Relli co-founder and CEO Mor Milo joined Rick Albert on The Key to the City of Angels podcast to talk about how raising capital for real estate has changed and what that means for individual investors. They cover why institutions have moved from equity toward debt, why Los Angeles is such a hard market to build in, how to choose between owning rentals and passive investing, and how Relli vets sponsors. The episode, "Creating a Stock Market for Real Estate" (episode 47), was released January 8, 2026 and runs 47 minutes.
Editor's note: first published January 2026, so some details have changed. Today Relli is a marketplace where investors review offerings from reviewed sponsors, express interest and talk to each sponsor directly, and each offering page shows its own minimum. Target returns mentioned are projections, not guarantees.
Watch on YouTube, or listen on Apple Podcasts or Spotify.
Key takeaways
- Higher interest rates pushed many institutions from equity toward debt, so sponsors now raise more of their equity from individual investors, who decide on trust in the sponsor as much as on the numbers.
- Los Angeles is a hard market to build in. Rent caps, the Measure ULA transfer tax and building code costs push some developers elsewhere, which favors experienced local operators.
- Owning rentals is rarely passive. Mor suggests starting with your goal: direct ownership gives more control and more work, while syndications and funds trade control for a hands-off role.
- Build a team (financial advisor, CPA, legal) before investing. Relli vets sponsors, but investors still need to read the documents, do their own due diligence and understand the risk.
- Every deal has its own exit timeline, and a large payout at exit can have tax consequences worth planning for with a CPA.
Full transcript
Lightly edited for clarity. Section times match the YouTube video.
Why did Mor want a different way to invest in real estate? (0:00)
Mor Milo: We didn't want to necessarily be landlords. We didn't want to deploy large sums of capital at once into one deal. We wanted diversification. We wanted access to institutional investments, as opposed to smaller projects that were affordable for us with the amount of money we had in the bank. And we also weren't accredited investors. So we didn't have any of those things going for us. We really wanted to be able to passively deploy our capital, but didn't know where to do so as an average Joe in the market.
Welcome (0:36)
Rick Albert: Hello everyone, Rick Albert here with another episode of The Key to the City of Angels. I'm super excited, because we're going to talk about a different way to invest in real estate. I have Mor Milo here from Relli. Thank you so much for coming on.
Mor Milo: Great to be on, Rick. Thanks for the invite.
Who is Mor Milo, and what is Relli's mission? (0:52)
Rick Albert: So let's start with your background and what Relli does. That will lead us into the conversation, so we all know where we're going. Why don't you start us off?
Mor Milo: Sure. Relli is attempting to create a stock market for real estate, where you'll be able to invest and trade in real estate-backed securities as easily as you buy stock on the stock market, or trade securities on your Robinhood account, your E-Trade account or any of the other brokerage firms in the marketplace.
The reason we built it is that my business partner, Ross Iannarelli, and I have been building businesses for the last 10 years or so. We had access to stocks and did really well in stocks over that period, and we wanted to do the same thing for real estate. We wanted to get into real estate. We didn't want to necessarily be landlords. We didn't want to deploy large sums of capital at once into one deal. We wanted diversification. We wanted access to institutional investments, as opposed to smaller projects that were affordable for us with the amount of money we had in the bank. And we also weren't accredited investors. So we didn't have any of those things going for us. We really wanted to be able to passively deploy our capital, but didn't know where to do so as an average Joe in the market.
How did Relli build its real estate marketplace? (2:10)
Mor Milo: What we discovered was that there was this whole industry, behind closed doors, of private placement deals that people invest in and syndicate capital into. The wealthy and the large institutions of the world have been investing this way for many decades. We wanted to help that industry shift into the mass market, allowing average Joes like us to deploy $100, $1,000 or $10,000 at a time into deals that normally required a $25,000 to $200,000 minimum, and required you to be what's called an accredited investor, which we'll get into in a little bit.
Essentially, we built our first product and went to market about three years ago, talking with 100 to 150 sponsors, real estate development firms that raise capital from retail investors, to gauge their interest in going out to the mass market. The response we got was: we'd love to do this, show us how to create and cultivate relationships with retail investors who are accredited or qualify from a financial perspective. For context, the qualification is a million dollars in assets, or $200,000 in income as an individual or $300,000 with a spouse. So it's a small subsection of the market.
Through that process, we've been able to build this marketplace, where we've brought deals that for the most part have been behind closed doors to the public, so that everybody can view them, connect with these real estate sponsors if they qualify, and deploy their capital. Slowly but surely, we're seeing more real estate developers take advantage of opportunities to reach the mass market through crowdfunding rules that were originally meant for venture capital, and that real estate development firms and lenders now use to offer opportunities to average consumers and retail investors.
So we've built a cool little marketplace where people can check out deals and find real estate-backed investment opportunities targeting 8% to 25% annual returns, which may also provide tax benefits and consistent cash flow throughout the year. It's been quite a journey, but we're starting to get a little bit of steam, slowly but surely growing our audience and our customer base, and the number of good deals available for our investors keeps growing.
Why is Los Angeles such a hard market to build in? (4:48)
Rick Albert: It's interesting, because when people talk about California, they ask, why aren't people developing in California? Part of the problem is the money, but I think the money's out there, right? And that's what you're proving. The money's out there. It's just a matter of making that connection.
Mor Milo: What I would say is this: the Los Angeles market specifically, since we're talking about the City of Angels, is a very unique geographic marketplace. If you don't understand how to deal with the city, how to properly underwrite your deals, and what it's going to take to bring that property from where it is today to where it needs to be to meet certain codes, or just to get it to a place where you can consistently rent it out and have some form of cash flow, it's going to be very difficult to walk into that market and be successful.
We actually happen to have a deal on our platform right now from an operator who's been operating in the Los Angeles market for over 20 years. He's vertically integrated, which means he can do everything from acquiring the property to renovating it to ground-up construction, and he's actually a CPA by trade. But what makes him unique is that he has a deep understanding of Los Angeles and what makes it tick. I think California, and Los Angeles specifically, is a very difficult market if you don't do your homework and haven't found the right network of people around you who can tell you what you're actually going to have to do.
Rick Albert: That's funny. I know someone who's a project manager on the development side, and he was telling me he was being offered tens of thousands of dollars per month per project. He said if you know the city, the developers will flock to you, because you know how to navigate it. I remember when we did our last property, even something as simple as: look, there are more than three stairs, I know the city's going to require a handrail. My contractors hadn't called it out yet. "It's fine." I said, but I know it's required. I kid you not, at the final walkthrough, the inspector says, "You need handrails." I'm like, mother...
And with LA development, I don't know if you saw, UCLA came out with a study showing we're seeing a decline of about 18% per year in building in LA, and they're tying it directly to Measure ULA, the so-called mansion tax. A lot of these developers build with the intention of eventually selling, and then they get hit with this transfer tax. So now they're losing millions of dollars per transaction, and the numbers aren't penciling out.
How and when do investors get their money back? (7:37)
Rick Albert: So out of curiosity, when people invest in some of these projects, is there an exit? Is that kind of the idea, so they get their money back and can reinvest in the platform? Or is it case by case?
Mor Milo: Each deal is unique, as you mentioned. Depending on the deal you're looking at, there's a timeline, and in most scenarios you're looking at a deal that will have an end date, a closing date. Whether that date is disclosed at the beginning, or is to be determined based on selling the portfolio or the individual property, depends on each deal.
There are certain circumstances where companies raise capital into their business, and all of the real estate within that business collateralizes the fund, but the business continues to move forward. Those deals usually lean toward a cash flow position, where the goal is a consistent distribution from the revenues generated within that business. That's a slightly different type of investment, because it's not tied to an individual piece of property, and the return is based on what's called a promissory note, which is essentially them promising to pay you back a certain percentage of return based on the collateralized assets as a whole.
But it really depends. In regard to the deals on our platform, we have national deals, from all over the country, and some will have drawbacks and some will have benefits depending on where they are, from the perspective of exit. Each of these deals will have some form of preparation for exit that you'll need to take into consideration. If you're going to have a large windfall of capital, you'll need to position yourself accordingly from a tax perspective, and that would likely require a CPA on your side to set you up to win. But yes, each deal will have an exit of some form.
Rick Albert: Got it, and that makes sense. I was wondering about that, because that's what most of these developers do, so they can pay back their investors and move on to the next project. So over the last few years, when you talk to developers about raising capital, what has changed? Is it getting that much more complicated, and that's why you're stepping in? Or do people want to flock to these projects? How difficult is it now to raise money versus the past?
Mor Milo: Great question. A very astute question. Capital raising has changed in the last five to 10 years, mostly because of macroeconomic factors, but also because of the way investments are marketed. Up until, let's say, the early 2020s, capital was pretty free-flowing, because there was a limited number of sponsors and capital was very cheap. There was a lot of opportunity for large institutions to deploy their capital into equity positions that could generate double-digit returns, compared with the very nominal returns they'd see from a lending position.
Because of the shift in interest rates, institutions have shifted their energy significantly away from equity and toward debt. That's not to say they're not deploying into equity. But when you look at the risk tolerance of a massive institution with large sums of capital, if they can receive a similar return, or maybe a slightly diluted return, from a first-position lending deal compared with an equity position that's at risk, they're likely going to lean toward that first-position lending deal. I don't want to put a percentage on it, but a large percentage of the time.
How are institutional and retail investors different? (11:41)
Rick Albert: So to clarify, you're saying they could pay for a property and build everything with cash, that's an equity position, versus leveraging the project, and that's a better deal because they can preserve the cash. Is that what you're saying?
Mor Milo: You're very close. Think about it from this perspective. In the financial stack, when you buy any sort of property, you're going to have a couple of tranches of capital. To simplify: normally, if you're purchasing a single-family home or a duplex or a fourplex, you'll have a lending product that gives you, let's say, 80% of the capital you need, and then you need to deliver 20% in equity. In the larger deals, the equity position is the same type of percentage, but the number's big. On a $100 million deal, you're talking about $20 million in cash. Not everybody can deliver that. Even if you're a big firm with $100 million in assets, coming up with $20 million in cash is not an easy thing. So they syndicate that capital and position it to deploy against the debt they'll receive.
When debt was 3% or 4%, there wasn't a whole lot of margin there. The banks were fine with that, because they have their own methodology for creating revenue, and they can leverage the Fed and do all sorts of fun things. Private institutions, on the other hand, couldn't compete. If a private institution, let's say a sovereign wealth fund or a large private equity fund with a couple hundred million dollars, collects a bunch of capital, they need to deploy it, and they need to make a return that's more significant than a Treasury bond or a mutual fund. So they had to look for riskier positions in the equity stack, as opposed to the debt stack.
Rick Albert: Got it.
Mor Milo: Now that debt is 7%, 8%, 9%, and if you look at hard money, 10%, 11%, 12%, up to 15%, they can take that capital and make the same returns they were originally looking for in equity, maybe a little less, maybe 20% or 30% less, but in a far less risky position. So all the operators who were going to these institutions to get that $20 million to do that $100 million deal find that the people who were giving them the $20 million are now more interested in the $80 million of debt than in the $20 million of equity. So they have to go find other people to fill that 20%. They have to go find retail investors.
Retail investors are people like you and me, who maybe have a little more money in the bank to do whatever they please with. "I've got a couple million bucks, I've got 5 million, I've got 6 million, I want to put my money out there and I don't really want to touch it." But those people operate on emotion and make their decisions with logic. What do I mean by that? If I come to Rick and say, "Rick, I need 5 million bucks, come invest $100,000 of your hard-earned money," Rick's going to say, "Dude, who are you? I don't know you. Why should I give you money? I don't even want to look at your deal yet. I don't care what your deal is, because I don't know you."
Where the institutions will look at the numbers and negotiate their own deal, the retail investor has to feel a connection. From there, they'll say, "Okay, this deal pays me X percentage, there's a 95% occupancy rate, that's attractive." They'll use the logic to justify the emotion of connecting with the person in front of them.
So what happened is you had a lot of real estate sponsors who were very used to the institutional game, which is very logic-driven. An institution says, "You're offering me 18%, I want 25%. You give me X and take Y, and I'm going to negotiate this. I don't care about your brand. I don't care about your messaging. All I care about is the numbers." Now they've had to shift their perspective and say, "I need to build relationships with people." You have a lot of really great operators who know how to run real estate deals, manage tenants and build a financial stack, but who don't know how to create relationships with people in the marketplace.
That's why we've seen such a crazy shift in syndication over the last five years. You had a lot of operators who weren't as strong from a real estate perspective but were great marketers. They built relationships and made average consumers feel heard and considered. They gathered that capital and deployed it, but they weren't great operators, so the deals they took on are now losing traction. They have stalled distributions, they're losing properties to foreclosure, and they can't refinance because they were on floating rates during a time when that didn't work. All of that makes it even harder for the good operators to work back from a bad reputation with retail investors who are a little trauma-shook from the last five years. So they need even more help.
So that's what we're seeing in the market: institutions shifting from equity to debt, retail investors shell-shocked from the last five years, and operators who don't know how to create relationships with them. All that being said, where Relli finds its place in the market is helping fill the gap between the great operators and the work they've done, and communicating it to retail investors.
Rick Albert: It's so funny. I've always told people that people make decisions based on emotion and then justify them with logic. That's always been the order of operations. "Hey, do you want financial freedom?" "I want financial freedom. That sounds amazing." "Then you should invest in real estate." "Oh my gosh, you're right." And then suddenly the numbers make sense. They didn't make sense before, but now they do.
It was interesting, because it was all over The Real Deal and other publications: people who had these massive buildings did their last refinance back in 2020, and then came the balloon payment. Now they're asking, what do we do? Especially in LA, where there were rent freezes and all these other things, they're stuck. So I was actually surprised when you told me there was still some development happening in LA, because rent control has now gotten stricter. The cap is now 4%, versus up to 8% before. Not that it was ever 8% on a practical basis, but it was there if you included utilities and that kind of stuff. So it will be interesting to see whether some of these developers shift from building apartment complexes to switching them over last minute to condos and selling them off individually.
Mor Milo: It might be interesting. It wouldn't surprise me.
Rick Albert: It wouldn't surprise me either, because you've already built the infrastructure for the apartment building. Again, I'm not a building code expert, but there's not going to be that much difference in terms of building. They'll say, "Look, I can't operate in LA." And in theory, now that I think out loud, you'd avoid the mansion tax, Measure ULA, because each unit would be sold under the $5 million mark.
Mor Milo: What I'm really seeing, for the most part, is a lot of single-family residential business happening, and some of the smaller unit counts. Maybe I haven't been approached by many bigger operators in this state because usually they operate behind closed doors. At the end of the day, Los Angeles is a very lucrative market. It's difficult to operate in, and because of that, it creates a fenced-in wall of people who can actually operate. Those people are consistently able to raise capital for their deals, because they're the small but select few who have been successful in these areas. So that wouldn't surprise me. There have been a lot of projects we've seen stall out, and I do see that the current restrictions and regulations in Los Angeles are definitely creating difficulty, let's say.
Rick Albert: I remember talking to clients and friends about the building code. Now they have to add solar panels, and people say, "That's awesome." And I say, is it? Someone has to pay that extra 30 grand.
Mor Milo: It's true. And it's not going to be the developer. It always ends up coming right out of the consumer's pocket. Look, it's with good intention, but it's definitely a difficult market to plan for.
Rick Albert: I don't know who the government is talking to, because you'd think someone would bring this up and say, in theory it makes sense, but on paper I'm not going to lose $30,000. And typically, at least in the solar panel world, I've noticed developers will say, "You see a price of a million bucks. You can either add on the 30 grand or you can lease it." So the price you see almost never includes the actual cost of the solar panels.
Mor Milo: That's interesting. I haven't seen that, because I haven't had much experience with subdivisions being built in Los Angeles, but that's very interesting.
Rick Albert: At least, I had a client who bought a townhouse, and those were his options, and in some of the newer construction. Now, as you get to the luxury market, it still costs 30 grand. It doesn't matter where you build it. It's going to cost you 30 grand no matter what neighborhood. So when you get to high enough price points, the developers can absorb the cost. It's kind of like building in Irvine versus maybe Buena Park. Two different prices.
Mor Milo: A hundred percent. And look, it's very interesting. I have a couple of home builders in the Los Angeles area, one specifically who does Malibu homes and properties here in South Orange County, and he also has to deal with the Coastal Commission, which makes it even more difficult. But because of their builds, I think exactly what you just mentioned comes into play: absorbing $30,000 to $50,000 into a $10 million home is not a particularly difficult feat.
Rick Albert: Exactly.
Mor Milo: But when you start looking at a half-million to three-quarter-million-dollar house, that makes a big difference.
Rick Albert: Exactly. Which is why we don't have affordable housing. The cost of drywall, plumbing and electrical, whether you're building in Malibu or in Pacoima, is practically the same. Recessed lights. I've never heard a high-end buyer ask, "What brand of recessed lights are those? What kind of drywall is this? Is this high-grade drywall? Let me lick it." You don't hear any of that.
What market trends will shape the next 10 years? (22:53)
Mor Milo: That's very true. And look, I think what's slowly but surely happening in the world we live in now is that people are able to leave metropolitan hubs. I think what's going to be very effective in the next 10 years is operations capable of delivering the full eat, play, work experience in new hubs they can create. Maybe not even hubs, but creating an interactive, city-type environment even in the outskirts. I think that's going to be incredibly effective in the next 10 years, because we've overpopulated certain hubs across the country. Now, with incredibly fast wireless internet and a virtual workplace, there's nothing holding us back from opening it up and shifting away from this archaic model of having all the people in one hub battling each other to the last penny.
The problem is that there are no great alternatives. There aren't luxurious alternatives people can go live in where they'd see a 20% to 50% reduction in cost because they're living on the outskirts. But slowly but surely, that's expanding. So I think that's a trend we'll start seeing in the next 10 years.
Rick Albert: On one of my earlier podcast episodes, I interviewed Hana Cha, who does consulting for people building mixed-use buildings, so retail at the bottom and apartments on top. I think it's an amazing product. It makes total sense. You're creating that community. You're basically creating walkability. And that's a good segue: for a lot of the developers and operators on your platform, where are these projects happening? Are there particular markets you're seeing more of than others?
Mor Milo: All over the country. The Sunbelt is definitely still very active from a multifamily perspective. We see a lot of prospective customers come to us from the Sunbelt: Houston, Dallas, Florida, Georgia, those types of places. We see a rather large mix of different types of deals, even in tertiary markets. We have two deals right now in South Dakota from incredibly reputable operators with half a billion plus in AUM. And we have everything up to primary product. We have an operator who's invested in our business, based in New York, that does high-rises in Manhattan. Unfortunately, they haven't had any great products come to market that they've been able to make pencil in the last couple of years, but that's a trend across the board for most of those primary hubs. We see a lot of Texas, which is a good place to build right now.
And we have a variety of deals. It's not only individual pieces of property. We also have funds on our platform, and those funds can invest across the country as well. For example, we have a debt fund that does hard money loans across the country on single-family residential property and commercial residential, like multifamily. You can invest in the first-position lien, or you can invest in the fund as a whole, which targets a 12% annual return on your investment. So we see a little bit of everything, which gives us an interesting pulse on the market.
Rick Albert: That's why I was asking. You get a snapshot. Even though it may not be all the development, you have a better idea of what's happening and what's coming up. It's almost like insider trading at that point. People can ask, "Where should I invest next? Let's go to Relli and see where the developments are happening."
Mor Milo: I'll tell you, there are thousands and thousands of developments happening. I think the difficulty is figuring out who's good and who's not, how to underwrite them, and where they all are. Depending on what you're looking for, you can really find anything if you sift hard enough on the internet. But I think the biggest thing we bring to the table is education. We have the ability to educate people on passive investments, which most people don't know exist, and to educate people on who these sponsors are. That's the goal. The goal is to come to Relli, get whatever deal you want, invest as much or as little as you want into it, and have your own beautiful portfolio working for you while you sleep.
Rick Albert: That was always the perception of real estate, that it was supposed to be passive. Because it's not.
Mor Milo: Oh gosh, no. The only thing I tell people is that the only thing passive about real estate is your tax return.
Rick Albert: Sure.
Mor Milo: Nothing else about this is passive.
Rick Albert: Fair.
Is owning rentals really passive income? (27:43)
Rick Albert: People say, "Oh no, the landlords are just collecting their checks every month." Who do you think is making the calls? "Oh, property managers." Okay, so they just hired out the tasks. If I own a restaurant and have a general manager, it's the same thing. You're passing it on to someone else to manage. I work with a lot of house hackers and smaller-scale investors. If you were to create criteria for "Should I buy my next investment property, or invest in one of these syndications?", what questions would you ask yourself to decide which route to go?
Mor Milo: Great question. I think the first place to start is: what's my goal? If your goal is to have 10,000 units that replace your occupation, and you're a portfolio manager and that's what you'd like to do, then do that. It's more lucrative, and you'll have more control over the deals. But you're going to go through the absolute burden of managing all the properties. And like you said, if you want to hire it out, remember that takes from your margin, and depending on how leveraged you are, your margin can be gone if you hire it out. So you have to build it to a place where it's worthwhile to hire it out, and have the property in a place where it's manageable.
On the other hand, if your goal is passive income, truly passive, the opportunity is to research how you can deploy your capital in a passive manner that doesn't require you to clean toilets, collect rent, maintain property and fix drywall, look at all the different types of options, and build a portfolio of passive investments.
And I think there's also a balance there. For example, we have many operators in the single-family residential space, on the smaller or mid-market side, at 5, 10, 15 or 20 million, who are looking for exposure to bigger property in larger metros they don't have access to. They know that if they put their money in those pools, they'll start learning about that product, which gives them the opportunity to then go build their own. That's their stepping stone into a new market, which is not a bad way to work either, depending on your goals. There are also people who just want to deploy capital into different places and keep purchasing their duplexes and fourplexes. They don't want to touch anything in multifamily or retail or self-storage. They just want to keep building that portfolio while also having access to those other asset classes. All of them are a great recipe.
Why do investors need a team around them? (30:33)
Mor Milo: I think the name of the game is really to get a team around you: a financial advisor, a CPA, a legal team, and have those people support you in your goals, where you want to go and how involved you want to be. You've got to put a plan together and build it out based on your background. If you know multifamily or single-family residential better than anybody, and that's where you feel comfortable investing because that's what you know, then you should build a strategy around what you know. So I really think it comes down to getting people around you who have your best interest in mind, and building a holistic strategy for where you want to go and what your goals are. From there, you can start to pinpoint operators and asset types in the market to drive that return for you. I think the first place is education and planning.
Rick Albert: That makes sense. I also like the idea of having people around you because, to your point, if I make emotional decisions and justify them with logic, I should bring in people who have no skin in the game. I always tell a lot of my clients: look, I wear three different hats. There's Realtor Rick, Friend Rick and Investor Rick. Depending on the situation, ask me which hat I'm wearing, because they're going to give different answers.
Mor Milo: A hundred percent.
Rick Albert: Realtor Rick just wants to make money and not get sued, so he's going to give you that opinion. Investor Rick says, okay, this neighborhood makes sense, the neighbors make sense. Friend Rick is the guy who's going to deny everything if you ever try to repeat it back to him: "Look, off the record, on a practical basis, this is what people have done. Whether it's kosher or not is up to them, but there's risk," and blah, blah, blah. So I think you have to decide. And your time also becomes more valuable, and there's how involved you want to be. That was always my hesitation with DSTs, Delaware Statutory Trusts. I like having some level of control, and you have to be really comfortable letting that control go.
Mor Milo: A hundred percent. And you want to know who the person is. You want to know they have a track record of success. You want to know that you can trust them and that other people trust them, all that good stuff.
How does Relli vet sponsors, and what due diligence should investors still do? (32:55)
Rick Albert: And do you do that kind of vetting?
Mor Milo: Oh, of course. We don't put anybody on the platform who hasn't been through our general counsel and our CFO. I don't actually do that review myself. I go out and find the sponsors, and then I hand them to my more compliance-oriented people, who have seen a million of these deals before, and ask them whether it's good or not. We've built an underwriting solution that is slowly but surely growing and improving. And we tell all of our investors this: we've checked to make sure they're kosher. We make sure they're real people, that they have a real business, that they have a track record, and that we're willing to put them on the platform. That doesn't mean you don't do your due diligence. That doesn't mean you don't read the paperwork. That doesn't mean you don't consult with your financial representative. Because everything has risk, these are private deals with private people, and you have to understand the risk profile before deploying your capital.
Just like in the stock market, you can go buy futures and do all sorts of crazy derivative-type trading. Would someone recommend that to you? Probably not. But do people make a boatload of money doing it, if they know what they're doing and what they're looking at? Absolutely. People make insane amounts of money doing that. So the first move is to get educated. The second move is to get smarter people around you. The third move is to bring all those people together and actually dig into the details and the data. And the fourth move is to understand the risk and be comfortable with it before deploying your capital.
Rick Albert: And again, everybody's different, but from people you've talked to... maybe I should bring in a financial advisor and the three of us could chat about this. Is there a certain percentage? Because you have to be comfortable with it, and you also have to be comfortable with it being gone. That was always my big fear with the stock market. I could invest in Home Depot, but what if Home Depot does something stupid? You never know. If my house burns down, at least I have an insurance policy on it. In a lot of ways, it's much safer.
Mor Milo: A hundred percent. You have a hundred percent of the control when you purchase the house. No question about it.
Rick Albert: But in some ways you might have less risk with some of these syndications.
Mor Milo: I wouldn't necessarily say that.
Rick Albert: In the sense that they may have a better understanding than you do. If I buy a fourplex, I might screw up somewhere an operator never would have.
Mor Milo: That's true. Look, there's no doubt they're professionals and they've been around the block. These people have made a living creating that type of solution for investors, and what we believe is that it's likely better in their hands than in ours, because we haven't done a 268-unit multifamily deal.
Rick Albert: Exactly.
Mor Milo: These guys have 21 exits in 26 years of experience. That's comforting, and accurate, in the sense that they know what they're doing at a higher level because they've been through it. But no matter which way you slice or dice it, the risk is still there. The risk profile doesn't change because of who the operator is. The operator can reduce the risk of constructing the property, or bring their knowledge and experience to the table, but that doesn't negate the risk in any way, shape or form. So from that perspective, it can be comforting to have someone on your team, someone you invested with, who has that experience. And you definitely have more control and more ability to make decisions when your name is on the deed. I wouldn't necessarily compare the risk.
Rick Albert: It's trade-offs.
Mor Milo: Trade-offs. It really depends on who you are. If you've done a hundred flips, then maybe you have a better chance than putting your money with a syndicator when it's your first time reading a PPM, a private placement memorandum, looking at all the numbers, doing the splits and doing the math. You might have a better solution there if you've done a hundred flips, or even 50. If you're going out to the market for the first time, and you're a software developer at eBay making a million dollars a year, does it really make sense to take on the opportunity cost of learning how to do a flip right now? Maybe not. So it really depends on who you are. That's where the financial advisor comes in: bring in that team and say, "This is my know-how. This is my knowledge. This is where I'm at. This is what's available to me. What are the benefits and drawbacks of each direction? How can I make the best decision?"
(Rick's daughter briefly stops by to say hello.)
Rick Albert: Sorry about that.
Mor Milo: No worries. That's awesome.
Rick Albert: I've made it really clear to my wife: when she gets to a certain age, she's going to start helping with the properties. And if she doesn't help, she doesn't get them. We'll donate the properties if we drop dead.
Mor Milo: Wow. That's strong. I like that. It's a good thing.
How did Mor's family shape his view of real estate? (38:56)
Mor Milo: My background: my parents came to this country from Israel when I was four months old. They lived a very frugal life, and what they did was buy real estate. So I watched them firsthand do the single-family, be-a-landlord thing for the last 30 years. That was the exposure that got me to a place where I thought, "I do really well in stocks. I should probably have that same type of experience in real estate. I don't want to deal with Section 8 housing and kicking out tenants and evictions."
Rick Albert: It's a thing, man. It's part of the game. I've had to do a few evictions out of state, and people get super scared. I tell them, look, if you own a property long enough, you're going to do an eviction. It is what it is.
Mor Milo: If you haven't done an eviction, or had tenant turnover, then you either don't own enough properties or you haven't been in it long enough.
Rick Albert: We just sold our last LA rental. I had a couple of properties in LA that I house hacked my way through. I bought a condo and rented out the second bedroom. Then it became a full-time rental: a house with an ADU, where my wife and I lived in one unit, rented out the other, and eventually swapped. Part of the reason we sold was that we've been investing in LA for a decade, and knock on wood, we haven't had any of the horror stories you hear about in LA. So we said, why don't we end this on a high note? If you hold onto a property long enough, a tenant's going to say, "I'm going to stop paying, and I get free legal services." Do you want to go down that path? So we said, let's take that off the table.
Mor Milo: That's a bold move, and probably a very smart move.
Rick Albert: We'll find out. We always do.
Mor Milo: It's a tough thing. For example, our single-family residential flip-and-rental guy on the platform is Pavan Maddi. Pavan is all about the equity. He doesn't play the cash flow game. He's playing a long game. All the money gets reinvested and reinvested, which is a beautiful thing. It takes a certain type of person to have that patience and to deal with the level of pain with the compliance. The opportunity from an equity growth perspective, though, is very lucrative. And that's the trade-off. That's the game you play: if I know I'm going to have to reinvest my earnings back into making sure things are up to code, taking care of legal and tenant management, and holding whatever reserves I need in case a tenant doesn't pay and I can't collect for the next X number of months, I still have the long-term perspective of equity growth, significant growth. It is there, but you have to attack it from that perspective. You have to understand what the game is here.
How do investors navigate high-cost markets like Los Angeles? (42:09)
Mor Milo: And it's very unique to Los Angeles.
Rick Albert: It is. One of the things I've told clients is: look, the more complicated it is, the more people leave the market, and you become the only game in town. What tenants don't realize is that the more laws come into place, the more it actually hurts them.
Mor Milo: Totally.
Rick Albert: I've tried to explain it to people, and they don't get it. You don't understand, we're short on housing.
Mor Milo: Yeah, we're short on housing.
Rick Albert: How do I convince a developer to build in a market where the rents are capped, when they can literally go to Orange County, Riverside or Ventura, use the same crews, drive two hours out of their way, get the same appreciation and not have to deal with it? People say, "Oh, landlords are greedy." I say, you don't go to work for free.
Mor Milo: Beyond "the landlords are greedy," the landlords are the people keeping the lights on and the doors open. Don't you need them? If they're making big bucks, it's because they took big risks and delivered big rewards to a lot of people. There's a balancing act with everything.
Rick Albert: There is. I feel people don't like to look at the other side of the balance. They don't remember that without this infrastructure, without this housing, you get less supply, more demand and higher prices. With rent stabilization, there's no more product going into place. So maybe there will be a small percentage of rent-stabilized property and Section 8 and all that fun stuff, but not everybody is going to qualify for it. That's just how it goes. And then you have the people on your platform, because that's where the institutional investors say, "Look, we have attorneys on staff. If a tenant wants to play games, let's play." It doesn't cost them any more to play the game, versus a mom and pop.
Mor Milo: If you're prepared. And that's why the big groups are doing well and the smaller groups struggle in this market. The market is very tough, but institutional-level asset managers and sponsors do well in it. It's the conversation around regulation: why do big businesses want more regulation? Because it removes the small guy, the middle of the market, who can't afford to do business. But that's a business owner's mindset. You have to understand how the finances actually work, and how all of this affects one another, for it to make sense. If you're an average consumer, maybe a skilled worker or a very intelligent person in some trade, that's great, but maybe you don't understand the macro- and microeconomics affecting your community. Those things affect every single person in the market, because of the way regulations affect building infrastructure.
Rick Albert: So if someone wants to take the risk off the table but still invest in these high-cost markets, that's kind of where you come in.
Mor Milo: I'd say so. It's a way for someone to jump into it. And I'd take it a step further. People have been promising passive income for a very long time, and what we've sold the average consumer is that if you go buy a rental property, it's passive income. It's not. It's very active income. You have to work for it. That's not to say passive income doesn't exist. It does exist. The thing is, it's not available in the market, so we're trying to bring it to the market and give people options. And yes, I think it could de-risk things if you don't know anything about building real estate but still want access to the real estate market. Or if you're very focused on one type of real estate, like single-family residential, and want access to the bigger game, what we definitely do is give you access to highly qualified operators who can give you that access 100% passively.
Rick Albert: Okay, perfect. I totally agree. All right, Mor, thank you so much.
How can listeners find Mor and Relli? (46:04)
Rick Albert: Thank you so much for coming on the show. How can people get ahold of you?
Mor Milo: You can check us out at relli.co, that's R-E-L-L-I dot C-O. We're on all social platforms at @InvestWithRelli. And you can check me out personally on LinkedIn. I'm very active on LinkedIn. My first name is M-O-R, my last name is M-I-L-O. Look me up and you'll find me.
Rick Albert: Perfect. Thank you so much for coming on. And everyone, thank you for watching or listening, and I'll talk to you guys next week. Keep unlocking the secrets to building real wealth.
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The Key to the City of Angels is hosted by Rick Albert. Learn more about how Relli works or review current offerings.
