JF1071: He Moved to the U.S. From Israel and now Owns Over $120,000,000 in Real Estate Internationally!! With Nizan Mosery
A true success story! Nizan has experience investing in all kinds of assets, from hotels, to marinas, and his main focus is multi-family value add. A lot of value in this episode! If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Nizan Mosery Real Estate Background:
-Owns K.E.A.N. Realty Solutions, a Florida-based real estate brokerage firm
-Also owns and C.E.O. of K.E.A.N. Management Solutions, a hands-on professional management company
-Nizan and his team head up the multi-family division
-Over 20 years experience in real estate, owns over $120 million in properties nationally and internationally
-In NY, he owned construction company; worked on single family, multi-family & commercial projects of up to 300 units
-Based in Boca Raton, Florida
-Say hi to him at www.investwithcip.com
-Best Ever Book: How to Win Friends and Influence People
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Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Nizan Mosery. How are you doing, Nizan?
Nizan Mosery: I’m doing great. How are you, Joe?
Joe Fairless: I’m doing great as well, and nice to have you on the show. A little bit about Nizan – he has over 20 years experience in real estate, owns over 120 million dollars in properties nationally and internationally, and he is based in Boca Raton, Florida. With that being said, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Nizan Mosery: Sure. As you said, Joe, 20 years in real estate; I’ve traveled the world for many years. When I was growing up, my father used to tell me “Son, there’s two types of people in this world: those that pay rent and those that collect, and you always wanna collect, son. You always wanna collect.” Going into that, about 8-9 years ago I moved back to the States – I was living in Israel at the time with my wife and kids, and I got back into the commercial real estate, doing apartment complexes in strong growth markets. That’s where we’re at right now.
In the last six years we’ve bought and sold over 1,500 units. We’ve got hotels, marinas as well… Our core business is value-add multifamily apartment complexes.
Joe Fairless: Okay, the core business is value-add apartment complexes – that’s good, because I can talk shop with you there; I’d love to learn a little bit more about that. You did mention hotels and marinas – I wanna ask about that stuff; if your focus is multifamily, how did you get into (we’ll talk about each one individually) hotels?
Nizan Mosery: Hotels – it’s another type of asset that cashflows. It’s very similar to multifamily, however it does have its different nuances and it’s a different industry. The reason why we went into this is because we’ve noticed that in the markets that we were in multifamily was getting very overheated. Big institutions were coming in, investors, and we didn’t want to start taking the risk of maybe buying it at too high of a price. So we kind of pulled back a little bit to see what was going on, and this opportunity fell on our laps. We looked at it… Do we know anything about hotels, can we make it happen?
The opportunity, the numbers were so great – just to give you an idea, it was 240 keys for 1.9 million dollars, and we bought it with seller financing, actually under a master lease option with $150,000 down. It came with a lot of hair on it; we spent the last year getting rid of all the nasty stuff, and rebranding it and moving it, and now the property is making about $50,000-$60,000 a month in profit. And we’re not talking about high-end luxury hotels or the low hotel [unintelligible [00:05:12].06], we’re talking about the mid-tier levels where we have a very wide base of clientele, where it’s not only the tourist that’s coming in, the traveler, but it’s also the business person or maybe a trucking company or FedEx that can rent out 40, 50, 60 rooms per night, per month, for their drivers and their employees and so forth, with the existing space for events and so forth, conference centers.
So we got into it, the numbers look really good, the location was great…
Joe Fairless: Where is it?
Nizan Mosery: It’s in Memphis, Tennessee. It’s a mile away from the airport, a mile and a half away from Graceland, so we have a lot of Elvis Presley trivia parties, there’s Elvis in May, or something like that, and it’s just huge. We’ve got a lot of Elvis impersonators coming and dancing and singing, and it’s just a really cool thing. We have a huge painting of Elvis Presley right in the lobby of our hotel.
The cool thing is my partner – she has these guys that are in the hotel business as well, in hotel management, and one of the partners is like two levels beyond. His father is actually a rocket scientist, and he was brought up with numbers and algorithms and what not, so he created this beautiful algorithm that goes out into the internet to the online travel agencies, live, real-time, every several minutes, and it updates our system so that we can be at the highest occupancy level with the best rate at any given point in time. Other hotels, they have to go in and manually adjust the rates. This does it automatically for us, so it keeps us primed on all the online travel agencies. The first month we implemented this strategy, our income shot up about 120%.
Joe Fairless: That’s beautiful. How did you hear about it?
Nizan Mosery: Well, like I said, my business partner knows these guys for many years.
Joe Fairless: Okay.
Nizan Mosery: And they’ve been bugging us, “Hey, you guys have gotta buy a hotel, you’ve gotta buy a hotel, you’ve gotta buy a hotel.”
Joe Fairless: What was the reason why this seller did a master lease with you?
Nizan Mosery: Because of the condition of the property. No lender in their right mind would loan on this property. There was mold issues, there was roof issues, there were leaks, there were just the wrong demographics… He was renting the rooms out by the hour, by the night, by the week, those kinds of things. So there was a lot of hair on it, and you couldn’t go and take it and raise institutional lending on it. No lender would put their hands on it. He knew that, and he wanted to get rid of it, so he came and he got into the master lease option program with us. We invested about a million dollars into the hotel last year as well, and it’s just running beautifully right now. We’ve got the right property management company in there, with the right algorithm, we’ve got the right team on site, and it’s just a beautiful thing.
Joe Fairless: How much did you exercise the option for?
Nizan Mosery: $150,000.
Joe Fairless: Sorry, when you actually purchased the property you were not doing the lease — what was that purchase price?
Nizan Mosery: Oh, the purchase price was 1.9 million dollars. It’s about $8,000 a door.
Joe Fairless: And then you’ve put a million into it, so you’re all in for almost 3 million. What’s it worth now?
Nizan Mosery: Right now the valuation is about anywhere between 5-6 million dollars.
Joe Fairless: Nice. And how long has it been?
Nizan Mosery: A year.
Joe Fairless: Congrats on that. What’s your personal role in that?
Nizan Mosery: Well, my partner and I, we own it. My personal role – I oversee and partner up with my partner (obviously), and I don’t do the day-to-day. I’m kind of the asset manager. [unintelligible [00:08:49].14] covers about 30,000 feet over the hotel, make sure on a daily basis when I go over we get the daily report from the night before, and make sure everything is correct, the numbers are there; I make sure that any projects or any renovations that we are currently working on in the hotel are moving forward and they’re making it happen. I’m also making sure that the strategy that we’ve put together for the hotel – are we getting enough groups to come in, are we getting enough events being planned, are we doing certain things to get the name out there, are we branding it correctly? That’s kind of what I do.
Joe Fairless: And you have already exercised the option, so now you have financing on it and you own it?
Nizan Mosery: We’re in the process right now, because we’ve spent the last year getting it out of the red and into the black, and now we needed several months so that we can show the lenders a track record. They’re trailing three, they’re trailing six, so they can take the valuation and see “Okay, there’s income coming in; it’s not just a month or two that it was a fluke, but now there’s actual trail happening”, and they can see that and they can project into the future what the value of the property will be.
Joe Fairless: What’s been the biggest challenge with this property? And then we’ll move on to the marina.
Nizan Mosery: The biggest challenge with this property was getting the right property management company in place. The first property management company, they were hell-bent on telling us we have to put our room rates at a certain price point, which we thought was very high for what we were offering; they kept insisting, and they kept doing things… They really didn’t look out for our wallets in the sense that they just splurged and went out and did — they did kind of what they had to do, but I think they could have cut corners in certain places and done things a certain way that would have saved us some money. I think they could have listened to us a little bit more as well on the price points and how we wanted to run it.
So that was our biggest issue – getting the right property management company. Once we got the guys that we’re working with right now and they installed the algorithm, it’s been night and day.
Joe Fairless: What are a couple ways that the first management company could have saved some money and didn’t need to do the full-on package, or whatever it was, that you would have had streamlined the costs a little bit?
Nizan Mosery: We had a lot of mold on the fourth floor, because the roofs were leaking into the rooms, and the current owner before us didn’t take care of it; he just let the mold grow. So instead of trying to do piecemeal here and there on the whole thing, they wanted to bring in a mold remediator, and he gave us a quote of half a million dollars.
Now, this is to all the Best Ever listeners out there – there are mold remediators out there that all they do is they’re construction guys; there’s really no real certification out there. How do I know this? Because my partner at that particular point went and took a mold remediation course, which is like 2-3 days, and she met the guy who wrote the law for remediation in the state of New York and other states. She actually invited him down, we gave him $1,000, we gave him a room to sleep in, he walked the whole property, and then you know what? $40,000 to take care of the mold situation.
Joe Fairless: [laughs] Wow…
Nizan Mosery: But they were so hell-bent on “No, we’ve gotta get it done the correct way… What are you doing?!” and she’s like “Dude, I’ve just spoken to the man who wrote the rules, and this is what he said.” So you’ve gotta give credit to the property management company when they’re doing something and they’re doing their job correctly, but the property management company also has to heed what the owners are doing and the direction that they wanna go.
Obviously, if we weren’t doing something safe or if we were about to harm people and the property manager didn’t [unintelligible [00:12:34].29] they’re not gonna obviously do what we want them to, to harm people, but if we’re taking the guy’s rules and regulations on how to do it and we’re implementing it and we’re saving 90% – really, it was 10% compared to the entire thing; $40,000 compared to the half a million dollars. So that was one of the ways.
Another way was wanting to blast out and do all the rooms at once. Obviously, that would have been a fantastic idea if we would have had two and a half million dollars in our back pocket, but we didn’t. So we had to really come out there and really renovate a certain floor, get that up and running, do another floor, get that up and running, just because of the amount of money that we had to put into it. We didn’t have the full two and a half million dollars to just kind of blow in and blow out and do with whatnot… So they were trying to push and push and push, and we were holding back a little bit.
It’s important that you and your property management team – if you’re doing multifamily, marinas, hotels, student housing, whatever it is, you guys really need to be eye to eye, and running together, hand in hand.
Joe Fairless: You mentioned the marina… How did you get involved with the marina that you have?
Nizan Mosery: We go to a lot of real estate conferences – when I said “we”, my partner Laura and I. We go to a lot of real estate conferences around the country, and at one of the real estate conferences they have kind of a shark tank, where people would bring up their opportunities and there would be these real estate sharks. We sat up on stage and we were talking and we heard different opportunities, and this gentleman came up and he presented a 14-acre piece of land with a private beach, 120 boat slip marina, with an RV park, dry storage, for 2.5 million dollars. The upside was going to be to get rid of the RV park and put in the glamping cabins… Put in about 30 glamping cabins in there and start running that, and have the marina and the events, because we have a private beach, so we can do events… Rent out the space for $250, $500, $1,000 an hour for a minimum of four hours. If you did that twice on Saturday, twice on Sunday, or even once on Saturday and once on Sunday, you made nice change for that weekend.
But what I fell in love with was a) the location, and b) what was going around the marina. The lake itself is on Lake Wiley in Charlotte, North Carolina, and the property is called Long Cove Marina. If anybody wants to go there, you just google Long Cove Marina Yacht Club and you’ll see the new glamping cabins. We’re renting them right now on a nightly basis; they’re beautiful. We’ve just installed them, they’re amazing.
But what I liked is when you look around the neighborhood, you see half a million to a million dollar homes being built all around. That tells me that we’re in a prime zip code, we’re in a good area, and we’ve got 14 acres of lush wooded land that maybe down the road… We’re doing our strategy – we’re doing the cabins, the marinas, the events, everything that we’ve put together, we’re working it. But we’ve already gotten an unsolicited offer from a contractor to buy everything at four and a half million dollars, a year and a half after we’ve owned the property. So right there that tells me that we’ve got something really special on our hands. But before we bought it, I drove up, I spent a night at the property, I walked around, I looked at it, I drove the entire neighborhoods, all the different communities, and these houses that were built were just beautiful, and everybody’s got a boat… But what it told me is that maybe we can develop the 14 acres of land, or maybe we can sell it to a developer who was gonna build these half a million dollar homes for a lot more than two and a half million dollars or even four and a half million dollars. So that’s why I got involved. But also because I saw that this is a cash-flowing opportunity; there’s opportunity to start something and have it generate income continuously.
When I walked the property, I was looking and I said “A marina – this is for people that have boats. What happens if there’s another downturn? People are gonna look their boats; this is extra cash that people use… What’s the story?” So I met a gentleman walking to his boat on a Saturday or Sunday morning that was there; he had his fishing rod, a Taco box, a case of beer and his dog, and he was making a beeline for his boat. I stopped him, I said “Hi, how are you? Do you mind me asking, how was it here during the crisis, the recession, when things were just bottoming out? Did people sell their boats? What was the story?” He says, “Son, let me tell you something. You can take away my wife, you can take away my kids, you can take my [unintelligible [00:17:06].14] you do not touch my boat! [laughter] And I can speak for everyone around here, we feel the same way.” I was like, “Alright…”
Joe Fairless: [laughs] “And don’t you question it, or else there will be hell to pay!”
Nizan Mosery: [laughs] Exactly.
Joe Fairless: Alright, noted. When did you buy that?
Nizan Mosery: Two years ago.
Joe Fairless: How did you finance it?
Nizan Mosery: We raised money through private individuals, we did a private placement, we did a private raise. We got seller financing, and we did a short-term bridge loan so that we can get the income of the property up, and then we’re going now to refinance everything out with an SBA loan.
Joe Fairless: And for anyone who’s not familiar with this SBA…?
Nizan Mosery: That is a small business loan, for small businesses. They look at your business, they look at your business plan, they look at your income, and what’s beautiful with an SBA lender is that they told us that if ever someone gets into trouble and you are having difficulties paying the note and what not, they said on the down low, [whispering] “They will never foreclose on you. They’ll do whatever it takes to help you with your business and with payments and so forth”, because obviously you don’t wanna foreclose on a business; the whole point is to help a business.
Joe Fairless: Yeah… Unless that’s in writing, they’ll never foreclose, and I don’t believe them. [laughs] Alright, so you’ve got the marina… How do you structure that with investors on that money raise? How much did you and your partner invest (if anything) and then what’s the split with investors?
Nizan Mosery: We like to, if at all possible, because sometimes we’re doing multiple deals – right now we have three properties under contract… But if it’s possible, we do like to throw $50,000-$100,000 into each opportunity; it just shows our investors, again, another level of commitment that we have to the property. I am also the sponsor on the loans, which means that I’m the guy that signs on the dotted line for the mortgage.
For one of our properties now we’re getting a 19 million dollar loan, on another property it’s a 13 million dollar loan… So I’m the guy that signs to the loans. I think the marina deal we did an 80/20 split, if I’m correct. Please don’t get me [unintelligible [00:19:16].18]
Joe Fairless: That’s fine, yeah.
Nizan Mosery: But 80% of the cashflow goes to the investors; they get their cash first, and I believe we said on the private placement memorandum (PPM, the legal document) that our Securities and Exchange Commission attorney put together, I believe that we said that any percent of the cashflow, when distributed, would equal no less than 7% return, and then we also had, of course, our projections, that we said that we would project into the future what the actual returns would be once we sold the property and after we added the value and so forth.
Joe Fairless: And on something like that do you do a preferred return, or is it just 80/20 split?
Nizan Mosery: It’s an 80/20 split that has a preferred return. That term, “preferred return”, kind of means different for certain people. With equity groups, when they talk about preferred return, they wanna get paid first…
Joe Fairless: Yeah, that’s what I’m referring to.
Nizan Mosery: Okay, so that’s what you’re referring to. No, on that particular we didn’t, but we did have what we called a preferred return meaning that we claim that they won’t make less than 7%. 7% is kind of the floor of what they’ll make.
Joe Fairless: And if it looks like it will be less than 7%, then I’m just curious, what’s the clause there?
Nizan Mosery: Then the general partners – myself and my partners, we will take from our 20% however much it takes to bump up their share, so that it’ll be a minimum of 7%. What happens if we give them all 20% and it’s still not enough? Because we’re doing repositionings, things of that nature, so maybe the cashflow is a little low… So let’s say 100% of the cashflow equates 5% return. So we give them 100%, they get that 5%. Now, we still owe them 2%. That 2% will get tacked on either to the next distribution if we have enough, or at the end, when we sell. So when we sell, we’ll just go back to the [unintelligible [00:21:05].10] that we owe them, catch everybody up, and then distribute the profits and so forth and so on. So our investors will always get paid first.
Joe Fairless: What’s the latest multifamily deal you’re working on?
Nizan Mosery: Right now it’s 368 units in Winter Haven, Florida. Are you familiar with Winter Haven?
Joe Fairless: I am not.
Nizan Mosery: I would say it’s about a half hour South-West of Orlando, between Orlando and Tampa. If you’re leaving Orlando and you’re heading towards Tampa, it’s kind of right smack in the middle. It’s a great submarket of Orlando. There is a lot of job growth happening right now, and there’s a big supply and demand issue – huge supply, very little demand.
People from Orlando are flocking to Winter Haven because it’s a nice suburb, prices in Orlando are going higher, units are getting smaller as more people are coming… The quality of life is really going down, so people are saying “You know what? I can move a half hour to Winter Haven, get a nice two-bedroom apartment overlooking a lake” (because the property sits on a lake) with updated appliances, with updated cabinets, new flooring, a wait room that’s open up until midnight, two swimming pools, three laundry facilities, it’s on a lake, it’s got a dog park, two tennis courts… Quality of life.
The beautiful thing also about Winter Haven, there’s no immediate properties coming online. There are no permits for new multifamilies to be built, so the supply is what there is. Right now 28% of the units are getting above market rents without even being renovated.
Joe Fairless: And is your plan to…
Nizan Mosery: Our plan is to go in, put in about $3,000 into the units: appliances, cabinets, flooring if needed, painting, change the jewelry… “Jewelry” for me is the lights, fixtures, faucets, door handles, things that pretty up the place. And a couple dollars on the outside. The outside was well-maintained. A little love is what it needs, basically. [laughs]
Joe Fairless: Got it.
Nizan Mosery: We’ve gotta clean up the gutters, we’ve gotta trim the trees, fix some of the staircases, put some light bulbs in… Nothing major. And we’re buying it at 24.125 million dollars. We’re gonna put about a million and a half into it, so our going cap rate, which means when we buy the property, the cap rate is about 6.7%. On the exit cap rate – we’re doing it on a conservative basis – we feel that we can sell it at 7.25%.
Joe Fairless: In what period of time?
Nizan Mosery: We’re saying that we’re gonna do this in a five-year period, and in a five-year period when it’s all said and done, the return on investment is a 19.3% return.
Joe Fairless: Do you do this via 506(b) or 506(c) for investors?
Nizan Mosery: 506(c). This is an accredited investor opportunity, because we’re raising 7.5 million dollars and we want the opportunity to [unintelligible [00:24:05].18] to everyone, to meet people and have them invest immediately… So we did the 506(c).
Joe Fairless: What is your best real estate investing advice ever?
Nizan Mosery: When you’re looking at multifamily, there’s a couple of things you wanna look at. You wanna look at job growth, you wanna look at different economic factors that are driving that market, and you want to have a good property management company on your side. Dig deep into a market. So if you’re taking a market, dive deep into it. Really get to know the market, get to know all the brokers, get them to know you, build a good relationship with a property management company that has done work in those markets that you’re in digging deep.
Every time I get a property, I send it to my property management company and they say “No, no, no, yes.” Okay, let’s look at that one. “No, no, no, no, yes.” And the ones that they say no to, really, they’re saving us. They’re doing such a good job by telling us, “No, don’t do that property, because we know it.” It keeps us out of bad deals.
Joe Fairless: And that is ultimately more important than being in good ones.
Nizan Mosery: Absolutely.
Joe Fairless: Are you ready for the Best Ever Lightning Round?
Nizan Mosery: Sure.
Joe Fairless: Let’s do it. First, a quick word from our Best Ever partners.
Joe Fairless: Best ever book you’ve read?
Nizan Mosery: I’ve got three: Sun Tzu, Art of War, Think and Grow Rich and How To Win Friends And Influence People.
Joe Fairless: Best ever deal you’ve done?
Nizan Mosery: Best ever deal was 240 units in Dallas. We owned it for one year. Our investors made 67% return.
Joe Fairless: Why only own it for one year? I mean, clearly you sold on a really nice exit… [laughs]
Nizan Mosery: We just got an unsolicited offer… Because of the way we underwrite. We underwrite so conservatively, like this Winter Haven property. We’re projecting these numbers in five years, but I really believe that we’ll hit it before. But we wanna be conservative, we wanna say five years. We wanna under-promise and over-deliver.
Joe Fairless: What’s a mistake you’ve made on a deal you can think of?
Nizan Mosery: What’s a mistake I’ve made… We let the seller on our walkthrough navigate and dictate what we would see and what we wouldn’t see. There were some doors that he says “Oh, I don’t have the keys right now. Come back blah-blah-blah-blah…” and we let it go. We should never have let that happen, because once we open those doors, it was a nightmare of mold and things that I was like “Oh, my god…” I couldn’t sleep for nights, because we didn’t know how to handle the situation.
Joe Fairless: What’s the best ever way you like to give back?
Nizan Mosery: I joined the Rotary Club about a year and a half ago. The reason why I joined the Rotary Club is because I felt that I wanted to give back, but I didn’t know which organizations were good or how to do it or who or what. I researched a couple of organizations and I found that Rotary is the largest organization of its kind in the world. Their motto is the eradication of polio. There are one or two countries left in the world that have polio, and now they’re working for something else.
My Rotary club, for example, we’ve just raised I think like $100,000 where we honored our doctors in our community and we gave back to medical students for scholarships and different organizations that help the needy. We sent $20,000 to Haiti for water filtration systems and things of that nature. I could not do all of those things on my own, so I joined the Rotary club to help me do that.
Joe Fairless: Where can the Best Ever listeners get in touch with you?
Nizan Mosery: The Best Ever listeners can get in touch with me via e-mail. It’s firstname.lastname@example.org. And is it okay to give out my phone number?
Joe Fairless: Of course.
Nizan Mosery: 561-212-7247. I’ll give it again – 561-212-7247. My website is www.investwithcip.com
Joe Fairless: Nizan, thank you for being on the show, talking to us about multifamily investing and value-add, what you look for – job growth, economic factors that drive the market, property management high quality, and also the last part where you said “Don’t let the seller dictate what you can and can’t see at the property”, so be very conscientious of that. The marina investment that you’ve done, the type of financing structure that you did from a debt standpoint and also from an equity standpoint with the 80/20 split with investors, and the hotel master lease. We covered a lot of ground in a short amount of time… I’m grateful for that, and I know the Best Ever listeners are, as well.
I hope you have a best ever day, my friend, and we’ll talk to you soon.
Nizan Mosery: Thank you, Joe. It was a pleasure.