In real estate, it’s collaboration over competition. You need to have that collaborative mindset. People can be way more successful and wealthy if they work together. If you have a problem with lending, ask your lending partners for help. Think about your client when doing your real estate projects. Join your host Sam Wilson as he talks to Dave Seymour on the state of real estate today. Dave is the CEO of Freedom Venture Investments. He was also a firefighter and an ex-reality TV star at Flipping Boston. Discover how collaboration helped him on his journey into real estate and lending. Learn what he is doing today with assets in Florida. Listen in and get educated today!
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Collaboration Over Competition: Why You Need A Collaborative Mindset In Real Estate With Dave Seymour
Dave Seymour is a retired sixteen-year veteran of the Fire Service and he launched his real estate career over a decade ago. If you’re not aware, he’s rapidly becoming one of the country’s top investors. Within his first few years, Dave transacted tens of millions of dollars in real estate and has become one of the nation’s leading experts in commercial multifamily transactions. Other fun fact about Dave is that he’s an ex-reality TV flipping expert. You can get on and find the four seasons he was on and see all the flipping shows that Dave hosted and was part of. It’s a pleasure to have you on the show, Dave. Welcome to the show.
Thanks. I appreciate the invite and having me on to share my credible knowledge.
There are three questions I ask every guest who comes on the show. Can you very quickly tell us, where did you start, where are you now, how did you get there?
I started with a financially broke attitude or a skillset, which was based off of the information I was given growing up. I have a funny accent. I was born in London, immigrated to the states back in the mid-‘80s, 20 years old. I worked my assets off, trading time for money. That has a ceiling and limitation of income potential.
Around 2006, 2007, I was working in the Fire Department, 42, 46 hours a week, construction another 42 44, part-time job another 20. I wondered why all my relationships were falling apart. In that construction world, I got to see real estate investors coming out to my job sites, wearing cleaner clothes, driving nicer cars and smiling. That was a part of my regular routine. That drove me to learn. It drove me to ask questions and education.
I was going through a pretty rough time, personally, as well as financially. In 2007, 2008 I was losing my primary residence in a foreclosure crisis that a lot of people went through, through ignorance. I hold responsibility for it. I found myself in one of those traveling circus real estate seminars. “No money down real estate. You can too.” I went for it. I used the Tony Robbins model. You burn the bridges if you want to take the island. That was what I did. I went all in. The first transaction I did was a wholesale single-family transaction. I made $5,000 and I didn’t own the real estate.
I thought to myself, “This is either illegal or it’s a secret.” I figured out it was a secret because the cops didn’t come and arrest me. I went from one to the next. I picked up some single-family, buy and hold some small multifamily. I learned that I didn’t want to be a landlord. I was a lot happier not taking the phone call that Bobby got stuck in the toilet at [4:00] AM. I found myself in the lending business. I was a hard money lender or private lender. I began my own coaching and education and found that to be highly challenging from the standpoint of setting expectations.
Somebody thinks they’re going to make $1 million in a week because they’re out doing in real estate. It’s not a reality. It’s a fallacy. I learned a lot about that world and at the same time for me, I was always in motion. Being stagnant is a challenge. I got to surround myself with some of the very best people in this industry nationwide because of the TV show. It allowed me to have exposure on CNN and NBC and Squawk Box. All of a sudden, I’m an expert because I was on a TV show. I let you in a little secret just because you’re on a TV show, doesn’t mean you’re an expert. You could be an absolute idiot that looks good on camera.
That was the transition. I was running a pretty substantial, hard money business, late ’19, early ’20. We know what happened in 2020. That lending business was out of business very quickly because Wall Street stopped buying non-QM loans. I couldn’t turn the LOC that we were working from. We regrouped with my partner, Walter Novicki and a third partner, Eric Wilson.
Walter had done approximately $250 million with the multifamily transactions in the Southwest Florida market. We said, “Let’s double down and go all in.” We went through our SEC filings for $100 million private equity fund, primarily investing in multi-family assets, B Class. That’s where we started. Now, we have about $320 million in the pipe in various phases of development as the compression of cap rates came into the marketplace with all the silly money that needed to be spent.
Instead of staying in what we had described in our PPM, we pivoted out of that into some ground up construction. We’re building a 106-unit multifamily asset in Cape Coral. I’ve got 320 single-family built for rent communities in transition in Cape Coral as well. That’s the short story of the joke to be in a position now where I raised a lot of capital, deploy it and pay my returns.
Just because you’re on a TV show doesn’t mean you’re an expert.
How do you balance being always in motion and yet at the same time going the idea of an inch wide and a mile deep? What we find is a lot of people stay in motion for long. They never get anywhere.
To bring that down to a simple statement, I saw a lot in my years of coaching, business coaching, and real estate education was that there are a lot of people get comfortable in analysis. We talk about that paralysis analysis. Just because you analyze a deal as an expert, Harvard degree, real estate commercials, CCIM, ABC, 123, I got all of the licensures under the sun, doesn’t mean you’re a successful real estate investor. For me, the word pivot has been overused, but being able to very quickly understand that I have to adjust as this landscape is adjusting with me.
If I’m always in analysis and I’m never pulling the trigger, I’m not making the offer, not raising the capital and deploying the capital, then I’m playing the game. There’s a lot of people out there now that are playing the game and not necessarily being successful in the game. That puts a lot of capital at risk. As a fiduciary and a steward of other people’s capital, I’m not interested in that.
I’m not interested in a ten-year play pushing rents at 7% every year. “That’s how we’re going to make money.” “No, stupid. That’s how you’re going to lose money.” For me, I have to be able to adjust and focus on statistics and market trends to be able to be successful with it. You’ve got to make an offer. You got to move money. Nothing happens if money doesn’t move.
In late ’19, early ’20, when COVID kicked off, how long did it take you to figure out that it’s time to shut the doors for your lending business?
Three days. What I did was I had enough relationships in the lending community to make sure that my borrowers were not stuck. I turned those borrowers over to other lending partners that I had who could carry that load for us. It was about $15 million in deal flow at that moment. It was almost one of those moments of clarity. It was almost an epiphany for me because I realized that moment, he or she who controls the capital is going to win this game.
I was working off of a $50 million line of credit. That was not my balance sheet. I never had that money to lend. I was a broker in capital. It’s a lot easier and less risky to be a broker. It takes no cojones and no skin in the game. It’s like, “I’m a broker. I’m intelligent.” I realized that if I wanted to be as successful as I believed I could be and the company that I represent, then it was a case of taking control of that capital. That was it for us. We were out in three days because the line of credit had a five-day turn. If I couldn’t sell that note back to Wall Street in a couple of days, the notes would due.
How did you unwind that? That sounds like I wouldn’t have slept for three days.
I’m not saying I slept for three days. Whether it’s what we’re doing now at the commercial level ground up, GCs, or whether it’s a single-family, buy, fix and flip, or even a single-family wholesale transaction, selling the equity in a contract, real estate has as an inert gift that a lot of other industries don’t have and that’s collaboration is better than competition.
There is always an opportunity to collaborate. In Freedom Venture, we bring that collaborative mindset to everything that we do. When met with a challenge as we did with the lending business, I went to my other lending collaborative partners. I called them partners because I still get a check every now and again off of a referral basis, which is nice and appreciated.
I took that borrower pool that we had in place and turned it over to the guys and ladies in the business that I know trusted and loved would take care of my clients. If you think about the crash 2009, it wasn’t anybody in that financial industry was handing their clients over to somebody who could take care of them. It’s like, “Sorry, doors are closed.” That’s the same in raising money as well. I think about my clients, their capital invested in our projects and our fund structures.
For me, it’s always having a plan B, C, and D. I know every accredited investor signs a PPM that says, “You can lose every dime. This is risky.” We all know that, but that’s not an out. That’s not a get out of jail free card. That’s the SEC doing its thing. I like collaboration. I want to be able to take care of the people that invest with us and alongside us. Whatever the capacity, whether borrowing capital to do it buy, fix, and flip, or whether they’re lending capital for a targeted double-digit return, it’s the same concept.
You need to move money. Nothing happens if money doesn’t move.
I’m sure you got a lot of experience on the lending side, so being familiar with the borrower, lender, or wearing all of those hats, I’m sure it would lend itself to going out and then raising large amounts of capital. Were there any struggles along that journey? You guys say, “You’re doing great. You’ve got $250 million. Let’s go open a $100 million fund.” That’s a big jump for a lot of people. What were some things you did to make sure that took off with the right inertia?
I don’t care how experienced you are in the business. It’s trial and error. We tried a couple of different marketing strategies and capital investments, that failed miserably. Chasing down, enticing, and engaging the retail investor is interesting. I use an analogy in every one of our E-Suite meetings, “Nobody in this room engages in pushing a donkey up a hill.”
If it feels like pushing a donkey up a hill or resistance, then it’s wrong. Something isn’t right. What I found was is that there weren’t enough questions being asked of the potential lender. Everybody runs out with features and benefits. “I’ve got targeted double-digit returns. I’m in the Florida market. I’m in the best market. I’m the balls. Look at me. I’m all that in a bag of chips. Give me money.” People go, “No, I don’t want to give you any money. You haven’t asked me what I want.”
As soon as I was able to identify what my accredited investor was looking for, that’s when I became more successful in raising the capital. A lot of the times, it was the simplicity of risk aversion, taxes, fear of a major financial event in their lives that was prevalent, be it illness. As soon as COVID hit, we saw much of a knee jerk reaction financially that for some people, it was a challenge and for other people, it was an opportunity. Isn’t that the case in all things? One man’s trash is another man’s treasure, that concept.
Once we dialed that in, we got better at it. 8 to 9 months into that process, we began to feel the pain and the workload of managing that database of people. I mean that with respect to any one of our investors, but the investor who put in $50,000 made a lot more noise than the investor who put in $500,000. What can you do to educate them and bring them up the gradient? We worked hard on that.
We began to entertain some of the high-net-worth family office, smaller institutional capital. That required a lot less education, but it required a lot more relationship building. I don’t think there’s an easy or softer way to any of these challenges in raising capital. If somebody tells you it’s easy to raise money, they’re a liar. It takes work, finesse, and track record. I wouldn’t be in any other position than where I am right now. I love what I do.
I love the idea of who pushes the donkey up a hill.
If you’re pushing a donkey up a hill, it’s wrong. A guy said to me, one time, “It’s hard to sell a hamburger to somebody who’s not hungry. Even if it’s the best, juiciest, prime, beefiest, yummiest burger that was ever invented, if I’m already full and I’m not hungry, I don’t want your burger.” How do you create a void that your product then fills? That’s the art of bringing in the traditional investor.
Why are you guys doing a build for rent and doing a lot more ground up? What’s the driving cause of that versus value add? How are you finding an opportunity on that front?
We began to see the value-add opportunities at a 6.5%, 7% cap acquisition price with the opportunity to push to 10% return on investment. We saw all of those opportunities disappear overnight. The amount of capital that came into Southwest Florida, Arizona, Atlanta, The Carolinas, your neck of the woods, has been unprecedented. It’s been exorbitant.
What I saw in the marketplace was a lot of operators decided to go with a longer run, 7 to 10-year run on a deal flow with the only factor that they could put in there to offer those 8% to 10% cash on cash returns that an investor’s looking for was to go in with your average 2% expense increase and yet they’re putting a 10-year run at a 5% rent increase.
Maybe I’m wrong or I’m the idiot, but I could not, in good conscience, raise money under that premise. We have a responsibility to hunt yield. What we did was we began to look at what was out there for a yield opportunity. We found that in building our own assets, so we can build fast. Southwest Florida, it’s all cinderblock and stucco construction. Once they start throwing block, it moves fast. Hurricane tie the roof, interior done. We can get through there. We’re in 106 units. We anticipate being from scraping dirt to OC, 14, 16 months. Stabilize in another six months because of the supply and demand after that.
If something feels like pushing a donkey up a hill, then something isn’t right.
The numbers on this one, to give you a big picture idea on the cost acquisition piece of the whole project about $19 million, $22 million we’ll go in that price range. Once stabilized, not 10 years out, but 2.5, 3 years out, pushing a cap right up to 5.5% where the cap is at 3.5%. I’m building in what I perceive to be a buffer. I’m now looking at a $36 million valuation based off of 3% rent increase and 2% expenditure, building in those buffers. That’s why it’s made sense. I’ve got a 27-year-old son. He has zero interest in owning his own home. He wants to own cashflow in real estate, which he does, but he doesn’t want to own his own home.
In the Florida market, we have a massive shortfall of both rental and housing. It’s only getting worse down there. We’re going to fill that void. Watch some of the bigger guys are doing. When you start looking at the Wall Street money that’s been allocated, billions of dollars to this strategy. I’m not up there with those guys yet, but I’m okay picking up the crumbs that they drop along the way as they’re doing the same projects.
I’ve certainly enjoyed this. Thank you for taking the time to come on and pull back the secrets on your company on what it’s taken for you to grow, shift mindset and pivot, and all the things you’ve done. You’ve worn a lot of hats and it’s fun to see you in your lane doing what you do. Final four questions for you are these, if you could give our audience one tool or resource that you can’t live without?
Business books and Audible. I can’t read, but I can listen.
Number two, if you could help our audience avoid one mistake in real estate, what would it be and how would you avoid it?
That would be due diligence, trust but verify. Don’t ever take my word or anybody else’s word for anything, and trust your gut.
That’s a good one and the hardest of all lessons is to trust your gut. When it comes to investing in the world, what’s one thing you’re doing now to make the world a better place?
We are ESG-friendly. I’m not overly, save the planet and hug the trees. There’s a middle road in there somewhere, but I do believe that we need to start creating a better environment in our facilities for not only our tenants but the people who live around them. We’re a green builder. That’s an important part of what we do.
If the audience want to get in touch with you, learn more about you and what you guys are doing, what is the best way to do that?
You can go to FreedomVenture.com. Jump on there, get a little education, and see what we’re doing. Punch in some info and we’ll touch gloves with you. I’m old school, so you can call us at (781)-922-4418. Make sure you let them know that you learn about me here and let’s have a chat. Let’s see if there are some deals to be done.
Thank you, Dave. I appreciate your time.
God bless. Thank you.
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About Dave Seymour
Ex-reality TV Flipping Boston A&E hundreds of single and small multifamily transactions Ex Fire Fighter now 100MM PE CRE Firm Build for rent single-family communities in SWFL.
