Videos

NEREJ Rick Kaplan One on One With Dave Seymour

Eric Wilson
November 12, 2020

SUMMARY KEYWORDS

investors, realestate, buy, capital, business, invest, rent, accredited investor, fund, deals,assets, rick, pay, population, gulf coast region, crisis, boston,massachusetts, people, evictions

SPEAKERS

Rick Kaplan,Dave Seymour

 

Rick Kaplan 00:06

Welcometo one on one. I'm Rick Kaplan. My guest today is Dave Seymour. He's a CEO offreedom venture investments, Inc. He's also the star of A and E TV show.Flipping Boston, and also a host a real estate reveal radio radio show onSaturdays. 12 to 1pm on the noise Sure. That's 104 point nine FM. Yeah. How areyou, Dave?

 

Dave Seymour 00:35

Um,well, it's like, my mom would be so proud of that resume.

 

Rick Kaplan 00:44

And Icould go on and on, you know, yeah. Let you tell me a little more about whatyou're up to today.

 

Dave Seymour 00:52

Yeah,man with with busy Rick with busy. You know, we, we are in a different worldtoday. I think we can all agree with that, you know, in business with COVID.And the chaos that that created in February March. So, you know, that companypivoted, I was I was heavily invested in the lending space and moved out ofthat very quickly because Wall Street decided they didn't want to buy mortgagesanymore. The kind of mortgages that we're familiar with as investors non youknow, non qm non owner occupied mortgages. So when that business endedabruptly, it was like all boy, right, what, what's next? And what we decided todo was actually go back to my roots. I could talk about you know, flippinBoston and the TV show, and, you know, all of that, that silliness. And I, youknow, obviously, I have fond memories of flippin Boston, it's still playing on.We're on Amazon Prime now. Right? I'm in the big leagues.

 

Rick Kaplan 01:53

I haveamazon prime.

 

Dave Seymour 01:55

Yeah,check it out. Just Just put flippin Boston in there. And you'll see, you'll seeall the episodes that we made. But you know, I was, people have made thatconnection with me personally, obviously, to that TV show, which is kind ofinteresting, you know, to be in a men's room and in East East wherever, youknow, Timbuktu and all of a sudden, Hey, are you that guy from the TV show?Now, man, I always tell him I was on America's Most Wanted. Just a littledistance. But anyway,

 

Rick Kaplan 02:24

well, ifyou're in the men's room, I don't know what you want to tell them.

 

Dave Seymour 02:27

Yeah,that's right. Leave me alone while I finish finish what I got to do here. Butno, seriously, I was I was connected with you know that that single familybusiness of buy, fix and flip, but what the recognition never came for the factthat I was always involved in commercial real estate. You know, the real wealthis really as we know, is created through through real estate's long game, not ashort game. You know, if you buy a house and fix it and sell it, it's a job,right? It's a well paying job if you do it, right. But it's still a job.Whereas, you know, what the creation of wealth is through cash flow andappreciation, depreciation, tax advantages, and all the things that we know of.So when the lending business, you know, kind of folded dramatically. I lookedat the landscape and kind of had one of those entrepreneurial moments where Isaid he or she, who controls the capital for the next 24 to 36 months, two tothree years. If you are in control of the capital, I personally believe thatyou're going to really win this game, this opportunity that's been created. SoI connected with a very dear friend of mine, a guy I've known for quite a fewyears, Walton and Vicki Walter is ex military is a couple years older than me,over 30 years in, in real estate. And Walter had been a prolific syndicator. Sobuy commercial assets, you know, reposition them, maybe ground up construction.And he had done that the bulk of his career was in the Gulf Coast region ofFlorida. So anyway, God is good if you're if you say your prayers loud enough, youknow, he replies and he listens. And Walter and I reconnected and it was a caseof, kind of like, you just asked me, Rick, you know, he said, What are youdoing? I told him my walls. I said, What are you doing? He said, You know, Ican continue David to do one or two at a time. He said, I contend, continue tobuy, you know, a 60 unit complex, you know, syndicate it raise, you know,three, four or 5 million, you know, exit out for five, six years later, pay myinvestors 10 14% returns 20% IRR. He said I could do that and ones or twos. Hesaid all what I think is the most the most beneficial strategy not only for usas investors but also for the folks that invest with us, he said Let's put afund together. And I know I kind of like answer in a long winded form as I tendto do, Rick, but that's what we're doing today, we created real estate fundwith with freedom venture investments, were 100 million dollar private equityfund. And what we're doing is is we're raising that capital and then puttingthat capital to work in 40 to 140 unit apartment complexes in the Gulf Coastregion of Florida. And we were just simply cut and paste the same businessmodel that worked for syndication. Now, instead of just buying one or two at atime, basically, without sounding cocky or clever, we're trying to buy themoff, as long as they meet our Buying Criteria, and they meet our buybox. Sothat's, that's what it's funny. I've kind of like when I'm looking at the thesignage behind you, right, New York and New England real estate journal, butyou know, I would be, I would probably be a little off base. If I said, I feltlike I was in real estate at the moment. I feel like I'm in finance, because Ispend all of my time right, I spent all of my time talking about capitalcapital stacks, ltvs elta, C's, you know, cap rates, ROI, noi ABC, BBC waiting

 

Rick Kaplan 06:15

for a gohand in hand, they can Okay, do

 

Dave Seymour 06:18

they dothey do and there's something very gratifying to be very direct. And Frank,there's something incredibly gratifying between preparing the very, very bestreal estate deals with with accredited investor capital. There's somethingthat's just really gratifying when you can look, look at a new investor, showthem your business model, and show them how, you know, double digit targetedreturns are not a it's not a unicorn, you know, it's not a fantasy. And youknow, that from your experience. It's not a fantasy. It's just, it's been forthe elite, for so many, many generations, that the opportunity to have thatWalter calls them was he called Country Club deals, he says, These are thedeals that are usually put together on the 10th Hall of the country club. Andto be able to put those kinds of vetted quality deals, you know, with it with asolid history and track record behind the operators, which is us. It's verygratifying. So that's what we're doing, man. We're raising money and spam. Youknow, I

 

Rick Kaplan 07:28

mean,it's similar to what I call, especially in the New England and New York market is,yeah, the insider business, because if you're an insider, you have all thegreat deals come along to you all always have access to plenty of fun down.

 

Dave Seymour 07:47

Yeah,yeah. Yeah.

 

Rick Kaplan 07:49

Butyeah, you're, you're taking this more to individuals?

 

Dave Seymour 07:54

Yeah,yeah. So when you can't just say, Okay, today, I want to have a fund and raisemoney doesn't it doesn't work that way. So you have to be sec Securities andExchange Commission compliant. There is a lot of hurdles and expenses to bevery honest, that we have to go through to be able to have a fund that we canthen market to the general public now. We work with accredited investors now onaccredited investor I'm sure most of you your listeners already know this. Butfor those that don't, I'll just give you the high points. an accreditedinvestor is determined by the Securities and Exchange Commission. And they sayan accredited investor has enough intelligence to be able to invest wisely isreally basically what they're trying to say. And the way they determine that isbased on an individual's income. So if you're an individual single earner, it's$200,000, a year or more, the SEC says you're accredited, you can look at thesetypes of offerings that we have, if it's a family unit to 300,000, or it's amillion dollars in net worth, not including a primary residence. So anyvaluable any other valuable items, or any maybe any other real estate that hasequity in it. So you know, when you say individuals, yeah, but my investor poolhas to be an accredited investor. And what we're finding is is an incrediblylarge and this is so interesting to me. An incredibly large amount of ourcapital is coming through what we call qualified funds. And qualified funds arethe self directed individual retirement accounts, or the one of the newervehicles in the self direction marketplace right now is a vehicle called a solo401k. You know, we're all probably very familiar with the 401 K's that wereoffered by employers, but a solo 401k has a much higher contribution amount ofcapital allowed Over 50. So I could put as much as $62,000 in contributionsinto one of these accounts every year. And obviously, that's just the tax

 

Rick Kaplan 10:10

structure,just for people listening it. If they do invest in that, that is not penalized,

 

Dave Seymour 10:18

correct?Correct. What a solo 401k does is again, big picture, right? I'm not anaccountant, I'm not an attorney, as a disclaimer, I'm not a financial advisor,we do all of that stuff. But the big picture on a solo 401k is so powerful, ifyou are, say, maybe a business owner, and a lot of people are looking and youwill be looking a lot harder after November, if it goes away, could potentiallygo, a lot of people are looking for ways to shelter tax exposure legally,right. And one of the ways to do that is a solo 401k. And what it means is onebusiness and one business owner. So a lot of say you're giving an exam at yourrestaurant, right? And well, they're not doing so well right now. But we'll usehim as an example. Anyway. So you're a restaurant, sir, and you're sitting onfour or $5 million in capital, if you opened up a another business and callthat your your investment business for, you know, investment company LLC. Well,that company can then contribute $62,000 in my age group of tax deferred, ortax free capital into that retirement vehicle, that retirement vehicle. Andthis is where it gets to be so so much fun, it's fun, it's fun watching it,that retirement vehicle that solo 401k can then invest in, in my example, at aprivate equity fund. And we target double digit returns to our investors 10 to14%, they get the first preferred 6% rate of return over the life of the timethat the money is working, we target anywhere between a 22 or 22%, what'scalled an internal rate of return. So the question I put to these individuals,as you describe them in the beginning, Rick is as I say to them, what wouldyour retirement look like? If your money was going to work at a 10 to 14%,targeted rate of return? What would it look like to be able to defer taxes on62,000? He said 62,000 is deferred at a 33% tax rate, right? Or 25. Somewherein there is the average. How does that look? Now, that's protecting protectionor deferment, a shelter of tax exposure of what $20,000 think about what somepeople have done in their lives to earn $20,000. And yet we can defer that. Andlook, it's not not paying taxes. I mean, real estate is the number one taxshelter strategy that I know of, I think if you lined up 100, you know,investors, I think 99 of them would know it's real estate. For some reason,only 20% of them are in real estate now, because like I said, they don't havethat, right, they don't have the inside scoop. But when you start looking atthat, and you get to see, you know, accredited investors in their late 30s 40s,and then, you know, 50s, and 60s, and they start looking at what's been goingon with the fee structure inside their current retirement plans. And then theysee what we get to offer them as investors, they, you know, it's exciting. It'sexciting to watch, to watch the impact that we can have on their on their livesand their retirements.

 

Rick Kaplan 13:36

But wewant to leave some information on the table. So when people do see this, theycan contact you today. We don't want to give

 

Dave Seymour 13:43

it allup and I don't hold anything back. I don't sell anything.

 

Rick Kaplan 13:50

So youknow what, let's go into you know, this, this whole COVID system that has gonearound the world has affected so many different industries. What are the whatare some of the opportunities that have a road or arisen from reason? Yeah.COVID for you guys.

 

Dave Seymour 14:09

Yeah,look, COVID has I compare right or wrong, man? Look, I'm a, I say this a lot.I'm a blue collar guy and a white collar world. Right. As you know, you and Ihave a friendship and they not so many years ago, maybe 1516 years ago, youknow, I was fighting fires in the city of Lynn, Massachusetts, in a paramedic.So when I start looking at the journey that I've taken, I bring a lot of bluecollar attitude to a white collar world. And what I mean by that is is that Ifocus heavily on fundamentals. And what I mean by that is I compare the the,the easy data that's in front of us, and what I do is is I compare 2007 andeight Right, to where we are today in the sense of a massive shift or changeor, you know, crisis, whatever label we want to, we want to give it you know,the real estate marketplace. 2008 was driven by Wall Street's greed, we allknow that we don't have to debate it or discuss it anymore. But what happenedin 2008 was was the wound was was made, and it was allowed to bleed. It was itwas a full on crisis, it was a full on foreclosure crisis, evictions, etc, etc.Capital, shrunk, lending, shrunk, credit shrunk, and it went into that full,you know, it was almost a lockdown in and of itself. But the consequences ofthat was a three to five year recovery. And then another five years of growth,okay, the data or the intelligent economists will give you plenty of data toback that synopsis up. So what does that mean? Your question is the COVIDcrisis and the opportunity? Well, here's here's the big difference. And thenhere's the similarities. The big difference is, is that COVID has created areal estate crisis, which has yet to manifest itself. And the reason it's yetto manifest itself is because nobody has allowed the womb to breathe or bleed,or do it hasn't allowed it to go through its process. Because what we did was waswe said, we remember 2009 and 10, we're not going to let that happen again, howdo we solve that problem now? Well, we look back and we say, Well, how do wesolve it? All? I remember, we shroo millions and trillions and billions ofdollars at it, because money solves everything? Or does it is the question. Soin our COVID situation around real estate, what they said was, is, here's whatwe're going to do, we're not gonna let anybody lose their house, we're going todo the best we can around unemployment. So what we're going to do is we'regoing to put $3 trillion into the economy without any transference of goods andservices. So let's say that, again, we'll put $3 trillion into the economywithout any transference of goods and services. fundamentals, if I get paid ifI get money in my hand, is because I either knew something, did something, gavesomething grew something made something I did something for it. So when wedidn't do that, we put a band aid over the COVID crisis, in the sense of whatwe'll do is we'll put forbearances in place. You don't have to pay yourmortgage. Well, that just expired. As you know, here in Massachusetts, youdon't really care what's right, flooding the court system, you can evicttenants. In Massachusetts, you can evict your tenants. Because we've got amoratorium on evictions, they just lifted that in Massachusetts. So what doesall of that mean? Well, basically what it means is COVID has created a massexodus of population from our inner cities. If you want to go rent an apartmentin New York City right now, there's plenty if you want to go rent an apartmentin Boston in the Back Bay, around any other colleges, there's plenty. So thoseproperties. Now in our marketplace, we come we don't we don't do business. Wedon't buy in New England and New Jersey yet, we will probably in 18 months.We're not buying here now, because the capitalization rates are still shrunk.But as we get to see evictions actually get through the court system in NewEngland, New York, New Jersey, where we get to see the you know, theforbearances come to fruition, because the bank will at some point, say time topay up. Okay, you got to pay, you don't just not pay forever, it doesn't workthat way. So that's when the bubble bursts. Rick, we're going to see the we'regoing to see that population that was a homeowner population now become arenter population. So do you as an investor as an intelligent commercial realestate investor? Do you have the product to serve the demand? So what we didwas is the COVID crisis for us will be will be manifested the most profitablynow, in the in the Gulf Coast region of Florida, which is where we invest.Because in the Gulf Coast region of Florida, you have the highest population ofFHA forbearances nationwide. And what that means is the lower price singlefamily homes, but 150 to 202 50s, which are nice houses in the Florida market,right? Compare that to New York, New England, you know, you can't get a youcan't get an outhouse for that amount of money. So those houses have thehighest delinquency in an FHA mortgages, so we anticipate that being our nextrenter population can't afford their mortgages, but they can afford their$850,000 a month rents. Now, here's where it gets interesting. One might sayyou're crazy man. buddy's losing their jobs down there. You're absolutelyright. But we will not as a society allow, you know, a 6% of our population tobecome homeless. We'll do what the good governor of massachusetts decided to doCharlie Baker, and he allocated 170 $3 million of capital for evictionprocesses for homeless programs for new rent stabilization programs for,

 

Rick Kaplan 20:30

youknow, we the rent subsidies. Yep, that's

 

Dave Seymour 20:32

right.Rent subsidies. So as an investor, that's just be honest. I don't care who paysmy rent? As long as it gets what?

 

Rick Kaplan 20:42

Yeah,fine. And you know, the thing is that, it This isn't something for the everydayJoe to be able to do. Because, yes, the all these apartments will now berented, and you'll probably have some rent subsidy. But if you don't know howto manage those type of properties, it's not easy. You could end up losing yourshirt as well. Yeah, yeah. So it's not really for someone that is, you know,say, oh, let me just throw $5 million into apartment complex. And I'll justclick my rents. No, it's not that easy.

 

Dave Seymour 21:18

I've gota property right now. It's $120. Was it because somebody on the block, I thinkthis was 107 107 doors. And this particular complex? No, that's a differentone. This was a 40 unit complex. It was built in, I think, 2018, somewherearound there. And the investor has never ever been to his own complex. Becausewhat he did was was he bought purely off of the sales technique of thedeveloper who built the 40 unit complex. And he said, It's brand new, don'tworry about it, you'll be fine. Two years later, we've got it on our salessheet right now. Like it's coming through our funnel, and it's coming in at15%, less than what this guy paid for it two years ago, because he has nomanagement skills. He doesn't know how to deal with the tenant population. Hedoesn't know how to keep them happy. He doesn't know how to raise their rentsproperly. He doesn't if you say to him, what's deferred maintenance, he has no ideawhat the term even means. So you know, commercial real estate investing. I wasI was talking to an attorney. He lives in my neighborhood. He's a, an injuryattorney, real nice guy. And he was contemplating coming in and invest

 

Rick Kaplan 22:31

in injuryattorney and a nice guy.

 

Dave Seymour 22:34

Yeah,this one, this one this one lives in my neighborhood. But he was, you know,most of our conversations for our investors around the 250 to 500,000. Mark. Soit's not, you know, it's not a $20 loan and pay me on Friday, right. So I was Iwas presenting the you know, property management and accelerating the the netoperating income and pop up upon I'm giving him the full presentation. And asI'm, as I'm on this call with your man, he had a deer in the headlights look.And I said, Kevin, what's what's up? He's like, dude, I have no idea whatyou're talking about. He said, I'm an exceptional attorney. I can give you tortlaw all day long. He said I can I can present the case I can defend my clients.I can go after the bad guys. He said, I got that covered. He said, What are youtalking about? And I'm like, What do you mean, you know? And then he looked atme and he said, I get it. I get it. He said, this is like your TV show flippinBoston only it's on steroids, right? And I said, Yeah, you're absolutely right.You cannot you cannot buy a complex thinking it's just going to work itself.Every single asset that we bring into the fund has its own individual businessplan. It's like having, you know, if you've got 20 apartment complexes, in afund like ours, our investors own a piece of every one of those complexes, yetevery one of those complexes has their own business plan, whether we call itcall plus. And basically what that means is, is we take an asset, we might dosome deferred maintenance fluff and buffer kitchens, bathrooms, no heavylifting. If it needs a new roof, we're doing a roof we don't do anything that'sthat's heavy, in the sense of repair. Plus, we only buy properties 1990 ornewer, they're called B class assets. We look for a certain capitalizationrate, we look for a certain occupancy we and here's what's what's sointeresting, because your point is so so strong COVID has crushed the dreamsand the abilities of all of these mom and pop organizations that buy thesethese smaller apartment complexes that we invest in. It's crushed them becausethey will they were running their business in an amateur fashion. You know,it's not it's not moral. It's just business sense. They're running these thingson such a tight margin, that as soon as they hit a bump in the road, they can'tdo it. Right. Real estate is easy when it's just going in that direction. Andthat's not,

 

Rick Kaplan 25:13

that'snot the nature of the business. It goes up and

 

Dave Seymour 25:17

down,and it goes back down again. So, you know, we're seeing, we're seeing ourinbound calls for these kinds of assets. That blow up. I mean, I have nooutbound marketing for my acquisitions at all right now. I don't I don't needthem. They're all coming in to us. And the reason we're getting the calls isbecause we've been doing it in that market for over 20 years now. And whensomething goes sideways, in one of these complexes, the brokers and the ownerssay hey, call, call the guys at freedom venture investments, Walton, a Vicki'sthe guy Oh, combine that. So it's, it's it's crazy.

 

Rick Kaplan 25:51

Butwe're running tight on time. So let me just think, and this is a quickexplanation, Dave? Okay. Oh, you said

 

Dave Seymour 25:59

you saidI could talk.

 

Rick Kaplan 26:01

I know.But you know, the people, we want to make it so that people will listen andcall you, oh, private private equity fund and read, read, just so peopleunderstand what the difference is?

 

Dave Seymour 26:16

Yeah,yeah, very, a lot of people are very familiar with real estate investmenttrusts. And those are publicly traded on the stock market, where somebody canput in a smaller amount of capital and say, Hey, I'm benefiting from realestate. The thing with a with a publicly traded real is it's kind ofinteresting, because the value of that rate is not dependent on the value ofthe real estate, it's, it's dependent upon the fluctuations in the marketnumber one. So it's really not, you know, stabilized against sticks and bricks.The other thing that I found very interesting is, is let's say we're in thesame rate, you and I, Rick, you put in 50,000, I put in 50,000. A read legallycompare your your distributions out of my $50,000 and vice versa. So again, it'snot based on the value of the actual assets inside of it. So that's a publiclytraded read. We're a private equity fund, you can think of us as a privateread, if you were a real estate investment trust, everything that we do isbased off of the value of the real estate, that's how we project all of our,all of that targeted returns to our investors. And as I said before, if you'reif you, you know, if you want to own real estate and do absolutely nothing,then this is the way to do it. You come in with us, you own a piece of ourcompany. And in return for that you own a piece of the company's assets, whichis all of the real estate inside of it. So we make the real estate morevaluable. That way the investors get a better rate of return.

 

Rick Kaplan 27:51

Okay,great, Dave. We're talking with Dave Seymour. He's a CEO of freedom ventureinvestments, Inc. Also the former former, I'd say say former because the show'snot on anymore, unless you go to amazon prime. That former star of a nice TVshow flipping Boston, also a host of a real estate revealed. That's the name ofthe radio show, I guess

 

Dave Seymour 28:17

yet realestate deal. Yep.

 

Rick Kaplan 28:19

Yeah.Which is on Saturdays 12 to 1pm on Northshore on Channel 104, point nine FM.And Davis own wanted to get in touch with you, how would they do so

 

Dave Seymour 28:31

whereyou can reach out to us at freedom venture.com freedom ventures.com if the ifyou're listening to this in the Florida market, you can reach out to us at FortMyers offices at 239-785-3299. If you're listening in New England on the northshore and you want to reach our offices here, you could call us at781-922-4418. Or as I said, info at freedom venture.com. That's another way toget a hold of us. Put in some information and one of our private equityspecialists, I'll reach back out to you.

 

Rick Kaplan 29:12

And yourwebsite also is on your backdrop

 

29:16

where itis.

 

Dave Seymour 29:18

Rightthere. That's all you got to do. Just go there. All right, you'll find this

 

Rick Kaplan 29:22

a Dave.It's been a pleasure speaking with you a lot of great information. I hopepeople do reach out to find out a little bit more about investing with you. AndI want to wish you a happy What is it Monday. Happy Monday. Yeah, it's Monday.It's a and stay safe.

 

Dave Seymour 29:39

Thanks,brother. Take care.

 

Rick Kaplan 29:43

Thankyou for watching today's interview. If you'd like to be a guest, a sponsor, oreven advertise in the New England real estate journal. You'll find our contactinformation in the description box below. You can also find all our socialmedia platforms so you can follow us Please subscribe to our YouTube channel.