REIA 372 Litan Yahav: Turning diamond tech into passive real estate investments

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Hello, enlightened investors, and welcome back to Real Estate Investing Abundance. I'm your host, Dr. Allen And so glad you can be with us today. We are going to take a journey in entrepreneurship, startups, and real estate investing. With us today is Litan Yahav, and he knows how to turn diamond tech into passive real estate investments. Litan is a Navy veteran and tech founder. He exited his last startup 8 years ago And became a passive real estate investor, mainly in syndications and other alternative investments. He has invested in over 30 deals over the last several years. He ended up building a new startup for planning and controlling our wealth and the wealth of others. The company is called Biser. So, LeTan, take us into the show and share a memorable experience that may have shaped who you are today.

Thanks, Allen. I'm super excited to be here. Thanks for having me on the show. So it's really hard to pinpoint one specific experience on sort of my life, but I'd say that if I have to choose a series of experiences, I think growing up, my parents have always given me the feeling that anything that I think I can do, or anything I put my mind to, I'll be able to achieve. And that sort of gave me the confidence that limits or boundaries are meant to be broken. And if there's a thing or something I want to try and solve, then I should go all in and try and solve it. And so that's like a mentality that I've had most of my life of seeing opportunities and even when odds are against it, trying to to seize it in a sense. So I hope that makes sense, if that's not too sort of basic. But—

Well, it seems like it was a good skill that certainly your parents instilled in you, and obviously it has served you well. And certainly seeing opportunities and then being able to ask the right questions to really see if this is an appropriate opportunity and then Deciding that it is and then actually solving the dilemmas that are always going to be there to bring those into play is certainly a valuable skill to have. Well, Li-Tan, just give us kind of a brief history on your startup expeditions. You've had several different ones. The last one you exited. was about 8 years ago. So just give us a brief history on your journey there. Yeah.

So first of all, I live in Israel, right? And so that's also an important aspect of my life. And when you finish high school in Israel, you get drafted mandatory to— drafted to mandatory military service. And so during that period between high school and the military, I had a bunch of ideas of stuff I wanted to build and taught myself a little coding, a little HTML and built a software to help people recommend to others about professionals, service providers for, you know, plumbers and stuff like that. And it was a complete disaster. So I learned a lot from that. And then I got drafted. I was in the Navy for 6 years and during the Navy, there's a lot of out-of-the-box thinking and achieving things with little. And so that was, you know, over the course of those 6 years, both from a leadership perspective and from an entrepreneurial I think there were a lot of aspects throughout that journey. And then after that, during my studies in college and working as a sailing instructor, founded another business with my girlfriend who's currently my wife and her sister, which was a tutoring school, which was— it went well, but we faced other issues which are building a business with family, which I'll never do again. And then after that, founded Sigoma, which is my last startup back in 2011. 2012, which was out of this program funded by Sam Zell here in Israel, which was this entrepreneurial program where 20 people get selected into this year-long program, final year of studies. The idea is to find a business, an opportunity or a problem to solve. And we found an opportunity in the diamond industry, somehow found ourselves in this crazy industry. walking around diamond buildings that are full of old-fashioned traders and manufacturers with the highest level of security you can imagine and trading diamonds around the world in a very old-fashioned manner. And that didn't make any sense for us. 21st century, people are buying Porsches online. Why can't they buy a diamond and inspect it and all that? And so we went out to build Sigoma, which is still a flourishing company in the diamond industry with a tech for photographing diamonds in 3D and trading them online so that people don't have to fly around the world with diamonds.

They can just—

unless someone buys it, because many times diamonds are traded before the actual acquisition of a diamond, and that's a lot of waste, opportunity cost, and a risk. And so that's still— we— that grew, and we sold that company back in 2015. Stayed on for a few more years to grow it even, even further, became the standard for diamond imagery around the world. Now almost every diamond you'll see online goes through our technology. In 2018, me and one of my co-founders decided we wanted to move on. And that's sort of the backstory about everything until that point. We can dive into real estate, we can buy into this, we can dive into this business, whatever you think is interesting.

Well, interesting journey. Diamonds of all things. It is, I don't know anything about it, but it just seems like a cut, such a cutthroat business.

Totally. Yeah, it's a, and it used to be the trade of diamonds around the world used to be all about relationships. Yeah, all about persuasiveness, like the ability to sell something was a lot more important than the ability to actually manufacture a good diamond. For anything. Like, if I could convince you that this piece of stone is worth $15,000, it doesn't matter. And that's what they did. Like, most— that's the history of diamonds, right? Diamond is a girl's best friend is complete BS. That's the beer coin that turned back in the early 20th century. We all know the story. And as companies like us came about and granted more and more transparency, and certification for diamonds and all that thing, those things came out, those industry players who depended on their persuasiveness were replaced with players that are all for productivity, transparency, and business. Like, and it just, it still is a crazy industry. It still is cutthroat, but not as it used to be, I think, in the past.

Yeah.

Wow.

Interesting indeed. So you were— I guess this fellow you were involved with, I guess he was interested in incubators, essentially. Is that what I understand, that that's really what his company was, was he took 20 people a year and helped them to develop businesses?

No. So Sam Zell is He just passed away a month ago, but he's, he's an American philanthropist, huge real estate billionaire. And he, he gave back to a bunch of different schools. And instead of putting his name on a building of a school, he came to— he has 3 schools, 1 in Israel, 2 in the US. Instead of the building, he funds an entrepreneurship program.

Oh, okay.

And during that year-long entrepreneurship program, there's a lot of content and actual training to become, to build businesses and become better entrepreneurs. That's the Sam Zell Entrepreneurship Program. That's the one I was part of.

Oh, okay.

Many years ago, like 12 years ago.

Oh, okay. So you were actually a student in the program?

Exactly.

And from the course content and everything involved with that, you, how did you go from there to diamonds? That's what I'm That's my question.

So at the beginning of the program, the idea is that let's split into small groups of people, 2 to 4 people in a group, basically a founding team of a future company. And let's find an idea, a problem to solve and a business to build.

Okay.

And so you should start to meet with a bunch of people and explore industries looking for inefficiencies and problems that you can solve with technology.

Okay.

And that's how we found ourselves researching the diamond industry, meeting with people in the diamond industry and finding this, this old-fashioned industry that was ripe for disruption.

I see. Okay. So you were actually going out and seeking inefficiencies and operating problems within companies, and diamonds just stuck out as a huge— who in the group was connected with diamonds, or how is it that you actually came across diamonds? Was it?

Yeah, so it was totally by chance. Like, none of us have any diamond background, any jewelry background, but we know— we knew a guy who worked in the diamond industry. And like we met other people in different industries and just picked their brains on inefficiencies, we picked their brain as well. And it was mind-blowing, the situation of what these guys go through in the industry.

So, okay.

And to be honest, I think the fact that we did not have a background in the industry gave us the added value of not being confined to what they're used to doing. We speak with diamond dealers when we were out, we were validating this idea and they tell us, yeah, I want to smell the diamond. Like, what the hell does that even mean? How do you— why? There's no smell to a diamond. It's just like, yeah, but I want to feel it. I want to see the life. And so these are people that are used to that, you know, old-fashioned type of trading and And definitions. But the cool thing is their kids were born with iPhones and their kids are looking for ways— it's a family business. And so their kids are looking for ways to make it more efficient.

Yeah, I suspect it was a benefit not being in the business because no matter what we're into, we just have this tendency to put on blinders and just keep doing what we've done over and over and over again, whether or not it's efficient or not. So yeah, that probably was a good thing that you weren't involved in that. Well, from that, uh, you successfully sold, uh, that company and turned your eye to real estate investing. Why, why would you do that?

So you get a windfall event, right? And you encounter some cash, some capital that you're not used to having. And, and then, all right, what do we do now? And, you know, you get bombarded by a bunch of people offering either products or services to manage your money. And we didn't make enough for it to make sense to have a family office, but we made enough to, you know, for people to reach out to us and want our money. And we said at that point, well, let's just meet with a bunch of other people like us who have encountered some wealth and what do they do with it? And you start to speak with people, especially here in Israel. Every second person in Israel invests in real estate abroad as passive investors with people they know and friends they trust. And so that was a rabbit hole we just dove into because it seemed like it was a lot more interesting for us than to dive in to try to understand the stock markets. And we never really believed that we're gonna be able to outperform any index or anything, you know, stock pick that we, that we we choose. And so we decided that we'll put money in the public markets but not touch it, just like, you know, regular managed accounts, not the interesting and not so the potential to drive enough yield or returns, but we'll take a larger chunk and start to deploy it with people we trust who do real estate abroad. And we started to do that initially with 2 single-family homes in the US that we bought remotely. that were supposed to be these turnkey products with a local property manager. And at the same time, we also invested some capital with some syndicators in the US. And that's sort of like starting just to get our feet wet and toes wet and to understand. And it was a really interesting learning curve because we found, you know, we did make a bunch of mistakes, but we had appetite to do more in that world, specifically around finding people we can trust, that have experience in the private equity real estate world. That's how we got started.

Enlightened Investors, if you haven't done so already, be sure and click that like button and also click that share so others can take advantage of the content. And finally, be sure to subscribe so you don't miss a single one of our upcoming episodes. You said you made a bunch of mistakes, and we can all learn from I think that's some of our best teachers. And unfortunately, oftentimes we have to learn from our own mistakes. But help us out here and tell us what were some of your major mistakes that we could avoid?

So this— there are a lot of things that are really like, you know, personal types of mistakes because every— each of us have objectives, goals, criteria specifically around investing. that we even don't know to ask the questions as to how we want to do it. And we didn't ask those questions. That was a mistake because we found out that we want to be passive, but we also want to generate— we're willing to take risks and looking for high returns. And so that equation of being passive while looking for high risk reward, or relatively high risk reward, but more higher on the passive level, sort of focused us on deals we should have done and deals we shouldn't have done. So for example, we bought those 2 single-family homes in the States and the amount of work, even though we weren't there and even though we had a property manager, it still turned out to be more work than we were set out to and the returns were lower than we expected. And then at the same time, these LP investments, these passive investments in syndications as only a capital provider without doing anything, were just like completely passive and zero work. The effort there was just finding people we can trust, good operators. And so that was like one of our first mistakes, like not asking the question as to what is our investing strategy, what are we looking for, how do we want to allocate this wealth? And that was like the first mistake. We only got rid of these single-family homes like a year ago. This is like 8 years ago when we bought them. So it took us time because these were bad And also probably we're unlucky with bad deals or we didn't look good enough into these properties because they were just like, you know, issue after issue and tenants and evictions and municipalities reaching out and telling us to take this tree down, fix this pavement, just like a lot of work. And I'm sure that other people who have larger operations or really that's what they do, single-family homes, like it's fine. Just that the passiveness versus activeness is totally different. there's that. And then there's, you know, questions, other questions that we should have asked, which we didn't when looking at GPs or syndications. And that's more around, all right, like, what's your— what are you? What's your job? What's your position in this deal? Like, and then we've learned that there are multiple types of players involved in these syndications. You know, there's a capital raiser sometimes, There's the operator, there's a property management company, there might be a co-GP, someone else who raises money for them from inside. So there are different types of people within this thing that's called a syndication, which we weren't even aware of. And I'm not saying this is a mistake or not a mistake, but this is sort of— we should have asked the correct questions and known that, well, this person we're investing with, he's a capital raiser, and that's fine. we already have enough access to the operators, which are the people that are the asset manager, the feet on the ground. We should just reach out to them because we have already enough experience. We already have access to enough deals. We can just go to the operator. And also the red flags that come up, like if you talk with the capital raiser who won't tell you who the operator is, that for us is a red flag because that means like, your value as a capital raiser is vetting a deal, Good at bringing in good operators, getting good terms. Like, that's what a capital raiser is for. That's the value a capital raiser brings. That's worth, you know, investing with a capital raiser. But if they're not even willing to tell me who the operator is because they're afraid I'm gonna go directly to the operator, then what value does that capital raiser bring to me? They're just like not telling me who the person is.

Are there capital raisers that have done that to you?

Yes, there are.

Really?

Yeah, they didn't Yeah, they presented, you know, they show this amazing deck with, you know, what they're going to buy and who the partners they're buying it with and all that. But then you learn that, well, they're just— I'm not saying just, but they're the capital raiser. They're not like— so anyway, it's just like things and other questions. And I don't know if you want to dive into specific dynamics.

Well, you know, I think this aspect of questions is really important because, you know, we don't know what we don't know. And so certainly when we're starting out in various different things, we don't know what questions to ask. And even experienced operators don't always know what questions to be asking. But of course, the longer you're in it, the better you get at asking those questions. But yeah, very interesting trajectory. But before we run out of time here, you have started a new business, which I think is a really critical business because it is a business that helps those who have wealth to control that wealth and to manage that. So tell us about this. company and tell us about the startup of this company and really what were the seeds and the reasons and the why behind this company.

Yeah, for sure. So we've, over the years, we've allocated, as I mentioned, quite a bit of capital into multiple deals across different GPs or different operators. And as the years went by, like, we just were overwhelmed by the mess we encountered, just like managing our own money. I'd get an email from an operator and I'd be like, well, shoot, when did I invest with this guy and how much money? And is this what I expected in terms of like the distribution? And these are good problems to have, like I always say, but again, these are problems. And if you're out, you're deploying capital for that capital to grow, it needs to be treated in a more serious way. Like being on top of it. And so we built ourselves the software to automate the tracking and management of our wealth. So I'd get an email from an operator and I'd throw it into the software and the software would log it for me and let me know what I'm— where I'm at. I'd link my bank accounts to the software and the software would monitor transactions and link those transactions to assets so that everything's up to date. Let me know if I missed something or someone missed something or And all the documents are in one place. So just like this to replace my spreadsheet, to replace my Dropbox or Google Drive, we built this for us and then a bunch of friends wanted it as well. And we decided there might be a whole business opportunity here. Spoke with a lot of people like us abroad in the US and Europe, found that there was nothing like this that solved the problem. And we decided to build a new startup and that's what we did. Founded Wiser. 2 and a half years ago, raised capital and built our product for ourselves, only a lot more robust, more broad, answering more holistic needs focused on just like helping people to streamline all of their wealth into one place, having that one source of truth. So that's like the backstory of Provisor. And it's been amazing because, you know, we've been talking, we talked with all of a bunch of our customers and We see how they move, they transition from heavy lifting of managing their stuff to just being passive. And our objective is to keep passive investing passive. Yeah.

So, yeah. And well, and once you get into multiple deals like that, it isn't passive. Yeah, it sounds like a really, it sounds like a really high demand product. And you're the only one that I know of that has developed that type of software. But is it specifically for real estate investors, or does it have a broader application?

No. So it manages everything. So you can track any type of asset or liability in Wiser. So it can be a brokerage account, your 401, your, you know, if you have If you have gold or a car or a boat, if you have startup investments or crypto investments, it tracks and manages and projects everything. It's— we like to call it a type of like virtual family office. So you just like link and throw in everything into the platform and it creates order out of a mess and gives you insights into things you should be up to date with across the board.

It sounds like this would be in high demand with family offices. Is it? Or have you broken into that aspect?

So family, yeah, so yeah, it sounds like so family offices are definitely a target for software like this. We're in touch with a lot of family offices, but, and there's a big but here because Family offices are professional financial managers. Me, a personal investor, I'm not a professional financial person. And so the requirements from a piece of software for someone like me are different than the requirements for something, someone like someone who's managing a family office, right? The ability for them to slice and dice the data, the formulas and high-level financial terminology is stuff they really need where I don't, I don't even want it. That's like, for me, that's a lot of noise. I want bottom line mostly. I wanna understand in layman terms where I'm at, where I'm gonna be, what's missing, what should I do, as opposed to a family office who needs it in different types of terms because they need to be the agent for the wealth owner and they need to be able to present that to them. And so they're definitely a potential customer and we're building out other functionalities for them, but it's not, it's not a clean cut same product.

Well, I know many people in our audience are going to want to know how they can investigate this further. So how can they get in touch with you to do that?

Yeah, so our website is Vyzr, V-Y-Z-E-R.co. So it's not intuitive, but it is the name of the company. So vizer.co. And you can reach out to me, Litan, L-I-T-A-N, advisor, or Facebook, LinkedIn, Twitter. I'm pretty active and responsive and happy to definitely speak with other LP investors and pick brains and find good opportunities and definitely also help with any questions around Wiser.

Well, excellent. And that information is in our show notes. Latan, one last question. What was your most challenging and difficult setback in life? And how did you come through that? And what did you learn from that?

That's a deep question. I have a deep personal answer that I'm happy to share. So there's something that not people, not many people talk about. And this is on a personal note. This is not an investment, but it does reflect on everything in life.

Certainly.

So after, after I got married, we wanted to bring— we, you know, tried to get— bring kids and get pregnant and found out that it's a lot more difficult than, than it seems. And went through years of IVFs and other types of issues throughout my wife's pregnancies that we had to deal with over the 4 years. And then we were blessed to have our first son, and the second one came by mistake. which is like playbook. So I think that was a huge, huge punch in the face in my life. I think the biggest in my life. It was like one of those situations you're totally unprepared for. You don't even think that's going to be an issue. And then what it is, you have to deal with it. And I think it, it's sure, it's like one of those things that puts your life in perspective. Everything you're dealing with means nothing compared to what really matters in life, and that's family. And it really puts a lot of emphasis on relationships with your spouse and valuing the future kids that come out. So I think that one for me was— and I don't know if that's one of your common answers for that, but that for me is— was that eye-opening experiences that are setbacks that I learned a lot from. So I hope that wasn't too personal, but that's sort of like I Well, I appreciate that.

Many of us are afraid to get into the personal, but personal is always going to bleed into the business. And, and so I appreciate you sharing that, and it provides insights for all of us. So, LaTann, thank you so much for being with us today. Wonderful conversation. Thanks for being on the show.

Thank you so much for having me, Allen.

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