WS1958 Investing Across Boarders | Nir Babajani

This episode of the Real Estate Syndication Show features Nir Babajani, a seasoned real estate investor and fund manager with extensive experience in the US residential and multifamily markets.

Nir shares his inspiring journey from an engineer in Israel to a successful entrepreneur managing hundreds of deals across various US markets. He discusses his early challenges, including managing multiple markets while holding a demanding engineering job. He emphasizes the importance of strategic partnerships and building a strong team, especially when operating internationally.

Key Takeaways:

1. Strategic Focus: Don't spread yourself too thin. Nir's initial attempt at entering multiple markets simultaneously proved challenging. Focus on building expertise in one area before expanding.
2. Building the Right Team: Partnering with reliable individuals and building a strong team is crucial for success, especially when managing projects far away.
3. Understanding the People: Nir emphasizes the importance of focusing on the "people behind the deals" and building trust in your investment decisions.

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Transcript

Nir Babajani: My mistake was that I started in many markets in parallel. So I started buying in Detroit, and I started buying in Cleveland, and I was still actually holding properties in Atlanta. And Whitney, it was kind of a side project still back then. I didn't totally leave my engineering job, which was a very good compensation, et cetera. So it was a process. We can talk about that. But it was a business mistake in the sense that I got too stretched on many things.

Whitney Sewell: This is your daily real estate syndication show. I'm your host, Whitney Sewell. I have a special guest for you today. His name is Nir Babajani and I've known Nir for a number of years now, and you're going to hear kind of how that came about. But he is a founder and CEO. He's an Israeli foreign national and funds specializing in the US residential real estate And since 2012, they've transacted hundreds of deals. He has a large single family business in the U.S. as well, experiencing several U.S. real estate markets, including Atlanta, Cleveland, and Detroit. And he has a fund that's in Israel, and he adds a ton of value to Israeli investors through the way that he has built strategic relationships in the US and a great business here as well. You're going to hear a little bit about his path to, you know, growing a great, leaving actually a career and growing a big real estate business, you know, from halfway around the world and how he has done that. And even some of the models that he has used to, you know, do a fund to fund to be able to partner on projects in the US as well. Welcome to the show. Honored to catch up with you again and really get to know you better, but to expose you to our network as well. Welcome.

Nir Babajani: Thank you. I'm excited to be on your show and I've been watching and following it for a long while, so I'm honored. Thank you, Whitney.

Whitney Sewell: Yeah, and I'm honored to have you on and because you carry a lot of experience that I'm looking forward to diving into today. You know, you and I go back a number of years already, you know, when our relationship started. We'll talk about that a little bit, I think, during the interview, of course. But, you know, before we jump into that and why don't you give the listeners a little bit about your focus, who you are and where you reside as well.

Nir Babajani: Okay, so I'll start from the last, so maybe it's an interesting fact. I'm from Israel and being out of the country or investing out of my backyard, I've been in the U.S. real estate investing and we will talk about what it is for 12 years now. in these twelve years i have done a few hundred real estate transactions in different states predominantly single family homes but quite a few multifamily deals so In terms of day-to-day, I live in Israel. I started the real estate investing actually just as an investor by profession. I'm an engineer. I was working as a project manager, corporate. for a pharmaceutical company, and it was actually an incident, was working day-to-day with our US colleagues in my day job, so actually maybe a coincidence or some things came together because back then the prices in the US, like US real estate, they were you know i don't have to tell about what happened in 2010 around and i was actually looking to buy an investment property in israel and i was just talking with calling and he said yeah i'm buying four properties in the metro atlanta area and i said well i'll also like i know i'm an engineer in israel You are a parallel in the US, but how is it that you are buying so many properties and you got me into speed and there wasn't all of the catch, is someone trying to sell me? There wasn't all of that, we were just calling. So for me, it was kind of a coincidence because I had the access in terms of communication, working day-to-day, doing business, not being there day-to-day, but doing business day-to-day. So long story short, I bought a rental property in the metro Atlanta area, and we will talk what happened from there, but this is kind of where I started off.

Whitney Sewell: Yeah, no, I love that near that you, you know, there was a connection there, you saw an opportunity, and you really went after it, you know, it's grown in a big way. And I want to talk about how you were, you know, especially when you saw this opportunity, you were very strategic about the relationships, right, you started to build. And, you know, and working from, you know, halfway around the world, essentially, right, that's, that's difficult. Right? I mean, of course, we do so much on Zoom now anyway. However, even at that time, it probably wasn't as much Zoom happening, you know, as there is now. But speak to the thought behind, you know, when you started thinking, okay, hey, this is a business opportunity, I want to collaborate, I need to collaborate, right, with people that are there on the ground, I need to find, you know, team members, all these things. But how did you, you know, strategically start to build that team and business, you know, from so far away and, and really be intentional about the relationships.

Nir Babajani: So you were spot on on kind of thinking about it strategically in the sense that for me, coming from corporate project management, it was quite of, OK, let's deploy what I'm anyway doing day to day. This is the way we're doing. There is a team. Everyone is doing his job. Let's work as such because this is what I know. This is my profession. So let's do it as such. But it was also a result of, as you said, of kind of a starting point that is a given that I'm not going to move and be on the ground day to day. I know that. So, for example, when I was thinking about investing in Israel, I was looking at things myself, etc. But because of the setting or the setup that was given, I was kind of, okay, the right thing to do this is to is to actually develop a team. So the challenge in a sense, well, at first, I didn't realize that. But in retrospective, the challenge was actually setting me up to begin with, to build a team and scale. So Yeah, I was lucky in this sense, we could say.

Whitney Sewell: Who were some of the first team members you knew you needed? Or maybe even from what you know now, who would you say should have been your first team members or strategic partners that you should have looked for, and maybe you did?

Nir Babajani: Well, this is kind of also wisdom of retrospective to understand not only what everyone is, what are the roles and responsibility, but I think with time you get the intrinsic understanding of where the interest is of every professional and in a good way, not in a bad way. these are the business interests, this is what they care. So for example, when doing the rental investing, the more I was, let's say, in strategic relationship with the property management, the better my performance was like with the properties we buy, with the way we make them, like the product was better. And it turned out to be later on, this is like, When I was more experienced, our main project was in the metro Cleveland area. We actually developed a strategic collaboration of kind of a one-stop-shop solution for Israeli investors for single-family property investing. So, you know, it can be a different setting when we will talk about syndication, but I think it's interesting because the same principles, they apply when you think about working in a team and honestly think like, okay, what is my highest and best value to contribute and the other stakeholders? an engineer or build a teamwork around that. So for me, for me, it worked really well in Cleveland, when I implemented these, these lessons and started and started as such, it was actually a very major, major thing for our business, our office in Israel.

Whitney Sewell: So you started with single family and really grew a substantial business, you know, around these single family homes, right? You know, speak to, you know, are you still focused on that? And maybe to speak to the when, you know, you realize, hey, I should transition to multifamily or commercial real estate, some of that. Yes.

Nir Babajani: So it's a funny story because now that you told me I was opportunistic, you might say now the same after I tell you this story. In 2014, I actually made a mistake. I didn't know it back then, but I made a mistake. I was looking for another market because like prices in the metro Atlanta market, we were buying properties in 70 or $80,000. And it was like, almost twice the price in 2014, and we were buying in good areas. I could go to different or lower sub markets in the area, but I was looking for different markets. My mistake was that I started in many markets in parallel. So I started buying in Detroit, and I started buying in Cleveland, and I was still actually holding properties in Atlanta. And Whitney, it was kind of a side project still back then. I didn't totally leave my engineering job, which was a very good compensation, etc. So it was a process, we can talk about that. But it was it was a business mistake in the sense that I got to stretch on on on many things. And it connects to the real estate syndication or how I did my first multifamily investing, because I kind of realized, hmm, It's not just about leveraging money. I also want to leverage my time, my resources, my energy. And I was struggling a lot in Detroit, but I saw like a local a local real estate guys over there, and they were doing single family and they were just transitioning to the multifamily. And I saw like they got a deal that I said, Wow, I wish I would have got this deal. So I said, Okay, let's let's invest with them. Why do I bother so much? And I've done it. I learned a lot from that. I thank them for that because it was the first time for me to really understand what is analyzing a deal and what it is underwriting. So I got the exposure to that from them back in 2015. So it wasn't just the result of the investment that was great. It was a great experience. analyzing a deal, analyzing or checking a local syndication, and getting into this investment. And also the experience of going through the finalization was kind of a realization for me, okay, this is actually a good solution for many investors, especially like out-of-state or out-of-country investors, they do have the money, but they would like to have more of a passive income, but they still need a lot of value, check the deal, check the area, check the market, check the syndication, communicate, update, etc. So this is when I kind of said, okay, It's interesting this kind of doing a fund and going into that direction. This was the first experience as such.

Whitney Sewell: Let's talk about that a little bit specifically, like how you ultimately do that for local Israeli investors, right? How you're helping them and we'll move into maybe that model a little bit of how we do that. But what is that value that you add to local investors there? Because ultimately you're creating a path for them to be able to invest in U.S. real estate, right? And you're doing a lot of vetting, obviously, over the deal and the partners. And, you know, you're creating those strategic partnerships for your investors, really, right? But, you know, talk through that a little bit, through the value you add to investors and how you do that there.

Nir Babajani: I think the greatest thing for me throughout this journey, and still, it's the journey with and through the people. So for me, eventually, you know, I can talk about the skills I've got in underwriting, and I was in the Michael Brown community, and I was, you know, it's all kind of techniques, but eventually the result of all of this together is like being able to say, okay, here is an investment opportunity that I've checked it. By the way, it can be single family or multifamily or anything else. But for, I mean, in terms of the trust of an investor to say, OK, this deal was vetted and checked, and now I can leverage all of that experience and work, et cetera. So this is one thing. We can go into that, like, what is in there? But I think that's one main idea that for me, it's kind of the same regardless of, let's say, the asset class. the asset classes is just the means.

Whitney Sewell: Yeah, for sure. And there's how many asset classes are you invested in now? Or is it Are you very focused on multi family? I can't remember.

Nir Babajani: So we have a real estate fund in Cleveland, because in Cleveland, we are more. in the operations. So we are kind of buying small multifamily apartments and single family homes and we are focusing on long-term yield in this fund and we have the investors that are going with us in this market. But in other, I would say, markets or asset classes, I am not looking to do that because the Cleveland result, it was actually, because I told you, I made a mistake. If I would redo it, everything together, I wouldn't build everything that I built in terms of the operations in Cleveland. I wouldn't do that. But since I've gone through that way and I'm happy to do that because now I have the experience from within, so the resources are there and we're doing that. But I also learned in the lengthy way, not to say hard way, but in the lengthy way, I think it's still a good way, that there are better ways around it with the teamwork, the collaboration. So mostly I'm looking to things like we are doing, to say, actually, my highest and best use and contribution for an existing syndication is the capability I have. For me, it's not to present deals. For me, it's kind to be of the extension in the Israeli market of the business, of the company. to explain that, to be a manifestation of that. This is the way I see it. And as long as the value goes both ways, this is what I am more focused on with what we are doing next. But we do have the Cleveland business that we are doing because we are there for 10 years and we have all of these resources, so it's already in place.

Whitney Sewell: Yeah. You know, you talked about, uh, yeah, you know, you might've done it differently if you knew then what, you know, now. Right. I think we could all say that. Right. There's so many times where it's like, oh, you know, we learn right. As we go, we've made mistakes and some, we get knocked down. Right. And you have to get back up. Well, that's, that's learning. Right. And however, I feel like too, you know, so many things that I've done, I'm sure you could say this too. Well, if you hadn't taken those steps to, to go after that single family business, you wouldn't even know now that you would have done it different. Like, you know, cause you wouldn't have, But you wouldn't have gotten to where you're at today, right? You had to go through that process and really put your iron in the fire a little bit. Right. To learn and, and make it happen. And you have, uh, and so, um, no congratulations to you by the way of doing that, right. Making it happen and making the hard decisions that most won't unfortunately. Right. And sticking it out. Uh, but let's talk about the dynamics a little bit of how you do that now, you know, through fund to funds and, and maybe some models that you found to be, that worked best for you, uh, you know, to partner, you know, in projects and some pros and cons.

Nir Babajani: So it's actually a great point. I think like the fund to fund again is a kind of a result that for me and actually I can say you know also for us we had we had a dialogue about this as well with you and with your partner with Sam that I love him so much. I think that, you know, when we understand, actually, okay, it's a business, and here is what I'm doing, and here is what you're doing, here are the roles and responsibilities. For me, taking, because, you know, it's all about alternatives. So being like inside the GP, and I've done that. I've done that in the past, because this is kind of the go-to model in the syndication, CoGP. But then you think about not just the compensation-wise, you start thinking about decisions, decision-making. And you say, OK, we should make these decisions. And do I want to have the liability for decisions that have been taken when I'm not in the decision circle, necessarily because I'm not the day-to-day operator, for example. And then I think when we start to ask these kinds of questions and we can go through it, I think the fund-to-fund model presents a right decision in the sense that we can always solve, you know, when there is the relationship and there is the value, we can always solve for the compensation that, you know, it's standard and everybody are happy. But the fund-to-fund, what I like in that is that first, it sets better the positions and the roles, the decision, the general partner, the limited partner, et cetera, and still allows the fund to be kind of the GP within this LP. So what we are doing, and that's part of the experience for me now as a fund manager and with my attorney, et cetera. So we structure it like we are the general manager of this LP. So we have all the roles and decision making within the fund for the Israeli investors. And of course, we have the dialogue and understanding between us of how it works. But I think it sets the tone better or it's right, I think so. And I also think that's one point. Second point, I think it creates value for the investors because a fund-to-fund, it allows all kinds of, let's say, financial benefits, not specifically being exposed to one project. focus on a market, focus on a chosen syndicator. So you can actually structure the fund and learn. For me, it's all about dialogue. When I also speak with my investors, it's always a dialogue and I'm always on the quest to learn. from the collaborators within the team and externally. And I think it creates a lot of maneuvering space, a lot of maneuvering space to the fund to structure it correctly in terms of investment product and make it more suitable to what the local crowd of investors may want. It can change for someone locally in the US, for someone in Israel, for someone maybe in the Far East. You know, investment dates can be different, but I like this option of the fund that I can structure that.

Whitney Sewell: Yeah, no, I agree with all of that. The more we've done the fund to fund model as well. I agree. It's it's a great way for both sides of that part of the business and to keep it legal. We're not operating any gray areas, you know. And yeah, it's like you said, the roles and responsibilities are even more clear. Right. I feel like it's even more clear for investors, you know, as well for your investors. Right. And and I mean, they can see your legal documents, you know, and it's just it's just more clear for everyone involved. Um, yeah, you know, uh, near, I want to, you know, I'll move to a few final questions. Uh, but I want to ask you, so I ask everybody, uh, you know, that are operators or, or doing, you know, with your knowledge base to, uh, you know, what, what are maybe the, uh, the biggest challenge in your business right now?

Nir Babajani: Wow. So. First of all, I think in terms of the external setting right now, there is the inflation, the interest. I don't want to get into too much of economics conversation and what are the reasons, but again, bottom line, Raising capital for projects, and it's all relative to the cap rates and what is available on the market. Honestly, it's slower. So it's kind of challenging. This is also part of the reason strategically for us that we are reaching out to do the fund to fund model, because we want to provide solutions. So to your previous question, it is also one of the reasons. We are gps in cleveland so allegedly we can just do you know a lot of deals in cleveland we do it ourself etc but i think it's also a question of integrity was like for us in terms of the decision making is it really what we want to do for our investors are there different options for us to have the flow or the scale of opportunities that we want to provide on one end And we are committed to our office, employees, et cetera. But on the other end, we are obviously first committed to our investor base. And that is, it was, and it still is, a strategic consideration for the fund to fund. And I think it's really connected to what is happening right now in the marketplace. I wouldn't say the entire US, or at least what we are experiencing in the market that we are, let's say, GP or within the grounds of operations.

Whitney Sewell: What's your best source for meeting new investors right now? How do you do that? I know you're, you're very focused on Israeli investors, but how do you what's your best source for doing that and growing your investor base?

Nir Babajani: Well, because I am more than a decade operating, and I would say a niche, because in Israel, US real estate investing is a niche. Eventually, most of the Israelis, they invest in Israeli real estate. But back when I started, there wasn't a lot of people that were answering people's questions, and I was enjoying it, and I was answering forums' questions, so I found myself one day getting a phone a phone call from this kind of a forum. Nowadays, all the forums are in Facebook. But back then, there were like forum websites. And I got to be the manager of this Israeli forum. Nowadays, there is like more than 7,000 people in that forum. So like, and you know, we are a business. So we have all of the social platform to, you know, to be honest, we are very strategic, we have day to day. So we are always procuring new exposure. In that sense organically and if we have projects we we are so right from the social but for me the main thing i think source also reputation is is one thing is is leading the israeli form and secondly i think. Read it then got the amounts of online and digital reviews we got on linkedin facebook google et cetera so kind of the lifetime value of investor realizing it's not just the deal because they will return. They will tell your friends if you work on this wisely, they will share reviews. So that's that's been tremendous for us in Israel, because we are focused on the Israeli market investor wise. That has been our focus, I mean, for the last decade or 12 years already.

Whitney Sewell: What's your what's your best advice for those passive investors right now?

Nir Babajani: This is something I would say for every investor. I think it's not just a question of location or geography. I think, and I see that, you know, in beginning, in beginner investors, there are a lot of questions about kind of shopping for returns. What is the IRR? What is the cap? What is the cash on cash? All of that. So for me, it's kind of, in my mind, it's kind of a model. So, you know, a lot of people, they can focus about the dairy milk, What is the yield? How much milk am I getting from the investment? So I would suggest for people to think, OK, try and develop the thinking and skills and understanding how you check about, OK, what is the cow? What is the cow worth? How do you know that it's been purchased? It's a good cow. It's a quality cow. And when you are more versed into that, you say, well, I can buy a good cow or a quality cow. But then I realized, and for me I have tons of stories about that, it's the farmer or it's the dairy farmer. How do you treat the cow? How do you get out the milk, etc.? So all of the people around it. you know with all of this and I always tell this in Hebrew so I'm sorry if it's like you know in English not the best description but I have like a one hour lecture in Israel when I'm speaking explaining my journey and explaining like how I made mistakes with the perspective or the too much focus on the dairy milk and then when I realized my lesson learned I made mistakes because I was too focused on the cow And eventually, how do I check, let's say, a syndicator or an operator or a professional, but being focused on the people. And I always say, like, good people will result in good deals, but not necessarily on the other way. This is the main thing I think is right for every passive investor, because if you will not be passive, you might find yourself very active. if you are not really checking into that proactively before you invest, because investment is a role. There is passive income. Passive investment, it's not an accurate term in my opinion. You have to be very active when you invest because you need to know what you choose and why. and that's where I'm saying here is our value proposition. We have done all of that and we also told you how we are checking this and we invite you here is how you can check with that all of the three perspectives because you don't want just to you know ignore the others so and this is what we do here in Israel so here is here is like an invitation to validate here are all the three perspectives for what we are doing And you can leverage us for your investment, because you cannot be a passive investor. You can delegate that role, but you cannot skip that. And this is kind of the value proposition that I'm working with, because I believe in it. I experienced it. I've learned it through many, many lessons learned. So this is the kind of energy or belief that I'm transmitting here to the Israeli investors.

Whitney Sewell: Yeah, I think it's, you know, it should never be completely passive, right? Or just throw your money at something, right? You know, and never look at it, for sure. But I feel like even investors that want to be, say, a more active, passive investor, meaning, you know, they're diving into who the operator is, the deal, all those things, it's still helpful to have somebody like yourself who has looked at a lot more deals, right? And already asked all those questions. I just think they are going to learn a lot, you know, from somebody like yourself. and have you to say, ask questions of instead of going straight to the operator at times, right? I mean, you've done all that. You've done so much vetting and in those strategic relationship building, right? I mean, you've done that and spent the time that ultimately a past investor can't spend more times than not, right? You know, to build that relationship and get to know operators. And so that is a big value, Nir, no doubt about it. Nir, tell us, how do you like to give back?

Nir Babajani: So I don't want to get into too much of what's going on right now. We're in Israel, and we are currently living in a challenging time period. And in this sense, honestly, I'm the second wheel, so to say, or the supporting wheel for my amazing wife. She's basically treating people like, you know, it can be all sorts of traumas and she's very active in supporting the community. And for me, I'm honestly blessed. I think it's one of the advantages of real estate. For me, it's not financial freedom. It's more of the liberty that I have more of a space to decide how much time I spend on things and when I spend and with who. But for me, it really allows to support and let her do what she do. A lot of time we support, we go with her, with my two daughters. But she is really the leader in that social activity and with people that are in post-trauma. And that's a huge thing for us, especially in this time period, these days.

Whitney Sewell: Yeah, Nir, well, I'm grateful for you sharing that. I'm grateful for you and your wife's desire to give back in that way and care for those people. So I just thank you personally, and I'm grateful for you all for doing that. And I'm also grateful for your time today and sharing with our listeners, but also just with your network, who you are and the value that you add. And I mean, the time spent building strategic relationships over 10 or 12 years, right, there's so much value there. Now, you know, and going through the difficulties of working at a distance, which you did and building, you know, the businesses that you have. And, and, you know, like you talked about, you know, leveraging the time and money and so many aspects and having to stretch, you know, to get in multifamily and now making it happen, the fund to fund model. Thank you, Nir. Tell the listeners how they can get in touch with you and learn more about you.

Nir Babajani: So first of all, Whitney, really thank you very much for hosting me again and for me it's really a pleasure to be working with you and also for the relationship that we have. I really appreciate it. And in terms of reaching, well, you have my name and I can be found on LinkedIn. So anyone that wants to connect and reach out, I would be happy.

Whitney Sewell: Thank you for being with us again today. I hope that you have learned a lot from the show. Don't forget to like and subscribe. I hope you're telling your friends about the Real Estate Syndication Show and how they can also build wealth in real estate. You can also go to lifebridgecapital.com and start investing today.