What Are the Secrets of Massive Real Estate Success? A Conversation with Joseph Lubeck

there is opportunity in every down cycle I've been as again very combination of luck hard work and blessings that Cycles have generally been not only survivable and not only manageable but profitable for us the best advice I give to anybody looking at getting into business is try and be as lowly leveraged as possible the less debt you take on the more you're able to manage through Cycles [Music] Joseph thank you so much for joining me on the let's talk business podcast it's my pleasure it's good to be with you yeah and a shout out to ushi title buam he connected us and I know he he's always connected to the right people and I think I'm very excited today to have this conversation because we'll be touching a topic that I know a lot of people are looking to invest in are investing and if we could help even one person it's definitely worth our time absolutely absolutely and I started very small many many years ago and one person helped me and that's how we create blessings and create wealth and create comfort and hopefully it all leads to blessings and lots of sadaka beautiful so let's let's talk about your Beginnings because I know there is a story how you started with something about $400 at very very early age when you you went away from home so let let's start there bring us a little bit back to the history so let's just was not my brightest moment however I grew up in very modest circumstances my mother and I lived with her parents and my grandparents were just wonderful people and a blessing but we grew up in very modest circumstances and not unlike a lot of uh young people I was not the best behaved and it led to when I was 15 I was both in regular trouble at school and I was also in trouble at home and my grandfather said to me at that that time he said you can't afford to smoke cigarettes they're bad for your health and they're expensive and if you want to live at home I won't have you smoking cigarettes and I pulled myself up by my bootstraps and very foolishly gave up free room and board and said I'm leaving home and at the same time we had also gotten a notice from my school that if I didn't start to behave I was going to be expelled then I would not be invited back now there's kind of an interesting sidebar and a wonderful outcome to this which is the reason they couldn't really get me in much trouble at school was no matter how much trouble I got in I always had Straight A's and I performed extremely well despite the fact that I was usually in trouble and skipping class and doing everything that I would have punished my own children for doing were that today fortunately at that time a guidance counselor took pity on me and said you know he's gotten all these good Gra grades but he's always in trouble maybe he's just bored and they gave me the SATs and I scored exceptionally well at the age of 15 and they said well maybe he'll do better if we send him to college so fortunately I was lucky enough that this guid counselor took pity on me and had made some arrangements for me to go to Cornell University at the age of 15 and so I skipped 10th 11th and 12th grade and went to college at a very young age my first semester did not do too well because I thought the same thing could be repeated that I didn't really need to go to class and I could get straight A's and my first semester I did not do well and then I realized I better grow up and I did and after that everything went swimmingly well worked my way through college I had to work the whole time we didn't have money I worked my way through college worked my way through law school and as they say the rest is history wow this is a interesting story where did at which point did you decide that real estate is the place where you want to focus the most of your energy in well ironically when I was very young starting early I had to have a job before school and my grandfather had gotten me a job working in an apartment building where I would go this is before fifth grade sixth grade I was very young and I'd get up very early in the morning I always had a good work ethic um at my jobs cuz I I liked earning money and so I would go and and sweep the Halles and mop the floors and polish the brass in this apartment building then I'd go to school then after school I'd go back and help the maintenance man carries tools and the like and I I learned a lot about apartments now the result of that was that I said I never want to see an apartment again I want to have nothing to do with real estate and I'm going to go to law school so I can make a lot of money so I went to law school and I went to work for a fund that is long since gone away but the fund was involved in real estate and a number of other businesses and so I was involved in the legal aspects of real estate and one of the people that the fund had heard the story that I quote knew a lot about apartments well what I knew about apartments was how to fix appliances and how to fix toilets and how to mop the floor but I played along and said yes I know a lot about apartments they asked me to get involved in what was then a very early apartment company and now we're going back to the 1990 and at that time I got involved in the real estate company became the COO and I was very involved in the operations and then I said you know again very uh nonchalantly I think I should be running the company and the fund said well we love you and we'll give you a raise and we'll give you a new title but you're only 35 years old you're not going to run the company and I said well I think I can do it myself and long story short again I was lucky I had One Mentor who became my one investor and my wife and I took every penny that we had and partnered with one person and bought one building in St Petersburg Florida in 1996 and again as they say the rest is history Hashem looked down on me I worked hard I went from being a corporate lawyer to being the maintenance man again and the leasing agent and did everything I was the leasing guy I was the property manager I did whatever I had to do but one property very quickly became three and three became five and five became 10 and I started the management company and I realized it was much better working for myself and I started getting investors and the investors got bigger and bigger and bigger and as they say one thing led to another just for our listeners in context so you know currently you have offices in New York Tel Aviv and Dubai what is like what could you share as far as the size of the portfolio of the multifamilies and hotels that you actually have in portfolio sure well I've been very blessed as I said I was I was always a hard worker I always believed that if you give you shall receive I always believed in sadaka my wife and I always felt give till it hurts and we did and I believe that Hashem liked that Hashem was my partner in every deal and I think that really accounted for our success as well as working extremely hard I'm still the first person in the office I'm usually in the office by 5 :30 in the morning and I love what I do I've been blessed doing it and I've also been very lucky with the people I've been able to attract and retain as my team members but particularly and this is very meaningful for those of you in uh Israel then seven I was lucky enough to um meet the uh principles of the suen family who are the principles as you may know of Elco and Electra in Israel and they became my partners here in the United States and we were able to grow the companies together under the banner of Electro America where I've worked and partnered with them now for 17 years almost I think and we've grown first the multif family platform which is our Flagship and then we also have Holdings in hotels we have Holdings in single family home rentals and we also have a small Capital company that is a essentially a boutique Bank in the real estate industry today American landmark in the US has approximately 800 full-time employees and we own and manage approximately 36,000 Apartments which is really incredible but I've just been very blessed with the team members my key people have been with me my president and CFOs been with me for 18 years my chief investment officer's been with me for 11 years my chief operating officer has been with me for 15 years and so on and so forth I've been lucky enough to partner with a wonderful family and a wonderful team at Elco and Electra and together we've grown the business and and done wonderful things and it's been good for all the team members and also very importantly I think we have three constituencies that we report to First is our customers customer service is everything giving people a good affordable clean and modern place to live is part of our Mantra it's part of our mission number two is to provide great returns to our investors and we have wonderful investors around the world we have Capital markets offices in New York Tel Aviv and Dubai and we have investors from Sovereign wealth funds to insurance companies to Pension funds on a global basis most of our investors are in fact institutional although we do have individual investors as well and our third constituency of course is our team members we have to grow a great company that provides people with a good life work balance with a happy healthy and enjoyable place to work not where people grind it out but where they want to come to work and where they like the atmosphere and like who they work with and that they see opportunities for advancement for themselves and I think by being really attentive to those three constituencies we've been lucky to to grow our business and of course reap significant financial rewards this has been great and I know that one of the things that it's so important for leaders is to be able to know who they're working for like knowing to ramble off the three main key factors what you focus on every single day I think it's so important is sometimes we lose sight as business owners we lose sight of any of those constituents and then all of a sudden everything falls apart so it's great to know that while we need to focus on each individual we need to make sure all three of of them are properly focused on I want to ask you some additional questions but I do want to make sure our listeners took note when you said before that you took AEM for your partner and you said I need to give until it hurts I think that's that's something that our listeners to take note because sometimes we say when we will be wealthy we will give and that goes against what you just said it has to hurt so which means is sometimes you have to give before you have the full wealth sitting in the account well that's right and you know Hashem as we know doesn't judge us by how much we give Hashem judges Us by the giving spirit that we give what we can Hashem doesn't want us to scrimp Hashem wants us to lead a good and comfortable life but Hashem also wants us to care about our fellows about our community about our world about our fellow Jews and and about others non-jews as well we have to work to heal the world we have to contribute and and I believe that as my Rabbi says Hashem is a mirror if we give Hashem gives and so my wife and I and my family even when we didn't have much to spare we always felt we would give whatever we can whenever we could and for me I'm living proof that that it's been a reward and honestly it sounds corny it sounds trit but it's never failed in my life the more we give the more we've received the more that we've given it's just always been fortuitous I don't want to say it's been surprising because I I don't think it is a surprise that we would give something maybe more than we could have expected and a deal would come up an opportunity would come up it never failed that wonderful things would continue to happen and this is something that I've taught my children that it's important to them and of course I work for my family I work for my wife my wife thinks I work primarily for my wife which is fine but of course she's been a partner um I'm now married 37 years my wife has been my support my partner has raised wonderful children in our Jewish tradition and I could not have done it without her of course but giving is something that we think has got to be in our DNA it's not just what the T says to us but it has to be in your DNA and passed on beautiful I want get to some some questions on the real estate side and then we'll come back to you your business as a whole first of all obviously it's we can't ignore what everybody's saying about the recession is coming the real estate market is collapsing you've been in rounds for a couple of Cycles already with this amount of multif family um apartments and so on and so forth we're not asking of what you think is going to happen what do you feel is the current state from your perspective well certainly we're approaching what I would call a down cycle in the real estate market certainly in the US and probably globally I don't think it's from any fundamental weaknesses in real estate I think it's been caused by the debt Market generally and the concerns about recession my comment about the United States is here the Federal Reserve as a result of coid or poor decision making went crazy one way with low rates and now they've gone crazy the other way with high rates I don't respect or support either one but will return to moderation I don't know whether this is the fourth or fifth cycle I've been through but to quote the famous Baron Rothchild quote buy when there's blood in the streets so there is opportunity in every down cycle I've been as again very combination of luck hard work and blessings that Cycles have generally been not only survivable and not only manageable but profitable for us the best advice I give to anybody looking at getting into business is try and be as lowly leveraged as possible the less debt you take on the more you're able to manage through Cycles we've been very lucky that we've always been and and I thank my partners for this that we've always been able to be a low leverage real estate company some people think that's contradictory but I think that's safety we like to sleep at night so I encourage people certainly you need more debt when you're starting but it's better to have Partners than it is to take on debt and partner with lenders because lenders are predatory and good partners are good partners through good and through bad as my partners have been to me I see in this current market there's opportunity there's opportunity where perhaps others who've been less well advised in their borrowing or overpaying and not the we're bottom Fishers to take advantage of other people's Misfortune but there are opportunities to take advantage of there are ways to navigate these cycles and to do so successfully so I think that Cycles are something that must be expected that must be anticipated you know many people built their business on the low interest rates of the last few years I think that's probably unrealistic just like those interest rates were unrealistic today's interest rates are unrealistic so right now we're being far more cautious than we would normally be and that's okay for people who were thinking is this the right time to start a business it just might be there could be opportunities out there to take advantage of situations when times are tough I can tell you the first deal that I bought day one I was in the right place at the right time and I bought a property from a bank where someone else had defaulted and that was how I was able to get my start it was 144 units I'll never forget it it was called Kings in on 54th Street North in St Petersburg Florida and it was not an attractive building and I did a lot of work myself but I was in the right place at the right time and I took advantage of an opportunity so I would say don't discount the cycles look for opportunities in all the Cycles but be prepared the Cycles will come and we go speaking about Cycles I did realize in your portfolio that you mentioning hotels you're mentioning multifamilies you're not mentioning any commercial or Office Buildings is that deliberately that's deliberate on my part when I was working for the fund I had an opportunity to view many different types of real estate and each one is its own specialty my specialty happened to be multif family and apartments since then I have partnered with others in The Lending business people who had better knowledge than me I've partnered with people in the hotel business people who have better knowledge than me I'm the first one to acknowledge that Sur surrounding myself with people who are smarter than me and who I learn from and still do each and every day is one of the keys in my view to success when we first decided to look at hotels it was an opportunistic play we saw that hotels were in trouble during coid many were closed a number of the ones that we bought were in default or were closed and we felt that by partnering with the right partners and again I partnered with a wonderful family out of Philadelphia who I had known and who were extremely well respected and they joined us as the operating partner and Electra and myself partnered with them and so far it looks like it's going to be successful it's still early to tell but I always felt and saw that in my perspective office and Retail had a very different risk profile land had a very different risk profile now there may have been greater rewards but there also were greater risks and I felt that the most secure risk adjusted return in my view was in multif family and there's a number of reasons I won't get into all the detail similarly a choice that I made again I don't know if it was smart or luck or both but I felt in the United States that the focus of growth the focus of population growth job growth industrial growth manufacturing growth was going to be in the southern states of the United States so at that time I decided I wanted to focus on multif family and I wanted to focus on what we refer to as the Sun Belt the Southern United States there are many people I know who are extremely successful in retail in office in industrial but they're specialty businesses and even within multif family I don't do student housing it's a specialty business it's a good business but you need to understand it military housing it's a specialty business you need to understand it so I follow the old rule no stick to what you know and know what you don't know that's great I want to ask you a follow-up question to that just knowing that you do have a lot of you know parts of your portfolio New York what do you say to you know I know that a lot of multif family owners have issues not with rent rols and how the government is is reacting to the landlord tenant Fiasco so to speak is something that keeps you up at night so to speak or you mentioned before you sleeping at night yes well well first the answer is i' stuck to my guns when it comes to Sun Belt we do own some hotels in New York I don't own any multif family anywhere north of Richmond Virginia oh and again a lot of families have made fortunes on multif family in New York or Chicago or La personally again I feel it's a specialty business the government laws in New York for how you can renovate how you can raise rent how you can evict tenants how you can accept government tax benefits and government subsidies and Section 8 it's a specialty business that requires very sophisticated knowledge and frankly I'm not that sophisticated in most of the southern states where I operate we don't accept any government intervention we don't have any rent control we don't have any of those government what all I believe the heavy hand of government and there's a place for that there's people who need that subsidy and that support and a lot of people have made a lot of money in that business but that's beyond my purview you mentioned before about land is also different business are you specifically calling out full ground UPS or like when you speak about multifamilies you also involved in any groundup uh multif family projects well yeah so I differentiate between what I call development and building those are two different things and development we don't participate in that entails buying land getting the appropriate permits the government approvals the zon in the entitlements the paying the fees dealing with committees and and boards and homeowners associations and to me again that can be a very profitable business but it's a specialized business and I didn't want to be involved in that as an attorney I felt that that was just too complex and a very high and very long-term risk profile so where we will get involved is that's where I differentiate between development and building we will do new build but only if it's ready to build got it so there's permit there's everything good to go exactly what we call shovel ready shovel ready got it so let's turn to the The Listener listening to this and maybe you could bring us back to your your starting point as you mentioned before let's teach them how to fish instead of you know giving them the fish so to speak so if somebody wants to enter the real estate market regardless of the scenario where would you say what are the dos and don'ts that you would just ramble off to a start you know obviously e sector and real estate is different but what would you say that the are the fundamentals dos and don'ts well like I did certainly a good education helps whether you're in law or whether you're in finance or whether you're in banking those tend to be conducive to getting involved in real estate ownership of course if you have a wealthy family that helps but assuming you're starting by yourself I recommend first take a job learn from somebody else don't go out there alone don't go out there inexperienced like I did I worked for another group I got involved I saw mistakes made I made mistakes but I'd rather make those mistakes when I'm working for somebody else so that's number one number two is go to meetings go to seminars approach people ask people questions read everything you can I highly recommend there's a book by Peter linman about real estate investment he's a famous Professor at uh warten and he also does a monthly report I find his books in particular very sophisticated they sometimes even for me today I have to read his reports twice to make sure I've gotten the gist of it but read of course everything you can be very attentive to the bottom line watch your dollars watch your cents watch your expenses a lot of people look at the income side and perhaps don't pay as much attention to the expense side it's what's left at the bottom that you get to keep so you could say oh I've rented all these apartments but if it's costing you more to rent them and more to run them obviously doesn't make sense and the other thing is start small you know I people say I started with a pretty big building which was 144 units but of course in those days it wasn't that expensive and the rents were pretty low and I got a very good deal so I say start small multiply use your smarts to grow use the yisha cut as you can use the Yiddish a cup as well you need to have both make Hashem your partner do it up front that helps in my opinion it truly does and also then there's the fundamentals you need to reach out to Banks you need to reach out to other lenders to see is there any opportunity is there something is there someone who's in trouble is there someone who's defaulting is there something available reach out to brokers in trying to acquire say look I don't want to be a bidder you know I never want to be the guy who stands up in the room and says I'm willing to pay more than anybody else that's just not a good idea you need to also stay under control don't get involved in bidding bidding hire hire hire if someone else wants something really badly and they can afford to out bid you let them out bid you don't worry but take your time find the right first deal find the right second deal find the right third deal and then surround yourself with people smarter than you that's great I want to ask you one more question on this what we just discussed is sometimes you could see people that are doing pretty well in real estate and all of a sudden everything is falling apart what would you say you know you mentioned the beginning about overleveraging yourself is that usually the cause of what you see when you say distressed portfolios yes absolutely that's the biggest problem problem or also going outside their area of expertise I've seen many people in my business and I've been asked by investors why don't you expand to this state or that state why don't you go to Europe why don't you you know you've got such success and you've got good systems why don't you expand it I tell people with all due respect I say you know I will look as dumb in Portland Oregon as the guy in Portland looks when he comes to Miami you need to have boots on the ground and no one understand in real estate people joke it's location location location but I say it's knowledge discipline and location you need to have all three so I'm very lucky in that the markets that I work I have boots on the ground now people who I know and trust who can tell me this street corner is good that one's not this neighborhood's good that one's not and for a a variety of reasons it has many different factors and of course the other thing is a lot of people today especially people come to me all the time Mr Lubec why do you worry so much about what people tell you on the street we have artificial intelligence that can tell you everything you need to know and we'll tell you where to buy and I say that's great we consider all that data we have three major artificial intelligence services that give us the latest and greatest data and population data and census data and crime data and who lives where and why we should be on this corner and that corner and we look at all that we consider all that but at the end of the day the real decision is that I know and trust somebody in Austin Texas who tells me that property has a bad history or that location had a bad history now not that you can't solve that problem but I prefer to take the path of least resistance that's great let me ask you a you know another question and turning it from you know you mentioned before about Investors unfortunately we've seen a lot of Ponzi schemes or different people turning to different people for Investments let's talk about somebody that wants to invest with somebody that has a portfolio in real estate what are the things the investor needs to look at in order to make sure that the money is is being put in the right place track record track record track record number one how long have they been doing it number two speak to their other investors number three again with all due respect are they audited and who's their auditor because you need to as the famous Ronald Reagan saying trust but verify I can tell you there are issues here in the United States and there are issues elsewhere particularly for the small investor where someone says oh with me you can only invest I'll take $25,000 or $50,000 my suggestion to them is go to the stock market where you know you can count on the numbers and everything is audited and invest even in the United States invest in a real estate trust invest in a publicly traded company if you're an investor at that level most of our investors now we've been very blessed are institutions who are investing a lot of money but they are not taking personal risk they know who we are they check us out every year and every quarter we send someone who doesn't send regular reports on every property someone who doesn't hit their budgets you need to check those facts before you invest but particularly if you're investing your life savings I recommend public companies whether it be on the New York Stock Exchange the NASDAQ the Tel Aviv exchange invest with public companies where there are also audited firms and other people watching out for your interest so you suggest somebody that has um you know like life savings and they want to put you know have something in a real estate portfolio so go go that route of course not that we don't want your money trust me we would love to have you invest but particularly of course always diversify your Investments I do for myself but with my own family money which is now really my children's money I invest a lot in the S&P 500 Index I invest in my competition in publicly traded REITs and of course my biggest investment is still in myself and in my partners at Electra but also I know the numbers are real and I know the numbers are good and whether you trust me or not it's very important you trust ernston young yeah so let me ask you more of a personal question if you don't mind so you sold a company for $2 billion in 2016 yes yet we're speaking now in 20123 and you're mentioning that you're the first in the office almost all every day why what motivates you to continue doing this and grinding well again it sounds corny but I enjoy what I do as you can tell I'm enthusiastic Absolut I like I like what I do also very importantly and and all men not just Jewish men can appreciate this my wife and I get along wonderfully for four to five hours a day and she doesn't want me home so that that is truly part of it my my wife says to me I married you For Better or For Worse but not for lunch and and this is true she she likes me working but in all seriousness as I said I'm I'm learning something every day I've always had a good work work ethic I like what I do I feel I'm being productive not just for myself but for Hashem I've been able to be very blessed with what I have of course and what I can give just as importantly and that remains very important to me I continue to work very hard on charitable uh Endeavors for myself and my family to give and create uh in the world I also like the people I work with I like what I do and I feel that we're creating things for the world we're creating good affordable housing stock we're renewing housing stock we're creating jobs we provide Healthcare we do a lot of these very positive things in my opinion not that we're perfect we have make mistakes every day and we learn every day but my retirement lasted about 12 minutes and you know we had at that time we sold the assets but we did not sell the company and we were offered even more money if we would sell the company and I said no and my partner said no and the suin family and I have been just wonderful partners and I was asked recently how many more years I want to work I saidwell my father lived to 93 so as long as I can they'll take me out of here in a box I really do enjoy it and it's it's part of my Persona if you will beautiful so we spoke about about charitable in philanthropy how much do you connect that as part of the business culture or you keep that separate from the business ethics and everything done in the business side of things no we consider that giving back both personally and corporately is very important and today many of our investors also appreciate that yes we do give away some of the corporate earnings and we're involved in community programs we're involved in philanthropy we're involved in training we're involved in everything from food raising to helping artists and in fact two of the things I'm very proud of and you'll forgive me for bragging but last year our company American Landmark won the national multif family Executives award for Social Action with a program progr we have called artists and residents and artists and residence is to help poor artists get us get a leg up and get a start and we hold we hold a contest for artists and uh we now have I think 10 or 12 we offer them the winners of the contest get a free apartment for a year and a stipend in exchange for giving art lessons at the community to the people who are living there so it's a double win it's a double win it's a dou everyone it's a triple win because our company wins we won the award the residents win because they love the art classes and the artist wins so that's one and then we set a record this year where we won the same award again shocking they said it's the first time the same company won twice we're actually getting the award next week in Dallas it's a big national award from multif family executive it's a national award and this time we won for a program called millionaire Mastermind Academy I didn't come up with the name I'm not sure that I like some of the anotations but it's a wonderful wonderful program started by a black Pastor and her goal was to provide access to business economic growth and capitalism to single black mothers in the United States and we all felt these are people who are single moms who are probably working very very hard but who don't have access and don't have the Hands-On education of how to grow a business and our goal was for them to become employers not employees that they should find ways to start their own businesses and there's been numerous we have of course a mentoring program we have a intern program we have classes and we've done that in Tampa Dallas Phoenix Atlanta Miami and so far first it's been very successful in starting a number of businesses number one number two we've actually hired some people who have come out of those programs progams to become property managers which is great so my goal there was to grow capitalism not grow charity and that was another example of corporate sadaka and we really firmly believe in that and on a personal level of course I do what I can where I can and part of my reason for continuing to work is I want to do more and of course it makes me feel good to do it makes me feel proud to do but most importantly I think we can have an impact and not only giving back but paying forward this is beautiful and ultimately um you know being able to support so many people working for you that's part of the charity just in the office and getting them to be experienc no that's not charity that's that's giving an opportunity we give an opportunity for them to make more of themselves and to make more for us frankly by being happy and team members and productive and growing the business and advancing themselves they're also helping the company so it's again a win-win beautiful this has been great let's close with the four rapid fire questions are you ready oh I'll try number one a book that changed your life the Torah the Bible that's beautiful number two a piece of advice you got that you'll never forget my mentor told me don't borrow too much number three anything you wish you could go back and do differently no no I I have to say that sounds corny of course I wish I had given more earlier maybe I had worked harder but the rebi says you are where you're supposed to be and you're there for a reason and I believe that particular bit of wisdom love it and last and final question what's still on your bucket list to achieve H well I hate to be corny but I want to spend more time in Rus Royale I want to continue to grow the company and I want to have more grandchildren and unfortunately that's a little out of my control so I may need to speak to my children about getting to work Joseph thank you so much I know your time is valuable that is why in the name of our listeners will forever be grateful for sharing some of your time with us today it's been a blast thank you so much thank you it's been fun and it's a blessing and an honor and thank you for giving me the opportunity to uh get on the uh Soap Box my [Music] pleasure