How Investors Find Higher Returns Outside Traditional Real Estate Markets

Alon Orbach (00:00)
wow, so many obstacles. Well, first of all, there are always obstacles. Like even when you have things right, it still goes wrong in a way and you need to see how to deal with it. For example, Airbnb, something that happens very recently. Airbnb used to charge 3 % give or take the owners of the properties for their commission.

Michelle Kesil (00:03)
Sure.

Alon Orbach (00:28)
And Airbnb is giving you roughly 70 % of the business to the short term property. Give or take depends. So right now they changed it that if you’re ⁓ a company, not an individual because it’s completely different for individuals, but if you’re a company and you run basically a full system through all your properties, let’s say if you have 50 properties and they go through a certain channel.

you need to pay them 15 % commission for all the bookings. That change in price is making you literally from gaining, making money to breaking even or losing money.

Michelle Kesil (02:43)
Hey everybody, welcome to the Real Estate Pros Podcast. I’m your host, Michelle Kesil today I’m joined by someone I’m looking forward to chatting with, Alon Orbach, who is a real estate investor, also has a brokerage, and has been in the short-term rental industry. So excited to have you here today, Alon.

Alon Orbach (03:11)
Thank you for having me. Pleasure.

Michelle Kesil (03:13)
Yeah, so first off for those new to your world, can you share what your main focus is these days?

Alon Orbach (03:21)
Yes, the main focus right now is with the brokerage here. So basically buying selling, whether it’s for investors or for end users. And at the same time, I’m also fully dedicate for my ⁓ hospitality business in Africa, where we have hotels ⁓ in Zanzibar, Tanzania.

And that’s really my focus right now. I just recently started shifting from the vacation rental investment segment. ⁓ I’m still a part of like managing and stuff like that, but the investment side to buy and hold ⁓ stepped out a little bit out of it.

Michelle Kesil (04:05)
Yeah. And so with your focus now, what markets are you operating in?

Alon Orbach (04:58)
So it’s in South Florida. In the last 15 years, I’ve been dealing with investors. ⁓ I’m going to explain a little bit. I know it’s a little bit off the specific question, but how I really got to this point that I shifted out of it because I think it’s important. ⁓ when I started working with investors back in the days, it was for a long term.

investors. So basically people want to buy and hold and rent it for the year. Back then we could find pretty easily 8 % cup rates for investors. with the years, you know, the market started going up in prices and stuff like that. It was almost impossible to find 8 % in good areas. always worked in good areas. So in good areas, it became very difficult. And then you notice that there are investors that

They have the money, but not much to do with it from investment side. So Airbnb back then was just started to pick up and it became a thing. I started looking into the potential of how to get into that before it’s too late, kind of like with the long-term positions. And then I joined the company with Design VR and

It was a very successful model. It was a pretty big company and we had very good acquisitions, but we noticed that again, the market kept going up until like a couple of years ago. Now it’s stable. And when the prices went up, Airbnb became very competitive and you could not make the same returns that you would have like six, seven years ago.

So again, I was looking at like what’s next and I knew that it’s a matter of time. You know, it’s not something that happens overnight, but I was looking to see how, what I can do next and basically, you know, not just get stuck. So that’s how I saw working on the hospitality business. Everything is like a matter of a few years. So I’ve been working on it for a few years. And at the same time, I just decided to have a regular

You know, if you can call it like that brokerage where you can deal with regular investors again, if they’re looking for flips, if they’re looking for ⁓ just buy and hold or people want to buy and sell for themselves, like an end user. So that’s what I was trying to shift my energy to. Everything is a process. Everything takes time. It’s not overnight. ⁓ And that’s where I’m right now.

Michelle Kesil (07:52)
Yeah, amazing. And what do you feel are some of the main keys that have allowed your business to be able to grow and have success?

Alon Orbach (08:04)
I think that when you’re the person that provide deals to other people, so the first thing that have to be in your mind is what value the deal really gives investors. A lot of people are just looking into the sale, basically to make the commission and move on. For me, a lot of it is my name and to make sure that the people that I bring into the table, they wanna keep working with me.

and it becomes a long-term relationship in a way. And I think that that’s something that is very important to really dig into the numbers of the deals, to know the analysis, to know how to check everything into depth and then decide if it’s a really good deal. And for me, a good deal, means that if I have money right now, I will invest it myself. If I don’t want to invest it, then probably I wouldn’t suggest it to other people.

And I feel that’s kind of like the most important thing to see the value in the deals and not just to try to make a cut out of it and move on.

Michelle Kesil (09:11)
Yeah, absolutely. And are most of your clients ⁓ investors in the area or who are the people that you usually work with?

Alon Orbach (09:21)
So that’s a good question. I think it depends also on the type of deals. For example, if it’s a flip, then I will probably work with people that are here locally in Florida. If it’s people who are looking to invest back in the days, let’s say in Airbnb. So that was people from different countries as well. Not only from here, I will say probably 50-50, give or take. And then in…

Africa majority is not from here. It’s very hard because the flights are very, very long. So most people don’t want to invest in something that is like a 24 hour flight from them. you know, already it’s far, but at the same time that they need to spend so much energy on just getting to see the deals and stuff like that. So over there, it’s also different crowds and different people. ⁓

And for, course, people want to buy for themselves. So, you know, a lot of people, ⁓ whether they live here and buy it for themselves or it’s just people that are snowbirds and then maybe people from New York or Canada, stuff like that, that they want to have a house for a few months in the year.

Michelle Kesil (11:13)
Yeah, absolutely. And what have been some of the obstacles or challenges that you’ve had to overcome and learn from in your journey?

Alon Orbach (11:24)
Oh

wow, so many obstacles. Well, first of all, there are always obstacles. Like even when you have things right, it still goes wrong in a way and you need to see how to deal with it. For example, Airbnb, something that happens very recently. Airbnb used to charge 3 % give or take the owners of the properties for their commission.

Michelle Kesil (11:27)
Sure.

Alon Orbach (11:53)
And Airbnb is giving you roughly 70 % of the business to the short term property. Give or take depends. So right now they changed it that if you’re ⁓ a company, not an individual because it’s completely different for individuals, but if you’re a company and you run basically a full system through all your properties, let’s say if you have 50 properties and they go through a certain channel.

you need to pay them 15 % commission for all the bookings. That change in price is making you literally from gaining, making money to breaking even or losing money.

Only that, that small change without even looking into competition and stuff like that. you have so many obstacles like that that are just all the time, you know, and that’s like in

one small item, but then property tax goes up, insurance in Florida goes up, the competition is always there, the people that goes to Airbnb for example, their vacation, their expectations are much higher. So before you just gave them the house and they were happy, now they want so many things and you have to be up to some rules and regulations. The neighbors complaining now because they don’t like it, because so many people…

do it so the neighbors keep complaining on every small noise. So many obstacles that there are really a lot of obstacles. And that’s just this field in Africa, we can talk about it for hours. But so many obstacles, but just to make it very short, ⁓ when you get into a new market. So the first thing you do is the underwriting and the analysis for everything. And in a way you feel

especially nowadays when you have AI and all the information out there, you feel like you have, you got it right. You know, all the numbers, all the, what are the expenses, how much everything will cost. And you put it very nicely and you’re trying to be as realistic as possible and you’re still adding more to it. But only when you really start doing it, you see a million more things that can go wrong and how you need to deal with it. And

then you’re more prepared, I guess, for the next deal that will come and then you have it more right. So that’s another thing, basically the obstacle of getting into a new market, ⁓ it’s not just to learn how things are working there, but it’s to learn about all the small new incest that cost of…

So for example, let’s say you know how much a local person should earn, right? And how much is making. You put that in the analysis, but what you don’t put on the analysis is the characteristics of the local people are very different, for example, from Americans or Latinos. And when you start working with them, you see that the timeline is different. Their mentality is different.

so many different variables and then it’s just to deal with it and to know the real numbers and to know how you should deal with people from far away. Obviously, I’m kind of managing it from far away. I do have people on the ground, but it’s not the same as actually being in person and be present and be on top of people.

That’s an obstacle that if you do choose to go that route of a far away investment, you need to know that you’re going to have all those issues and you need to know to deal with it. In my mind, I keep it pretty simple if the deal is very lucrative. So let’s say I’m saying, okay, I should make 30 % cup rate a year. ⁓ But some already taking in my mind that I’ll have so many headaches and obstacles.

And worst case, let’s say I’ll make at the end 14%, but I’m still making decent money. And that’s kind of like a worst case. And I’m hoping to make the real numbers that I’m thinking. But that’s my point of view. It’s not for, I will not suggest most people should do that. Let’s put it this way.

Michelle Kesil (17:07)
Yeah, absolutely. And so what are some of the benefits of investing in places like Africa? Like what drew you to that?

Alon Orbach (17:18)
So investing in Africa, first of all, it’s kind of like ⁓ a wild west in a way. It is legal and you know, it’s safe and all this stuff, but it’s a wild west in a way that if you don’t know the process properly, you will get burned. So you definitely need people that you trust 100%, like literally 100 % because if not, it’s not gonna work.

And other than that, the main thing are the numbers. So if right now in real estate here, let’s say to make seven, 8 % a year is pretty good. You know, some people that are doing great or 12%. So in Africa, I would look to do 20%, for example. And to me,

That’s the only, you know, when you start going to those third world countries, you have to have the two number in front of you, or it’s not worth the headache and dealing with it. But that’s definitely the benefit for me, because we’re very well connected to the government over there. We have good connections, we have good people on the ground. So for me, I feel it’s very beneficial.

but that’s the only reason why I will go to a place like that.

Michelle Kesil (18:40)
Yeah, absolutely. And so what are you most looking forward to or any opportunities that you’re excited about? ⁓ Clearly this, but if there’s anything else?

Alon Orbach (18:53)
Yeah, of course. first of all, regarding, let’s say, Africa. So right now we opened recently a new hotel. And in a way, when you already opening something, you want to jump to the next deal. So for me, I want to stabilize this hotel 100 percent to make sure that it’s profitable like we want it to be and only then to go to the next project. But if I’m looking into the future,

So I’m hoping that in five months or so, I will be able to start another project there, another new ⁓ hotel development. So that’s kind of like the expectations of, or goals of what I’m looking to do over there. Overall in life, I will say the goal is I think to make passive income and to see how you can get there. So you’re not always relying on, you know, work and stuff like that.

And here it’s just really with the brokerage to keep ⁓ pretty much paying the bills, you know, in a way with working with the people here. you know, everything that I already mentioned that I’m doing, it’s going to be kind of like a combination of everything and everything will contribute to what I want to do. But I’m not necessarily looking to grow here tremendously right now in the United States.

I think the focus will be more over there. And here it’s going to be to stabilize it more that I have consistent income, but not necessarily grow it.

Michelle Kesil (20:27)
Yeah, absolutely that makes sense.

Alon Orbach (20:31)
Yeah.

Michelle Kesil (20:32)
Awesome. And so what advice would you give to someone that’s maybe wanting to invest or create a project?

Alon Orbach (20:39)
Sure. Well, first of all, it’s to know your stuff. You know, like a lot of people jump into things when it looks pretty and they think the numbers are great, but they don’t really know the business and they just want to jump into something. I think that if somebody is really believing in something, I’ll throw something. For example, you think a car wash is a great business, then I wouldn’t recommend just to go and open a car wash.

suggest to start working in the car in a regular car wash to understand the business to see really the numbers and to know how they advertise where people are coming from the machines the cost to repair and and so on and so on and then you can have a much better guess if it’s a good business or not so to me in real estate it’s the same thing I’ve been doing so many different stuff and I

you know, I wish that I could say I can just focus on one. I don’t think it’s great to do 20 different things. For me, the way I see it is that I’m adjusting because the market adjusts. So it’s not necessarily by choice. It’s like I have to adjust to the market conditions to see where I can still make money. And that’s for me, the main reason, not everybody, you know, some people they’re still doing Airbnb. Some people are doing hotels here. They still do it. So

to each its own. ⁓ But my biggest ⁓ suggestion for somebody is to decide on really one thing that he wants to focus on and start from the bottom and learn how to do it. Because you have to look at things long term, nothing is going to happen overnight. So if you’re looking into the long term, then you have time, right? You’re not in a hurry to just do something and…

and start tomorrow. And I had people that they had no money and they asked me, okay, I have no money, know, what can I do? And I said, well, you can still do it. I mean, you can find an investor and you can tell him that you will give your time and effort and manage the project and stuff. Then you split profits and with time you save money, you grow, and then you can contribute also some capital. So that’s my two cents, basically.

Michelle Kesil (23:03)
Amazing. Thank you so much for sharing before we wrap up here, if someone wants to reach out, connect, learn more, where can people find you?

Alon Orbach (23:12)
So my company here, it’s called Deal Estate Florida, pretty similar to real estate, just with a D. So Deal Estate Florida, people can find me and my name. I have all the links for social media, but basically my name, very easy to find me. It’s my own phone number and everything. So I’m out there and people can just reach out to me directly.

Michelle Kesil (23:37)
Perfect, well, appreciate your time and your story. Thank you so much for being here.

Alon Orbach (23:42)
Thank you for having me.

Michelle Kesil (23:43)
of course And for those of you tuning in, you got value, make sure you’ve subscribed. We’ve got more conversations with operators like Alon who are building real businesses and we’ll see you on our next episode.