how much you have to put in to get >> Yes. More rules. You were you were allowed charging it was 1/40th. So, 1/40th of every dollar you put into the property, that's what you were allowed to add onto the rent. Oh, wow. Up until you got to the limit, which was it moved, but it was usually $2,500. So, once that legal rent got above $2,500, it became destabilized. And then you were able to charge whatever you want. Once you hit that point Oh, okay. Hit that threshold, now you get to charge whatever Okay, so that was that was the business plan. >> That was the business model when I first started. Okay. Now, people did start taking advantage of it. And you did see a lot of people again, when we were selling back in before pre-2008 and then come back in 2011 up until 2018 or 2019 when they passed the law. They would come in and they would start buying out these these units. So, they would go to the go to these tenants who had a $1,000 rent and say, "Hey, I'm going to give you 50, 100, $200,000 to leave." Right? They paid the tenant. They then renovated the the unit and took the $1,000 rent up to market up to the $4,000 rent. So, you had people coming in and condensing this timeline. That was Again, people made a lot of money. Because they took a building, a 60-unit building, bought out 30, 40 tenants, renovated the building, and then flipped the building a year later and made 3x, 4x their money. Mhm. >> [clears throat] >> And again, I think there was a tipping point. It was people weren't happy about it. Tenants, the city wasn't happy about it. You're taking all these older tenants and you're throwing them out of their units and that was the cry. And okay, we could talk about who was right and who was wrong. Come 2019, they passed the law, the rent stabilization law of 2019, and they eliminated raising rents on vacant apartments or raising rents through this program, which was called the IAI program, a renovation program, completely eliminated. Wow. So, now, you have a thousand dollar rent, you're only allowed getting what the city allows you. Every year the city puts out the legal allowable rent increase. It could go from anywhere from 0% up to about 3 or 4% per year. The city will tell you every year what you're allowed to charge and that's the only way to raise the rent currently in New York City. Mhm. Wow. So, that's the history Uh I need to see where it's going. Yeah. So, now think about if you're a landlord. You own a property. This is a property that used to pay when we talk about times rent roll people used We used to sell these buildings for anywhere from again, when I first started it was eight, nine times rent roll. At the height of the market in 2017, it was 15, 16 times gross rent these properties traded for. And they shut the door and they say no more rent increases. So, whatever your current rent is, that's what it's going to be forever. And now obviously I'm done he's coming again and he's promising rent freezes. So, even that little percentage you got was two or three percent increases that you were expecting, that's gone as well. So, think what that does to value. Right. And you're talking about crashing values. That was That was That's only one part. That's one part of New York City's issues. Um the other part is the obviously the raising expen- the rising expenses which from real estate taxes, insurance is way up, it's skyrocketing. Um Con Ed just went up so your electric bill and your your your your heating bills skyrocket through the roof. So, all the rising expenses and then the third piece of the puzzle is all the regulations. So, the city started cracking down, forcing you, whether it's the green energy bills they're passing, whether it's the different scaffolding laws or go through all the different regulations they keep passing. Every day they come up with another one how you have to or what you have to do to the building and it just keeps going. It keeps going and going and again, value is now on the rent-stabilized product, we're looking at anywhere from 50 to 70% drop of value from pre-2019. Wow. Wow. I want to just understand one other thing just to Sorry if I'm Sorry if I went off on a tangent. I might have gone a little too much. >> this this is great. Again, I want to hear the the ins and outs. And people should hear the ins and outs cuz it all boils down to the fundamentals, um like we're saying. But so let me just get those two numbers. You had a thousand let's say a thousand dollars a month and then the four thousand dollar number again. >> Right, a thousand dollars a month was >> paying? What they're currently paying. And what you would get on the open market is the four thousand dollar number. And that and to get to four thousand dollars you don't need to destabilize, right? You didn't need you had you didn't technically have to destabilize, but you have to put in enough money into the unit to get [clears throat] it above the threshold, which was 25 and then 2700 dollars. >> Oh, so get above So then there's a threshold of what you can charge. And then once you could do that, then whatever you could get. And it's open market, whatever someone will pay me. And four thousand dollars was just an example of what they were paying. >> Correct. I'm just what the open market is. >> So, okay. So you got there's three three stages really before let's say pre-2019 was what they're paying, what the maximum they can what you're allowed to charge. >> Correct. And then [snorts] the market. >> What what you would get if you had a a non-regulated unit. Which you have. I mean there's many free market units in the city. Oh, yeah? Yeah. Yeah, many. Um How does that work? Which ones are Which ones aren't? So it's interesting. So properties that are built after 19 are free market units. Oh. Okay. So that's just the newer stock a lot of Except if they were built under a tax program, but that's a different conversation. So the newer apartments are usually free market. Um and then units that were taken out of the program. So anything that was taken out of the program is becomes a free market unit and you could charge whatever someone will pay you. Okay. >> Right. What you're seeing now, by the way, which is classic supply and demand, and you could you could talk about that, because there's no new free market units anymore. Right? Cuz they stopped it. So, now what's happening to the What's happening to the rents on the free market units? Why are there no free market units? >> new ones. There's no new ones being created. >> There's no new ones being >> So, what happens? There's no supply, you constrain supply, and price goes through the roof. So, right now in New York City, you're setting new records on rentals every single month. Because there's no new units. Uh-huh. Cuz those free market units Right. There's only There's a limited supply of them. Mhm. There's more and more [clears throat] people asking for them. To buy them, you mean? >> Not to buy them, to rent them. To rent them. Young people Young kids moving into Young professionals moving into Manhattan looking for a place to rent, they've nowhere to go. So, they they're looking for the free market units again, cuz those are the >> available. Well, the rent-stabilized units don't come on the market cuz the tenants never leave. Never leave. Right. So, those are gone. Uh-huh. So, those are locked. The free market units, there's only a limited supply of them, and no one has anywhere to live. So, what happens to the rents? They just keep climbing. On the on those free market units. >> Exactly. Uh-huh. Okay, so it's not all hopeless, so to speak. There is some activity in New York. [laughter] There's There's We could talk about the activity there. >> let's really Let's talk So, I wanted to So, now it's it's post 2019. We're getting back to how you're functioning in this environment. That's where we're headed to. >> There you go. So, let's talk about now after 2019. >> Right after we started I started ARG. So, it was >> Right, right. Right after we started ARG, it also COVID hit then, too. People forget COVID shortly after that. This is great. >> We moved into our new office. The rent laws and then COVID hit. And I remember still we we weren't even in the office cuz we weren't allowed to be in the office. Over Zoom, we were looking at each other, we're like, "What did we just do?" >> [laughter] >> It's the perfect storm. Any new broker going through a challenge, listen to this one. >> Listen to this one. >> Just started a firm. >> Rent laws, COVID. >> In New York, rent laws that year, 2019. Um what else? >> COVID COVID. Yeah, and COVID. And now you have Mamdani. Right. So uh Perfect storm. You're making the question get Yeah, it's like uh it's like bombogenesis with our snowstorm. There you go. Getting worse and worse. Okay, good. Yeah, so now where are we? Getting worse and worse. So this is important So you get to now, let's talk about where we are today. So understand as a broker, it's you're different you have different risks than the market in general. Right? So we're not really affected by the market going up or down. That doesn't really affect our day-to-day business. Yes, we have clients who are losing on buildings and losing properties because they have to give it back to the bank again, that story that we talked about earlier. And losing equity. But our business model doesn't really change. We just need movement. >> need to make deals. >> transactions. >> Transactions. So yes, does my transaction size go down now because the value is less? Of course. The same property used to be worth $30 million and I'm trading it out for 10. So vol- the size of the deal is is smaller. But the volume is there, and that's all I really need. As the broker, you just need the trades. And you put yourself in the intersection of where the trades are. That's the answer. That's the answer. Uh-huh. So now in New York New York, you're having more and more trades. Because a lot of people are getting out. You have a lot of people fleeing New York City, fleeing these regulations. Trying to run away, move to Florida, right? That's really Is that really happening? >> I think so. It's not just in the newspaper. >> It's not just in the newspaper. >> People are actually fleeing New York. >> I think fleeing New York, especially the business people fleeing New York. Uh But for every person that leaves, there's someone who wants to buy the building. I mean, you know, again, we I we said old one of my old mentors used to tell me, he said the greatest line that I heard in real estate, he said, "Yosef, no such thing as a bad deal, just bad pricing." Got you. Greatest line. Well, got you. I see what you're saying. >> Hanging on the wall in in my office. No such thing as bad deals, just bad pricing. And it's true. There's always a some There's always a price someone will pay. And your job as a broker is to establish buyer and sellers on the same playing field and make the connection. That's that's your you're hyper-focused on. >> Right. The market decides what people will pay. Your job now is to bring both parties to that same level Wow. >> and make the transaction. That's uh every business Right. you know, my father-in-law has a business, successful, uh and I used to ask him, you know, what does he do? He's like, "I sell widgets." He told me. He was in foreign exchange, built a global brand. He's like He told me I sell He says to me, "I sell widgets." Sell widgets. Everything is just sales. It just boils down to transactions and yeah, I mean, they were big widgets, but Right. but that's really what you're saying. It boils down into stay hyper-focused on what the business is is your Sourcing. That's what we talked about. Being able to source business. If you're going to own Again, if you're going to own a business, the way you have to make money is being able to source business. And be in sales. I don't care what business you're in. You could be a lawyer, you could be a doctor, you could be in financial planning. If you're able to go source business and get clients [clears throat] who want to be part of your sphere, you're able to make money. That's And that's And there's I don't think there's any easy route to that, right? No. No, no. There's no easy route. That's hard work and it's day in and day out and it's every day coming in and putting in the hours in the grind. You don't just wake up in the morning and oh, this guy wants to be my client. Never works that way. Yeah. It takes thousands of calls and thousands of emails and follow-ups and chasing. And then the business comes in the back door. That's usually what happens. Yeah. Yeah, I agree. I agree and that's uh important for anyone to I think everyone to understand, especially in especially in real estate cuz that's catching me a little bit by surprise. I have this image of a you know, a guy who just got out of BMG. Right. And he's like he's still got the white shirt with the coffee stains and the tzitzis and everything and There you go. He's doing real estate and like he's got the best deal ever in Kansas, you know? Right. Well, listen, there's a reason you know, unfortunately you see all those crashes. There was a lot of that going on and maybe you need a you need a podcast on that of all the why people invest in in Jewish guys who don't know what they're doing. It's Well, that's another >> Find the guest for that cuz cuz it's definitely a be a hot topic. I I actually it's crazy. I do have someone who I'm working on who is completely screwed. Um do people get screwed in in real estate? We're seeing it all again, we're seeing it all over. I You know what's interesting about investing with other people? I have a good friend who's a he's a doctor in the Five Towns. And he's been investing with people [clears throat] for 20 years. So, he was saying he's I I said we were having the conversation about investing with other people as a small piece and I said, "What does it look like for you?" He said, "Yosef, I've put out I think his number was 25 million dollars over the last 20 years." He says, "And I I think it's about a hundred different deals he's invested in." And he says, "I'm right back where I started." Are you serious? >> He says, "I haven't made any money." I'm like, "Why is that?" He says, "What happens is so you invest with all these people and most of them do okay. Right. But when they do okay, the investor doesn't really get rich. The investor just does okay. He makes 10, 12, 15% on his money. Right. >> who put the deal together makes money. He makes all the fees. Right. And all the transaction fees and when the deal hits a home run, the whole get his promote and he'll make his money. But the investor doesn't really do amazing. And then balance that with the deals that went sideways. He said I have out of 100, I think eight of them I lost all my money. Mhm. And [clears throat] so now I look back at it a 20-year run, I'm left with the say I should have put it somewhere else. I'm like, maybe you should have. Yes, I agree. Put it in the S&P and you'd be uh So you see a lot of that. You see a lot of that. And it's an interesting conversation why I think it's You have it with the Jewish world. And they run to invest with the guy in shul who sits next to them and has the fancy watch and you know, the fancy car and he must know what he's doing. And unfortunately, there's too much of it. There's too much of it what you see now when the times get tough and you read all the stories unfortunately. >> Yeah. Yes. Cuz it's like but you invested with people who didn't have any experience and didn't know what you're doing and yes, their schwere might have had a owned a building 20 years ago, but it doesn't give them the right or the ability when the going gets tough. So That's what we saw. We saw and I'm telling you this from clients who who and you know, who work with me. They have you know, they send me their tax returns and have K-1s for properties. I'm like, well, what do you do with these properties? Like, I don't know. My money's gone at this point. >> Right. The guy who invested it for me is not sure if he's in the business or he's gone. I don't know where he is. Maybe he's in jail. I don't know. Uh but that's that's uh because people they don't know uh you have to be uh Yeah, they Well, they Yeah, but they choose to not know. They choose to not know. So if you're investing your money, do your homework. Do your homework and then what I do say, make sure you're investing you know who you're investing with. Try to cut out the middleman. That was where a a of the problems start. Where it's the guy who "I raised $10 million together. I invest it." And you don't even know who he invested it with. Wow. So, take your time, read it through, everyone, it's all public, and find out who the guy is, and then go meet him. Right. >> Meet the guy who's actually making the decisions Uh-huh. on the property you invested in. Uh-huh. If you can't do that, you shouldn't be investing in it. Uh So, that's a good I think transition to uh real estate like we've talked about the career, but now real estate as an investment asset class. Right. Just to understand that a little bit. Um you personally, right? Um I know people swear by real estate as the greatest investment ever created. Um now you're in the field. Mhm. What do you How do you feel about that? Let's say a portion of your money um is it only in real estate, or what do you believe it is an investment? >> Okay, so again, investment strategies, this is your forte, but investment strategies, never put everything in one basket. That's real estate. Even Even real estate. >> Even real estate. Even real estate. >> Okay. Does everyone Does everyone hear that? Real estate is not God's gift to mankind. Um don't put all your money in real estate. Don't put it all in real estate. >> go. Okay? >> is key, obviously. Obviously, diversity is key. Right. >> So, definitely choose different places. You're never going to You're never going to know. Take the rent laws of 2019. Who would have thought? Right. >> Who would have thought? New York City, right? Right. They could change rules on you. So, never have all your money in one place. That's rule number one. That being said, real estate in general, if it's a long-term investment, great place to be. Don't look at it as the quick rich. It's not what it's for. Real estate is number one, the depreciation is huge. And you could talk to me more about that. That's why people come back to real estate. And as long as there's leverage in real estate, people will keep reinvesting. And let me let me jump right in, sorry, Ossi, cuz I know that's what you said. Depreciation is when you make income off of a real estate property, you don't have to pay taxes on that because it's offset by the depreciating value of what you're invested in. Correct. Correct. And you have, I believe it's 30 30 39 years? >> Uh 30 Yeah, 39 years schedule you got depreciation. So, it's it's considered clean income, right? Cuz you have these phantom expenses that they call it. Although, you pay it back when you sell the building. When you sell it, you capture it. Everyone's like, "Oh, it's it's free." It's not free cuz you recapture it. You capture it when you sell. But, as you go along, the income you get is Whatever. Correct. But, the income that comes in is Right. Tax free. Exactly. Basic knowledge and why people invest. So, that's step one of why people invest in real estate. And step two is there's leverage. Right. Leverage allows you the ability Simple idea of leverage is, "Hey, I could take my return, as long as I'm borrowing, here's the simple idea of leverage. As long as I'm borrowing from the bank at a cheaper rate than my unlevered return is, I borrow as much as I can." So, simple, if I would get 5% on my money without if I buy it all cash, now if I borrow from the bank at 3%, my return goes from 5% up to about a 7 and 1/2. Right? Obviously, it's inverse is correct. Never take a mortgage that's more expensive than your return to the property. Or better yet, don't buy the property if your mortgage cost is more than your actual return unless obviously there's a turnaround play and hey, there's something to do. But, don't make that mistake. >> Yeah, that's a good one. >> [laughter] >> Don't borrow at a greater price than your return. There you go. I guess people have made that mistake. You should add that as a rule, right? I think Yeah, [clears throat] well, hopefully it goes without saying, but um yeah, it's similar in stocks with margin. You borrow the stock at a 2% interest rate and you make 8% on it. So, you've just made 6% between what you pay for that borrowing and the return. So, you end up making That's what Same concept. Same concept. Although, real estate loans, you get these long-term loans, right? You get these five and seven and 10-year loans. Um sometimes you get as long as a 30-year loan if you go to these Fannie Mae programs and these Freddie programs and these city-backed programs. So, You have much more time >> Much more time. But, real estate shouldn't be a quick It's not a quick rich scheme. It's a long-term investment. It's something you invest for your kids and for generations to come. If that's your plan real estate, you should be investing in real estate. So, okay. So, um but again, even even long-term you're saying not to just put it all in one basket. Um really to have other asset classes besides real estate, right? I just want to make sure I'm Different asset classes. Some should be in the market. Right. Some some in the markets. Maybe some life insurance, right? You can sell them on some stuff, but spread it. And even in real estate, spread it among classes. It shouldn't all be in one right? Apartment buildings in New York City. No. Right. That's also good Buy a shopping center. Buy an industrial property. Go invest in Kansas, Florida. So, spread it even in real estate. Spread it out as much as you can. Diversify is is the key to anything. Okay. So, I have a couple more things to to ask. Maybe just give us a basic overview of the different asset classes within real estate. You know, terms that come to my mind are commercial, industrial, residential. So, is that What are the basic terms? Um Those are the three big ones. However, so residential, but the way it's used, the residential is usually the single-family houses. It's considered residential. >> Right. Industrial is kind of easy cuz that's the big industrial properties. Commercial encompasses a lot. Okay. >> So, when we call like when we say Alice Real Estate Group was a commercial real estate broker, We encompass a lot. So, it's the multi-family properties which are considered commercial as well. So, that's the six-story elevators you walk up and down or the The four-story walk-ups correct. Multi-tenanted housing is considered commercial property. That's the residential. There's also the retail properties fall under the commercial tone as well. So, that's the shopping centers, the strip malls, the stores underneath the three, four stores, the mom and pops, the single-tenanted stores, so the Starbucks and the Chipotle's, just the single-tenanted stores that are out there. I came very popular. There's all also all fall under the commercial. So, under commercial there's a couple different one. There's the multi-family, there's the retail, and then the last one I would say would be the development side of it. Right. Which is [clears throat] also something we're very active in. So, selling either raw land or vacant buildings that someone's going to take down and put up a big big six-story building or a 10-story building or a couple hundred units. We do that as well, which is obviously very popular now. In Lakewood? In Lakewood and New York City, very popular. Developmental, yeah? It's very popular. Yeah, what's driven by tax incentives. City has a bunch of different programs involved and they give you tax incentives and long-term abatements. And why people buy it, the trade-off is again, we could talk about it, but the trade-off is you have to give some of those apartments back as affordable. Uh-huh, right. That's the trade-off. So, you give 30% of those units back as affordable and in turn, right, for that that tax basis. But it keeps pricing down and allows people to build. So, without it, no one would be building. Would you say again for a starting broker to pick and choose an area or it's not it doesn't make that much of a difference? It sort of shapes its way as you move in the It definitely shapes its way. I mean, there's different models in the brokering industry. So, different shops run things different ways. There's some shops who you only get they have territory system. That's the two main models. So, it's not what we do, but there's other shops who have a territory system, which is you get this certain area. So you'll get these 20 blocks in Brooklyn, these are your 20 blocks and you're only allowed working in these 20 blocks. If you're in which period side of real estate? Like what what >> As a broker. As a broker. >> As a broker. Okay. >> They'll give out different areas to the new brokers coming in. Mhm. And that's your area. And it's it's a diff it's an interesting model. It's limiting, right? Cuz you can only work on this specific area. At the same time when you own a shop, it's >> Hey. Now this broker knows every single owner in that area. So his job is to know every single building. In fact, there was a old brokerage when I first started called Massey Knakal. Uh no longer around. He actually sold out, but his famous thing that he used to have the brokers do is you had to take a picture of every single building in your territory when you first started. With a Kodak or something. >> With a Kodak. So the first 6 months on the job, you had to take a picture of every single building. Now we have Google Street View and It's all there. There's no point. >> Right, right. And you have to get a camera. Yeah. Yeah, I think he used to give them a camera. I think he gave them a camera and they had to take a picture of every single building in the area in their territory. That was your job for the first 6 months. Wow. Um but now so there is definitely a territory system and again, when I start I always have when brokers come in day one after we give them their training and we do have an extensive training pro process for the kids and we give them senior senior broker to work with them. But day one, we always start in one area. Pick an area, start there, but then move. Then move on and call every building, go down the list and block by block and house by house, apartment by apartment and call every single person and find out what's going on. Wow. And and when you hire a new broker, I know there's a popular thing called a draw. Sometimes. Do you structure your How do you structure compensation for new brokers when you bring them in? >> So most new brokers don't get anything, actually. We actually don't give draws to start. You don't give draws. Right. Not at all. Yeah. Once he's there, we've done it. Sometimes you got someone who's been there 6 to months to a year and needs some help. We've We've done that for them. Mhm. But the turnover is so large. Right. >> Turnover is so large. It doesn't make business sense. It doesn't make business sense to be giving draws. I think you'd be out of business if you just decide to give every person a draw. Really? Yeah. Do you say that this field is different cuz I know in mortgages a lot they give draws. Is that also a I think they used to. I don't think they I don't think a lot of people do that anymore. Cuz of the turnover and whatever people do. >> Turnover is tremendous, right. You got to be committed. Again, we we That's a big thing I try to do. Like I won't There's a lot I turned out a lot more people than I take. Okay. And that's I feel a cry a little bit of a cry stem. Like I don't want to take someone who's going to fail. Right, of course. And sit there for a year and then just be miserable. It's This business isn't for everybody. It isn't. Um you have to be You have to be able to put your head to it without a a salary coming in without a paycheck at the end of the week. That's hard for a lot of people, right? Right. >> lot of especially young married young married guy, he has a family, he has a kid. Unless someone's supporting him, it's not for you. Right. >> That's important. It's important. Yeah, and there's nothing wrong with saying this isn't the business for me. I do like the kids who start earlier. The single guy who's still living at home. That's That's the guys who have a better suc- a better shot at success. But even then, the fail rate is Again, it's over 80% 85%? Might even be higher. So how do you How do you get recruits? I'm curious, you know, from from your personal business, how do you get recruits? And and how do you market through marketing and what does marketing do for you? Marketing, [snorts] good question. Greatest question. What does marketing do? Um >> Right, because you're really just creating relationships. I mean, I don't see someone doing a business deal by seeing your brochure. Yeah, so we You don't see it. I I I think to me maybe I'm wrong, but to me marketing is just brand awareness right in our field. So my goal is when my guys or I pick up the phone and again, I'm cold calling and I get on the phone and say, "Hey, this is Joseph Katz from MRG." The guy knows who I am. If that happens, that means my marketing's doing great. So that's the goal. Now obviously we're not always successful, but that's the goal. It's about and again, when someone's selling a building, it's the same thing. Marketing is being there that when he does he say, "Hey, I want to sell my building, who should I call?" Right? He wakes up and he comes out of an investor meeting or he talks to his wife and he says, "Okay, we're done. We're selling our property." Who does he call? So if your cup is on his desk or you just sent him an email last week, hey, guess who he's calling. So again, I I tell the guys all the time, your job is not you're never going to convince someone to sell. You just have to be there when he's ready. So that's you you know, I think a good piece of business advice how marketing cuz many people want to see lead generation, you know, from their marketing. Like Right. how is me sponsoring, uh, you know, putting my thing on a billboard going to lead to leads? Mhm. It doesn't always work like that. It's branding. You like you said, if someone's ready to buy, your name because you sponsored that sports team, you know, they realize you are a brand. There you go. Right. >> in front of them and hey, maybe that tilts it your way. There's a couple brokers competing for his listing. Right. He's like, "Oh, I right. Hey, they sponsored this or I saw the name and say or I've seen that they just sold X, Y, and Z and they just sold a building next to me because So there you go. That's a lot of marketing to me, that's what it is. I might be wrong, but No, I agree with that. I really believe in that. in our business is as opposed to where we're your business to business as opposed to Right. direct consumer. Right. Yeah. >> [clears throat] >> Yeah, I really believe in that. Someone's active on social media, someone uh you know is posting statuses, you know. >> Right. No, important. Yeah, statuses are >> It really works. It really statuses aren't important. Get out there. Again, we push it. I know you do a lot of it. Your status is a great status is by the way. >> [laughter] >> Thank you very much. Yeah, I didn't even know until I did it and then uh I got some good feedback. I you know I post my smoothies. I'm like all the random stupid things. There you Uh but people are really inspired by my morning smoothies. >> morning smoothies. You know, it's >> right. We just did something with donuts over at over Hanukkah. >> I knew I also anyone's reaching out. But I knew Cafe Chocolat was going to win. >> There you go. Right? [laughter] They won. I knew could from the beginning. It was no no-brainer. [clears throat] I mean they're the most expensive also. Yeah. But uh you know Cafe Chocolat donuts during anyone who feels that they need a good fix. There you go. >> Um and also um side hustle of you. We always speak about side hustles. Yossi is a donut taster. And he can help you figure out the best donut for >> There you go. you know, the calories. We stick to just Hanukkah now cuz it's the calories uh Just Hanukkah, but it's exploding business really. You know. Um Exactly. >> Sorry, we digress. Okay, Yossi. So, we've covered a lot of topics and um it's great to see someone who's been in the field for over 20 years and still shows up to work every day with the same passion, the same excitement, maybe even more passion and more excitement than when you started. >> Possible. Yeah, it's like you're not even burnt out. Like wow. Um it's like already like wow. Um I think I saw a stat once that the average person changes careers six times. Some kind of thing like that. Oh, really? Yeah, hopefully it's not true. Um but >> [laughter] >> Um so you know, what is what gets you to show up to work every single day? In in popular language it's called the why, w h y, the why. And I feel it's important for people to hear that because they can see a picture of the long game and say, you know, real estate does work for me and here's, you know, a path for me to get to that point. So, what is What is driving you every day? >> What's the why? What's the drive? Great question. Great question. And again, I tell my wife all the time, I'm blessed what I do. I'm blessed I do cuz I love doing it. You know, famous I I had a rooster used to tell me, I remember, back when we were in the Yeshiva, go back to Yeshiva days, and he was and he was learning Ben Ish Chai, right? And I'm looking at him like, "What are you learning, right?" [laughter] He's like, "You don't realize, I'm always on Ben Ish Chai cuz I love learning." That's That's great. >> deep Such a deep thought, right? He's like, "I'm always on Ben Ish Chai." So, it applies to work. If you love what you're doing, you're never working. And thank God it's something I love. So, the challenge is why and why do I love it? So, every day something different. Yes, it's about doing the same thing every day and making the same making the calls and putting in the hours and the grind, but every deal is different. In fact, now what I like, yes, obviously you love to close deals and you love to transactions and being successful is obviously great. But each deal, figuring it out, there's a puzzle. There's a puzzle to every deal. And why? And and we we try to drive it into my young guys. Your job, we follow what we call the transfers. And every every guy in my office's job is to follow transfers, which is every building that sells in New York City. And my job that I give them is you have to know call each buyer and each seller and ask them that question, why? Why did you sell and why did you buy? And if you can answer that question, you're on the road to being successful. So, people Why does people sell these assets? Now, there's a lot of different reasons. You know, there's again, they call it the three big D's is why people sell is debt, divorce, and death. That's the three D's of real estate and why people sell. Um Okay. But there's a lot of other reasons. People wake up one morning and hey, it's too hard for me. I can no longer manage it, right? My kids don't want to be in the business. Or hey, this building's losing. I have a problem tenant, he's making me miserable and I don't want to be there. There's a hundred reasons why people sell. But you have to understand why. If you can, now you'll know, hey, is he selling something else? Or maybe then the guy next door is selling. Right? And the same thing for the buyer. As understand why he buys. And real estate's fascinating like that. We have buyers, again, the stories you hear, they're they're they're amazing. But we have guys, he only likes corner elevator buildings. Why? I don't know. That's what he likes cuz the first building he bought was a corner elevator and made tons of money. He only buys corner elevator buildings. And we have guys who only buy buildings, you know, that we call them pre-1940s, where they're they have the sunken living rooms and they're a little nicer. He believes those are the best buildings to buy. Why? Who knows? That's what he likes. But we have buyers who literally in their bio we'll sit there and talk about we know that's his building because it's the corner elevator or it's the pre-1940s or it's hey, it has the boiler that he likes. So he's buying the building. And it could be one phone call. Sometimes I'll walk into a building, I'm like, okay, I know who I'm calling. Right? Or it's simpler than that. His management office is on the block. We do that all the time. He works [clears throat] there every day. Right? Or he owns the building down the block and his super, he could use the same super for both buildings. So that's for him. So it's not just the marketing and you take a listing and hey, let's see who's going to buy it. We target those buyers. In fact, we go the other way sometimes. I know someone's looking for something, I'll go target a seller. And we call them and say, hey, I have the guy who wants to buy your building for whatever the reason is, but I know that. So that part of our real estate is the exciting part. The puzzle and understanding the circle and why it's happening. And when you do transactions like that, the reward is amazing. I'm hearing the excitement of the really a relationship factor. For sure. It's all about relationships. >> Like you know that Schlemiel G likes he likes buildings that have red bricks. >> There you go. Yeah. There you go. It's Michigan. So we call we call red bricks. Yeah, yeah. Again, real estate is about it all boils boils down to relationships. So important, it's all relationships and I like to say it's it's not about who's nowadays, right? Everybody has everybody's number. Right. You know. Right. And we do this with the young kids also. I'm like, okay, here's this guy's number, billionaire investor. I'm like, here's his number, his cell phone, call him. And the guy calls him, the young guy in the office calls him and of course he doesn't pick up, right? He's not picking up. He doesn't [clears throat] know who you are. Right. Right? And then I call him and he's like, hey Joseph, what's going on? So I'm like, it's not about who's number you have, it's about who has your number in their phone. Mhm. >> [clears throat] >> Classic line, I love it. So true. So again, relationships obviously most important part of this business. Wow. I really feel like your training here in your firm is valuable. Wow, it's really it opens up my mind. Um wow, okay Yossi. Um I was enthralled by your presentation. >> [snorts] >> Um we'll wrap up just with the you know last question. Where do you think you know real estate is headed to in the near future? Do you think we're going to see a recovery soon? I think New York City's going to see It has to see some. I mean listen, New York City's cyclical. It's always been cyclical. The real estate market and back in the 60s and 70s, you know, you talk about the Bronx is burning and go read history. The Bronx was actually burning by the way, it's not just a movie. Yeah, it was actually burning. Oh, okay. So it's cyclical and there was the hard times then. You look at when those generation were buying, they couldn't collect the rent. The the were there, it was rough. but they came in and they bought and they created generational wealth through the '80s and the '90s. So, is it coming back? The answer is yes. I just don't know when. I don't know when. Um I don't think anybody could tell you when. That being said, now I is the first time since I'm in the business where you could actually make money running buildings again. I mean, it's a longer conversation, but >> [clears throat] >> the market changed where it wasn't about actually making money on the rents, it was about valuations and creating these crazy valuations and selling it to the next guy or refinancing. That was the only way to really make money. Now, you could actually make money the old-school way running the buildings. And it's a monthly check and your expenses are less than your income and every month you make get a check. It's the first time since I'm in the business that we're back to the fundamentals. So, if you're able to manage and you're able to run this product, it's the time to be buying right now. And there's a reason the market's on fire. There's so many deals trading right now. >> [clears throat] >> And again, we're seeing the excitement come back. Pricing's not It's still well depressed. So, get in now. Right. Cuz once it jumps, it's going to jump It's going to rebound fast. That's what you're going to see. So, whenever that time comes, I don't know. It might be a year, it might be 5 years, might be 10. New York's coming back eventually. I mean, with the interest rates going down and all that stuff, like in general you see real estate picking up. I mean, what about the outside New York? Like >> Volumes are Volume in New York is up tremendously. Okay. >> Tremendously. Year over year. Like I said, right now we're closing a deal a week in the office. The market in general is up 300% quarter over quarter. So, New York City's on absolute fire right now. It's crazy. But yes, pricing is way depressed. You got to be ready to jump in. It's not easy. It's not easy. Um you got to know how to manage this product. It's It's It's It's tough. Talk to the guys who manage it. I'm sure you could have one of those guys in tell you how hard it is and the regulations. You mean they call you at night with the toilet broke? >> It's a grind. And yeah, yeah, you're you're working for your tenants. They call you, you run cuz you don't want them calling the city. Oh. Yeah, cuz they if you don't come jump around, they call the city and you have a violation and then you're paying a $500 fine. So, yeah, >> [laughter] >> people are jumping. So, you have to It It's an intensive management business, but if you could stomach that part, you should be buying. Now is the time to build generational wealth. Wow. Once again. Oh, wow. Okay. Um so, uh we've reached our time limit really. I would think there's a lot to talk about. It's great. It's really I learned so much from this. Again, I know I have an outside exposure to real estate, you know, I don't know the ins and outs, but I think it's going to be helpful for our audience to see really we went from A to Z, I think. I think we covered a lot. >> Covered a lot. We covered a lot. You did a great job, by the way. Thank you very much. That's what it's all about, me doing a great job. Um but uh I do appreciate a compliment in my thankless job every once in a while. There you go. >> Please don't have pity on me. Um great. No, but really I enjoy this. I And And I think that um really any real estate broker who wants to get into the business, this is perfect for them. I would If I would be doing that, I would want to hear something like this. And [snorts] I'd want to join your firm also, to be honest with you. ARG. [laughter] There you go. I'd like to plug. From Yeah, well, we didn't discuss it before. Um but yeah, you train from A from scratch and do it doing it right, fundamentally correctly. Exactly. I mean, Yossi, it was really a pleasure to have you. Um is there any final thoughts you want to bring out that you think is good advice? I think it's I think we covered everything. Again, it was a pleasure being here. I don't We had fun, which is most important. That's right. Right. Time flew. I liked it. I think we Hopefully we taught people a lot. Yes. >> Hopefully people got something out of it. Yes. And again, if anyone you need uh uh ask people who want to join the the podcast, come join. It's a lot of fun being here. Oh, that's great. Get on the podcast. Let's blow it up. Thank you [snorts] very much. >> the views going. Oh, yeah. I really appreciate it. >> Oh, yeah. I was also going to make a shout-out here that um uh Yossi is the one who has a lot of hair, you know. I've [laughter] been Before my podcast, I always have to offer my brush. Hasn't been used. But uh Yossi has hair, so obviously he's not under a lot of stress in his job, which is great. >> Uh I don't know about that. Comes from my dad. My dad still has a full head of hair, and he's uh he's 81, so >> Oh, he's genetic Oh, okay. All right. He's also a humble person. There you go. Um [snorts] anyways, thank you so much. It was really a pleasure, and uh feedback. Everyone should give feedback. We always appreciate it. We're learning a lot from the feedback of what to put on the podcast, and There you go. >> what not to put on, also. Um so, [snorts] we look forward to hearing from you. >> Amazing. People want to find me, I'm easy to find online, so look me up, find me, ask me questions. >> What's the What's the website? >> Website is arg-re.com. I'm on LinkedIn, and my numbers are all over the brokers. We're not We don't hide. We don't hide. We don't hide. >> Like you said. >> Exactly. We're out there, easy to find. arg.re >> -re -re arg-re.com .com Atlas Realty Group. Amazing. Thank you so much. Thank you. Very good.