Real Estate Revealed

#3 - Walter Novicki, CIO of Freedom Venture Investments

Dave Seymour
November 24, 2020


property, buy,real estate, investor, walter, talking, assets, investment, single, market,multifamily, acquire, business, pay, florida, house, fund, cash, people, boston


Walter Novicki,Dave Seymour, Intro Voice Over


Intro Voice Over  00:00

Haveyou ever wanted to create cash flow outside of your job income or retirement plan?Have you considered large commercial real estate assets? Do you know aboutalternative investment strategies? Keep listening. This is real estate revealedhosted by Dave Seymour, the star of any living Boston and CEO of freedomventure investments in Denver. Get the real deal about investing in commercialreal estate to create long term stable financial wealth smarten up your realestate skills now.


Dave Seymour 00:35

Hey,Well, welcome back to real estate revealed. This is your host, Dave Seymour, I tellyou, we've been getting a lot of action, a lot of traction. I was excited atsome of the responses we got last week, when you guys got to hear from our headof business development, the Kevin Harrington original shark from the hit TVshow Shark Tank. It was amazing. One of the comments I got was, he sounded likehis energy level was, uh, about 150%. And whoever made that comment, I can'tremember who you were, but you were absolutely right. It is. I think it's, Ithink it's the curse of the entrepreneur. I was talking to a gentleman thisweek about business and entrepreneurship. And we both agreed that we gave up,you know, 4050 hour week jobs, so that we could work 8990 hours a week asentrepreneurs in our business. Thank you for your comments. I appreciate it.Keep them coming. You know, you can find us at info at freedom infodot freedom All right, I'm not going to just talk for the sake oftalking. I have a I have a fantastic guest for us. This week, my businesspartner, my chief investment officer, a gentleman by the name of WalterNovitzky. He's called him from from the sunny state of Florida. And we're justgoing to discuss real estate at a high level we're going to talk about thetypes of assets Walter identifies why we think they're so good for the for thefund, and we're just going to break it down. It's great to have him with ustoday. Walter, please tell me you're there.


Walter Novicki 02:11

I am here.


Dave Seymour 02:12

Yeah.Nah, man, Walton. Oh, Vicki. So Walter, I know I kind of talking and being oncamera and in these scenarios is not your, your favorite place to be? I knowthat. So I did. I did send out a little list of questions for your brother. Butlook, man, I think I think is important just to, for folks to be able to listeninto a conversation of a couple of guys who are operating at a high level andsee see where they resonate. But let's go back, Walter, let's go all the wayback to those many, many days ago. tell the folks a little bit about your history.Walter, how you got started. You know, were you in the single family biz. Wereyour construction. Share a little about your history?


Walter Novicki 02:55

Yeah,absolutely. All the above Dave's been at this 34 going on 35 years. Wow. Yeah.Yeah, I started way back 19 1986 I could still remember my first deal. It was ait was a dilapidated shack that I bought for $10 from the city of Columbus, andbought it last Columbus, Ohio, Columbus, Ohio. How much did you pay for it?$10. I had made a decision to get involved in real estate investing. I waslooking at the Columbus Dispatch that Sunday. And they had a big article in thereal estate section talking about how you can come in and you know, help thecity revitalize the area south of campus. Yeah, that they had properties thatyou could actually acquire for for $10. Now, the caveat was within a 12 monthperiod of time, you had to either rehab the property, you know, bacon, so itwas livable, or tearing down and make the lot safe. So I went in and that wasmy first real estate investment. I bought the bought the property. You know, weended up converting it into campus housing, we started to look at what thatneighborhood needed. It didn't need, you know, this was a monstrosity of ahouse was almost 10,000 square feet. It didn't need you know, mansions out inthe middle. Oh,


Dave Seymour 04:17

hold on.Hold on, Walter, slow down. You bought a 10,000 square foot house.


Walter Novicki 04:22

Yeah,close to 10,000 square feet. It was an ancient Rome for $10 for $10. The othercity had come in and they had actually condemned two city blocks of these homessouth of the south of campus. They wanted like I said they wanted to revitalizethem and we came in we acquired the first one I acquired the first one veryquickly realized that I was ill equipped to rehab property. So I partnered upwith a friend of mine who was also a general contractor. Like I said, we couldvary debt to campus housing, we actually divided that property into four unitsthat each had Three bedrooms, little social area and a small kitchen. So, youknow, we we went from, you know, having a old mansion to a to a cash producingasset.


Dave Seymour 05:11

And thatwas that was cash flowing because of the student housing. Oh yeah, your rent rentthe bedrooms, Walter,


Walter Novicki 05:17

that'sexactly what we did. We rented the bedrooms, we rent the bedrooms, and we endedup within a period of about three years, creating a portfolio of about 100 justa little shy of 150 units, all campus housing, in that in that two block area,we bought everything we bought the fire station that was there that wasabandoned.


Dave Seymour 05:38

Youbought a five that you know, I couldn't find it.


Walter Novicki 05:40

I know,I figured you would like that. Yeah,


Dave Seymour 05:43

Iactually did you did you kick the pole.


Walter Novicki 05:45

We didno pole, no pole, they, they had taken the night it was a double but they hadtaken that out and they add Believe it or not firestation a burn down. Fire, ithad fire damage. So you know, we had to come in and mitigate that we basicallyturned that into a Yeah, an office complex for ourselves. So you've


Dave Seymour 06:07

so let'slet's just get this in big picture. So you started really with the mindset ofholding on to real estate to cash flow? Did you ever do the buy fix and fliplike I did,


Walter Novicki 06:15

I didfor for a period of time when the market really lent itself to it? You know, weshould we started going out and doing just that, you know, finding propertiesthat we knew that we could bring value to but necessarily didn't want to bringthem into the portfolio to hold long term. So yeah, we did. We did quite a bitof that. That's actually one of the things that motivated me to come down toSouthwest Florida, in the late 90s. Was that opportunity.


Dave Seymour 06:41

Sothat's that's what that's where you started down there was was buying andfixing and flipping in the Gulf Coast.


Walter Novicki 06:47

Yeah,absolutely. That was the that was the big motivator. You know, we came into anarea, Cape Coral, Florida, very well known area for real estate investing forgood and bad reasons. But, you know, we came in into boom times. And you know,we were doing quite a bit quite a bit of volume taking these older propertiesand bringing them up to the to the new standards, because it's an interestingplace to be.


Dave Seymour 07:10

Youknow, what's interesting, Walter, I don't think I know, you know, we've knowneach other for years, we've been in business for quite a while now together,but I don't think you you know this, and I'm going to share it because I thinkit's pertinent to the conversation. When we went into the financial crisis dueto the market adjusting back in 2008 910. Martha Coakley was the AttorneyGeneral here in Massachusetts prior to the one that we have now. And her one ofher favorite projects was, it was called the abandoned housing initiative herein Massachusetts wall. And what they used to do was was they take professionals,you know, people who really knew how to put a property back online, and we werecalled receivers. And I still think I'm on on file in Essex County, North andSouth. But I was actually a receiver for the state of Massachusetts for a whilewe used to take these properties over now you paid $10 for your property, weuse that we used to get the properties for free. But yeah, we did. While it wasit was crazy, because what we do is is we'd supersede the first lien position,which was usually a bank that had abandoned the property. And then we bring itback online we took what we actually did it on one of the episodes of flippinBoston and Martha Coakley was in that episode with the ag so you know, whenyou're talking his I, here's what I always think about when I get to, I get toyou know, kibitz a little with with with real estate investors who are in thegame at a high level is think about the win win situation in there. So the cityof Columbus had all of these dilapidated properties, they saw an option and anopportunity to turn them around, get them back on the rent roll, get them backon the on the tax rolls, you come in, you make a good living out of it, yougive good decent, affordable housing to the student base. And everybody's like,Hey, this is awesome. Let's do it again and again and again. And you know, kindof astori same period of time you know, a few years later but you know, we'relooking at these abandoned properties that the banks have left behind in the inthe mess and the chaos that was left behind the financial crisis 2008 910 youknow, we got to do the same thing we got paid for the for managing the projectsand also rehabbing the projects. Pretty interesting. So anyway, I digress myfriend get down in Florida, you know, me, man. It's a shame. It's only an hourshow. Well, we could go for like three or four. But so you down in Florida now.So bring me up to speed a little bit because I know you then transitioned fromthat into some some bigger project some some new construction because themarket demanded it down there, correct?


Walter Novicki 09:42

Absolutely.You know, I, I'm one of those people with I see opportunity. I'm going to I'mgoing to take advantage of it. So yeah. As the market started to mature downhere, we saw an opportunity for new construction. So you know, I hit acquiredmy general contracting license in Ohio and then I came down He went through aarduous process to get to get my license down here. And you know, we became ageneral contractor down here did a lot of new home construction. Because we sawa void the market. After the after the crash, we made a transition back intodoing a lot of the fix and flip. But what we also saw is we saw an opportunityto, to kind of take a step into into a new route. What we did is that myselfand a few partners went out we put together the very first syndication I everparticipated in Oh don't you got you got to explain what a syndication meanswhat we brought, we went out we raised a lot of money from private investors.Okay, so we ended up raising $125 million to go out and actually acquire landraw land. It was all waterfront premium property. In in Lee County, CollierCounty, and Charlotte County. So in in this Southwest area, so what we did iswe actually went out we acquired, acquired heavily discounted, waterfrontbuildable lots, and you know, we held those we held those lots for a few years.And then once the market started to improve Guess what, you can always buildhouses you can always build land, especially waterfront land. So we saw a verydramatic increase in value and, you know, returned to a very hefty hefty returnof investment to our to our investor pool and native photos ourselves.


Dave Seymour 11:29

Yeah,yeah, look so so for the folks listening to us today. I know it's Saturdayafternoon and I say it every week it might be fixing a little lunch for thekiddies or maybe not standing on the first tee anymore up here in New Englandbut if you listen if you listen to us down in Florida now on the on the one onone on 4.9 app that's a plug wall to stop sharing with friends. You know, youmight you might be you might be on the golf course. syndication is the abilityto raise invest the capital those invested capital is then used to purchasesometimes you'll use bank financing as well for the acquisition. But it's it'sa way to get money working at a very high rate of speed. So I'm gonna say thatagain, money working at a high rate of speed, so don't go anywhere. I got morewith my friend Walton. Oh, Vicki, let's take a quick break and tune into someof our sponsors on the show standby.


Intro Voice Over  12:24

RealEstate revealed We'll be right back.



Today,the real estate market is booming. mortgage rates just hit historic 30 yearlows and the New York Times recently reported that investors are snapping upreal estate at rock bottom prices. And now savvy investors are buying realestate using their IRAs that allows them to access their retirement funds tobuy properties without paying any penalties or early withdrawal fees. If youhave funds in your retirement account and you are interested to learn more callhorizon for us today at 866-712-2007. That's 86671 to 2007. Unlock the power ofyour retirement account and take advantage of one of the most profound opportunitiesin real estate since the housing crisis 15 years ago, call horizon trustretirement specialist at 866-712-2007.



And for



alimited time, get our free Ultimate Guide to buying real estate with your IRAthat's 866-712-2007 or visit horizon trust calm slash day. Horizon TrustCompany is an independent passive custodian and it's not associated oraffiliated with and does not recommend to promote or advise any specificinvestment investment opportunity investment sponsor investment company orinvestment remote or any agents employees, representatives or other such firmsor entity horizon trust is not providing investment advice, advocating orendorsing real estate. These options may or may not be a fit for individualinvestor investments are not FDIC insured, offer no bank guarantee and may losevalue. Horizon trust doesn't receive any commissions or fees if I invest withany other sponsor.


Intro Voice Over  13:53

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Dave Seymour 14:33

and youknow Walter, it's it's always interesting to listen to somebody else's journeythrough real estate because, you know, most of us only ever think of realestate as our primary residence or, you know, maybe you know, maybe anapartment that we rent or something of that nature. You know, name of the showreal estate reveal that just I just love the opportunity of being added toshare some of some of what's going on and what's going on. Right now in realestate, it's kind of juxta What's it? What's the same just just juxtaposed? Isthat the word like? How am I doing like my teeth outfit until Well, today?Well, but you know, it's juxtaposed it's it's, you know, the markets doinggreat in the single family. Although some statistics came out recently that sayit's, it's, there's a bit of a softening going on. And yet at the same time,unemployment is crazy. People. You know, in this fearful situation, we don'tknow if there's another lockdown common. By the time this show is, you know,some parts of the country might have some kind of lockdown. And I heard today,Walter, and I know if you pick this one up, the European trading markets are consideringputting breakers on trading, because they're going into a dive in the Europeanmarkets based off of, you know, based off of the pandemic. So look, my friend,you've seen a lot, I know, you've served our nation, and I appreciate you forthat. So you know, you've been, you've been some places and seen some things,Mister now, Vicki, tell me what, what's your take on on COVID? Because inFlorida, you know, you guys down there kind of have a different take on it. Andwe do up here in Massachusetts, but also, you know, how has it affectedbusiness? How do you see affecting real estate? And let's just let's just delveinto that a little bit. But,


Walter Novicki 16:18

yeah,that's a huge question. I mean, you know, yeah, you're talking a pandemic,something that's having a worldwide impact, by sheer definition, what we'reseeing here local, is probably similar to what you're seeing around thecountry, you know, we kind of make the joke that we're kind of sitting out thepandemic. That is, that is a joke, we are taking that seriously down here. Youknow, we haven't had the severe lockdown. But you know, our restaurants shutdown, just like everybody else's small businesses closed, just like everyoneelse's. The sad part is, you know, when you when you drive down the street, yousee that a lot of small businesses aren't coming back. A lot of those serviceservice jobs are going away, and it's going to take a while for them to comeback. You know, every time I see a business closed, I think about all the peoplethat that impacts, not only the owner of the business, but all the employees,these are people that no longer have wages coming in, or are taking, you know,other jobs that might not be as lucrative, and that's creating financialstress. We talked a couple weeks ago, about the you know, the forbearancesituation, it isn't going to go on for forever, at some at some points. At somepoint, you know, you're going to have to you're going to have to deal with theissues. You know, we see that in a single family, and I think we're going tosee a rash of foreclosures, unfortunately, I think it's inevitable, I thinkwe're going to see, you know, the banks being more proactive this time aroundwith workouts, you know, helping to facilitate short, short sells things ofthat nature. But but you're going to see a lot of properties going through thegoing through the legal system, and a lot of people ultimately displaced Youknow, that's that's bad news, in some ways. it for real estate investors, it'salso good news, in some ways for real estate investors, wherever


Dave Seymour 18:19

there'sunpack that Walter because look, look, man, let's let's go zero degrees, right?Health and Family First, okay. We got to look after our family, each other ourcommunities, you know, wear the mask, don't wear the mask, I suggest wearingthe mask when you're in public. I know you and I have had a few jokes over themass swearing thing and I get it, I get it. But we got to bring, we got tobring some maturity to the health factor. And I think if we do that, we'll getthrough it faster. But you know, you say Good, good and bad in both bothequations. unpack that for me. Well, what is what is the opportunity? I mean,what what do you what do you see as the opportunity in real estate right now?And why and why real estate? Why would real estate be an investment? You know,position that somebody should should or could consider taking?


Walter Novicki 19:05

Well,Dave, you know, I've always been bullish on real estate. Ultimately, we all needa roof over our heads. Someone is going to own that roof, whether it's it'sit's us, or it is an investor and we're paying rent. Somebody who's going toown that. I figured out at a very early age, I I basically did research and Ilooked at the wealthiest people in the country. Very quickly, I came to realizethat they either made their money or they stored their money in real estate, soI knew what


Dave Seymour 19:32

to holdon. Hold on. Hold on, hold on that that's too good to leave alone. What theheck do you mean stored their money in real estate?


Walter Novicki 19:39

Whatdoes that mean? Others two things on this planet that keep pace with inflation.Precious metals, particularly gold, and real estate, the negative part of goldThis is the reason I don't have a big vault, you know, like Scrooge McDuck forfull of gold. It doesn't produce income. I could go out and I could buy realestate That actually keeps pace with inflation gives me great tax benefits, butalso produces income.


Dave Seymour  20:07

Mm hmm.Get it? Get it? Yep, pop Paki wealth and let it work at a high rate of speed.Yeah,


Walter Novicki 20:14

thereyou go. There you go.


Dave Seymour 20:16

So look,you were doing you were doing a lot of the syndicated deals, rural land, newconstruction. I talked to a lot of guys up here in Boston wall. And there's alot of guys still in, you know, East Boston, Cambridge, Somerville. They're inthese areas. And they're still trying to build these these four and 46 unitapartment, condo converted complexes and you know that they're playing a longgame. Are you seeing a dial back on that long game in Florida, because I'mbeginning to see a little bit of it are getting dialed back up here in in theBoston Market, you seen the same thing?


Walter Novicki 20:53

Well,we're in a different market down here, Dave, we are so under built. And we arein a situation where our population is growing. You know, if you just have to,you know, we call it the I 75 corridor. Interstate 75 goes north and southacross the state. All you have to do is jump on that road and drive five milesand you'll see what's happening. All the roads have been rebuilt, all thebridges are being well and large. There is construction going on everywhere. Inthe multifamily market, in this area in this Gulf Coast region of Florida. Weare severely under built. Last statistic I looked at they said of everythingthat is in permitting now was suddenly to magically just appear, we would stillbe about a quarter of a million residential units short Wow, in this in thisregion. So we have a totally different scenario than we do in the in the BostonMarket.


Dave Seymour 21:51

Mm hmm.





Dave Seymour 21:54

his hiswork here is where I'm going with this, right? Sure. You know, for the folkswho have listened to the past few episodes, they know who I am or what we dothey understand who freedom venture investments are. And what I'd like to do iswe're going to take another short break, but when we get back from the break wall,I want you to break down and unpack for us. Why multifamily is an app ouropinion right which with bullish on it what why Why be so bullish onmultifamily in that Gulf Coast region on that, you know, that I 75 you know,route 41 corridor that we talked about. And then let's also unpacked a littlebit about how you know, you and I kind of connected to put the fun together andwhy we believe the fund is is such a such a fantastic strategy. And we'llunpack all of that when we come back from this break. So just stand by


Intro Voice Over  22:44

realestate revealed We'll be right back.



SteveAlesis of Solaris reality, has intimate knowledge of the North Shore market.With over a decade of experience and record of 300 real estate transactionswhen it's time to buy or sell property give Steve a call directly at617-763-1001. That's 617-763-1001.



Today,the real estate market is booming. mortgage rates just hit historic 30 yearlows and the New York Times recently reported that investors are snapping upreal estate at rock bottom prices. And now savvy investors are buying realestate using their IRA that allows them to access their retirement funds to buyproperties without paying any penalties or early withdrawal fees. If you havefunds in your retirement account and you are interested to learn more callhorizon trust today at 866-712-2007. That's 866-712-2007 unlock the power ofyour retirement account and take advantage of one of the most profoundopportunities in real estate since the housing crisis 15 years ago call horizontrust retirement specialist at 866-712-2007. And for a limited time get ourfree Ultimate Guide to buying real estate with your IRA that's 866-712-2007 orvisit horizon trust calm slash date. Horizon Trust Company is an independentpassive custodian and is not associated or affiliated with and does notrecommend promote or advise any specific investment investment opportunityinvestment sponsor investment company or investment remote or any agentsemployees representatives or other such firms or entity horizon trust is notproviding investment advice, advocating or endorsing real estate. These optionsmay or may not be a fit for individual investor investments are not FDICinsured, offer no bank guarantee and may lose value horizon trust doesn'treceive any commissions or fees if I invest with any other sponsor.


Intro Voice Over  24:42

You'relistening to real estate revealed with Dave Seymour from Amy's living Boston.


Dave Seymour 24:48

Allright, so let's let's just open this up a little bit. So we've transitioned youknow, you know, you personally have transition. We've created our companyfreedom venture investments with our third partner Eric Wilson, the USYoungblood on the team. And we're now focused primarily, solely, in fact, onmulti families. And you know multifamily up here in New England wall couldcould mean a three Decker like three units or four. That's not what we'retalking about in the Florida market. So just described, what is a multifamilyasset apartment complex? What kind of units and size are we looking for? Andhow many? How many are we trying to buy wall? How many do you want to buy thisthis this quarter and q2, q1 and q2 next year?


Walter Novicki 25:30

Thereyou go. There you go. Good question stuff. I just to give a breakdown of whatwe're looking for what you know, we call it our buy box, really, you know,what's, what's the underlying criteria that we compare all these assets tonumber one, Class B or better. So these are not workforce housing, nothingwrong with workforce housing. But these are these are nicer, more upgradedresidential units, because that's where the demand is right now. Now,everything that we're looking at is is typically 1996 construction or newer.The reason being, there's something called the Miami Dade code that impacts ourbuilding codes, standards to withstand hurricane strength winds, elevations tomitigate any potential for flooding. So we look for properties that were built96 or newer, because they fall under those guidelines. We target smallcommunities. I mean, you know, our our favorite, our sweet spot is that 40 to150 unit count.


Dave Seymour 26:36

Why whywe stand with the smaller ones, because I think I think that's important tohighlight as well.


Walter Novicki 26:41

Absolutely.A lot of people have asked, the larger complexes are the the hot button forthese for these large companies, these large development companies. And thesereal estate investment trusts. So the big players are playing at the 200 plus unitlevel, that's what they look for. That's what they go out and and acquire. Sowhenever there's a lot of demand for something, there's an increasedcompetition, a lot of competition and competition drives up prices. If we'repaying a lot more for something, obviously, we're not going to be able to giveour investors the returns that we're able to give them. So what we did is wereally looked at the market, we said, What's the most economic point that wecan enter, what is the the area that's going to be that sweet spot that's goingto give us really nice rent rolls, good consistent tendency, high rentcollection, high occupancy rates, but still be a good buy for us. And that'swhere we identified that 40 to 150 units sweet spot. And, you know, it's just itgives us very attractive acquisition capitalization rates, it gives us thatthat higher occupancy rate, the higher rent collections, everything thateverything that we're looking for, we're in what's called the core pluscategory. These are like value add opportunity. So what I mean by that is, ornot coming into a complex and tearing it back to the studs, and basicallyrebuilding it. And we're also not buying, you know, turnkey assets that havebeen built six months ago, what we're doing is we're buying properties that wecould come in, we could bring our expert management, put them in place, do someoffice upgrades, increase signage, improve amenities, do some light repairs,basically, bringing the places up, give you a good example, the deal the week lastweek that we talked about, you know, as a property where we were coming in,we're putting some new flooring in some new countertops, new fixtures, that'sthe extent of the of the renovations, but by doing that, or able to take itfrom, you know, one level to another, and increase that rent per square foot.


Dave Seymour 28:56

Well, wewere we were on our partners meeting this morning. And you know, we werediscussing you know, that single family history that you know, that I have I'vealways been in commercial personally but that single family history and andalso your history in the single family business. And it really is, you know,it's just scalability right for those folks listening on you know, Walterstalking about you know, cost of acquisition and you know, we use the theseterminal cost of capital, etc, etc, we use all these terminologies and we usethem so frequently that sometimes the simplistic meaning behind them gets lost.You know, so when when we talk about coal plus and reposition in a largeapartment complexes, we're just flipping bigger buildings with more doors,that's what we're doing. We go in it right instead of, you know, in NewEngland, it's a full gut. You know, when I buy a single family house up here,it's usually a full gut, it's not you know, paint and cap it, as we call it,you know, it's not fluff and bath my gallon, you know, we're doing, we're doinga little more work to the properties up here, but it In the Florida market,what Walters you know, just laying out there is, is we can take a 50 unitapartment complex, we can go in and change appliance packages, we can go in andchange countertops. Maybe some fixtures like he said some some new lightingfixtures, maybe some, you know better faucets and things of that nature, whichin the in the big scheme are a lower cost than obviously replacing a roof orground up, or you know, infrastructure type stuff that, you know, really eatsinto into the profit margins. So, you know, if you're trying to wrap your headaround the information that's getting, you know, thrown around here betweenwater myself, just think of it, you know, like, like a flip, like, you know,you're buying a building that's, that's got some deferred maintenance, ithasn't been loved. And, you know, we give it we give it some love. And the waythat we give it love is comes from a couple of angles. And we'll talk aboutwe'll talk about the management challenges in a minute while but so, you know,multifamily gives us the ability to be more consistent in paying these thesedouble digit targeted returns to the investors who come in and, and join us.So, you know, Walter talked earlier about syndication, a small group ofinvestors on one particular acquisition, right in the acquisition from from theday that you buy it to the day that you sell it, and then everybody togetherwith cash out of that deal. Now we chose in when were we, Walter like February,March of this year, we chose in February, March of this year to, to decide tonot do syndicated assets. We looked at the opportunity that COVID created inthe Florida market, and Walter and I reconnected It was really a coolconversation while because it was like, Hey, man, what are you doing? I don'tknow, what are you doing? Like, we've always had a lot of mutual respect, we'rein the same age group, we're not, you know, we're not wet behind the ears,we've seen some market cycles. And we decided to create a fund. And the fundallows investors to not just be in on one deal, but it allows investors to owna piece of everything that we buy. So get what we'll give, just give me acouple of the advantages wall of a fund structure in comparison to a syndicatedstructure.


Walter Novicki 32:21

Well,the biggest disadvantage that I see is diversification, you know, you can't be100% 100% of the time, the best development company, the best investors outthere are going to fall short. If you happen to be in that single investment,that fall short, you lose, right? What a What a fun does is it gives usmultiple investments, you know that you're looking at this, at this particularsituation, our fund will probably acquire 2500 to 3000 doors during itslifetime. Okay, that breaks down into, you know, quite a few, quite a fewindividual projects anywhere from 25 to 35 projects.


Dave Seymour 33:10

Now,each one of those, each one of those of those assets, each one of thoseprojects, it's a you know, 140 doors, let's talk about the one that we can, youknow, we can walk into the assumable loan. So that's $107, I believe, right? Idon't, hundred hundred and four. So there's so many of them right now, man, Ican't, or whatever, that. So the hundred and the $104. I mean, that in and ofitself has its own business plan, correct? Correct?


Walter Novicki 33:37

Yeah,correct. That, you know, that project, every one of the projects is its ownentity, it's its own its own business. It has its own management internally.You know, there's there are challenges or opportunities. With every one ofthese with every one of these projects, no two are, are alike. That's thatsaid, though, we know that there are certain practices that we could bring tothe to the table that are going to improve revenue by bringing that verycapable management structure, or going to be able to get a predictable stream ofrevenue. So we go up, we analyze the assets, we acquire and improve the assets,we tend at it, and we manage the asset.


Dave Seymour 34:20

So inthe fund structure that, you know, look, I know the answers to these, but it'sgreat to do it in a q&a format like this. It really is a it's a it's acompletely passive investment for an investor who joins us if they want to bean investor partner with us. It's passive in repin. They're reaping the rewardsof the diversification in the fund. What What about the the tax advantages thatthey're still privy to those as well? Correct? Absolutely,


Walter Novicki 34:49

absolutely.This is it. This is a 100% passive investment. I mean, other than the time thatthey need to review the private placement memorandum and you know, wireless Thewire is the funds. Other than that, and you know, cashing those those quarterlydistributions, there's really not a lot of effort that goes into it from aninvestor's standpoint, that said, they're investing in a piece of real estate,ultimately, you know, they have a prorated interest in all of the assets of thefont.


Dave Seymour 35:21

Mm hmm.So they own a little piece of every stick of brick that that's in the fund?


Walter Novicki 35:25

Absolutely,they own a piece of every stick and brick, well, guess what, we have some veryfavorable, you know, tax situations that that benefit real estate investingthat allow, you know, many of our investors to offset a lot of the gains, ifnot all of the gains, and once again, I'm not a tax expert, I could just tellyou what I've seen, other investors do, but we see we see them, you know,create a very tax favorable situation, with regards to the depreciation and ina few higher level techniques, that's one of the other benefits about doingdealing with somebody that, you know, has a lot of experience and is, you know,structured in a larger fund format is opposed to, you know, single assets.Because we're because we're so large or able to go out and, you know, spreadthe cost of some of the higher level accounting practices that we, that we useone of them, you know, the big one that we always talk about, is, you know, oursacred depreciation fee data aggregation, yeah, being able to go out there andthrough cost segregation, maximize the amount of depreciation that we're goingto be taking, it just offsets so much of it, so much of the gain, that it putsyou really in a great situation. Unfortunately, on single asset type scenarioswith smaller individuals are going out the two syndigate, it just does, it'sjust such an expensive process to go through just doesn't make sense.


Dave Seymour 37:00

So I'mwatching the clock. I'm being cognizant of time because man, I have like,excited, just for those listening again, a little clarification. So real estateallows us to depreciate as a write off 2727 and a half years, I believe Walteron. And then a cost segregation is another way to accelerate the depreciation,because we're allowed to depreciate another seven years worth of the value ofexactly what Walter was talking about appliances, fixtures, all of these otherpieces that we put into these properties. So it accelerates depreciation, whichis why sometimes gains are written off against, you know, these, these, thesetax advantages. So, you know, it's an interesting world in which we live. It'snot illegal. These are this is legal. This is the rules and regulations of realestate. I didn't write the rule book me that they you, Walter, but my Lord, welearn it as fast as we can. So how many deals? Are you analyzing? Well, I mean,I know your team looks at quite a few on a weekly basis, and out of that manythat you analyze and underwrite, how many get kicked out to us at the farmlevel?


Walter Novicki 38:14

Well,right now we're analyzing every week 20 to 25 projects come across our desk.When you when you look at what actually makes its way through that process,because it's a very arduous process. We actually will seriously consideracquiring two of those projects.


Dave Seymour 38:35

Yeah,yeah. Yeah. So you gotta you got to sort through all of the all of the garbageto find the the diamond in the rough. You get a kiss


Walter Novicki 38:44

a lot offrogs. Yeah.


Dave Seymour 38:44

Kiss alot of frogs. Right to find I was talking last week, I think it was the weekbefore I was talking about how you refer to these deals as the the Country Clubdeals that happened on the happen on the 10th. Hall, and now and now theinvestors get to look at them and play in the sandbox with us. So let's let'sdo this. If you're looking through that many deals, what is the what is thetargeted structure for returns look like? Because I know they're aggressive.They definitely, you know, outpace anything else out there. When you do a T,you know, t 20. Look back, you start looking at a 20 year history of aninvestment. What what what do we have in the ppm? What is what does it looklike on paper? Yeah,


Walter Novicki 39:24

I mean,what we're targeting is on the cash on cash basis, a 10 to 14% return, quitefrankly, right in the middle there that 12 that 12% is is the sweet spot forus. If we can't, if we can't work the numbers to get there. It's it's usuallysomething we're not going to move forward with internal rates of return, we'relooking for 20% plus.


Dave Seymour 39:48

Mm hmm.And that's the value of the money working over a five six year period.


Walter Novicki 39:53

Exactly.Yeah, it's the time time adjusted value of the investment and then the equitymultiplier when we want to be at a 2.4 or batter.


Dave Seymour 40:00

Got it.Got it. So there you go guys. You heard it. You heard it from Walton. Oh, Vickihe is the wizard behind the curtain. I gotta just tell you a direct Walter andi don't i don't i don't mind screaming it on on an open platform. It is anhonor and a privilege to have you as a business partner, man. Yeah. Decades ofexecution on these things are critical to our success. You know, when you lookat the team, that's been a mass myself, you Kevin Harrington, and Eric Wilson,I mean, it's, it's an exciting time, and yet still paying respect to the, youknow, to the darker days that surround us. So I just want to say thanks forfinding some time. Now, get back onto your underwriting go find us anotherreally great deal. And I'll let the folks figure out a way that they canconnect with you in the future. Okay, well, it asked Dave, thanks for havingme. Thanks, man. God bless brother be well Bye.


Intro Voice Over  40:55

RealEstate revealed We'll be right back. Thinking of purchasing a new home secondhome for investment property, or maybe refinancing to get a lower rate,consolidate debts, drop PMI, or need cash out to do home improvements. Georgecuartos mortgage Officer of cross country mortgage in Denver is just the loan officeryou will need as Essex County's top loan officer with more than 8000 past happyclients in over 30 years experience. George and his team will be happy toassist you with rates the lowest in history don't have that paid act now youmay be able to save thousands of dollars call George at 978-777-4663.



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Intro Voice Over  42:03

you'relistening to real estate revealed with Dave see more from Amy's living Boston.


Dave Seymour 42:08

Welcomeback. I learned from a guy one time he said to me if you're the smartest personin any room, you're in the wrong room. And I never forgot that it kind of likekind of like always set me up to to be in a place where I was always lookingfor, you know, the next valuable relationship. And Walter is has been that ashas my my other partner, Eric, if you have any questions for us, you want toreach out to us and connect with us either on the investor side, or anyquestions that you have around real estate and the experience that we share. Iencourage I encourage those questions. It always keeps everybody sharp. Whenthey're being put on the spot. And a lot of the questions that we've beengetting again, you can get the questions answered at info dot info dot freedom ventures calm you can reach out to us or just godirect to freedom slash 104 point nine? And we'll answer anyquestion that you have. But some of this stuff that I was getting asked aboutwas was the single family business. You know, I was always recognized first andforemost. For my time on the TV show flipping Boston which aired on the a&enetwork. And you know, flipping Boston was one of the first single family buyfix and flip shows that came into the marketplace. After the after the lastcrash. You know, if you if you told somebody that you were a real estateinvestor in 2000, and late 789, you were treated as if you had some kind ofthing terribly, terribly wrong with you. People used to distance themselvesfrom from from real estate investors back then. You know, in 2009, there wasprobably I would say and I'm guessing but I'm just going off of experience, Iwould say there's there was probably 40% or even 50% less realtors in themarketplace in 2007, eight and nine. So having that environment which I you know,you know, sharpened up my skills in the single family business, you know, neverleft me and some of the questions that were coming over after the last coupleof shows was what they've you're not doing buy, fix and flip or you're notdoing single family houses anymore. And I had one one question came through hesaid, What's with the signs that I see on posts all over my city say we buyhouses cash, and there's a phone number. And, you know, I thought I thought itcould be helpful and educational to just look at that a little bit. You know Icame out of the fire department, I went to an event. And I began to learn realestate from a different perspective. You know, most most people, as we saidearlier on in the show, you know, that real estate is their own four walls, youknow, people are told that, you know, your primary residence is is an asset, itshould number one asset. And, you know, I always thought to myself, well, ifsomething was an asset, it's supposed to put money in my pocket, not take moneyout of my pocket. And yet, I don't know about anybody else, unless you boughtcash for your home, you know, I was always taking money out of my pocket andgiving it to the bank. So I think my house was made. Just, I think my primaryresidence by single family house wasn't wasn't necessarily always my asset, Ithink it was the bank's asset. And I always found it interesting. Now, the bankwill pay you like, you know, 1% on a CD, right on a certificate of deposit. Sothey'll pay you 1% CD, because it's, you know, FDIC insured. So they take ourmoney, and they pay us 1%. And then they take that same money that everybodyput in there, and they charge us 4% or 5%, of 6%, on a home mortgage, andthey're actually just using they're using the money that we gave them. I don'tknow, that might be a lesson in there. Just think about it for a second. Butanyway, you know, single family houses? The answer is yes. Yeah, I, I've neverreally walked away from the single family business. I believe, as Walter wassaying earlier that there will be a distressed asset class coming back in, inthe single family world. So to you know, give you like an inside scoop, if weif I could share a little bit with you about, you know, the single familybusiness when, when you see that sign, or that marketing material, or thatcartoon character on TV, whoever it may be that, that comes across your radar.And it's like, you know, we buy houses cash. Now, I'm going to be very directwith you, there are amateurs and there are professionals in all businesses. Andyou know, the the moniker if you will, of a professional is to be able toreally take into consideration the need of the property seller. You know, as adistressed single family home buyer, I always thought of myself as a, somebodywho's solved the problem. And I'll give you a classic example of one was aproperty that I did in Salem, Salem mass. Last year, we did this property, anda lovely couple, but they lived in this house for over, I want to say 65 years.And, you know, no judgment. But the house, you know, had the same kitchen thatit had 65 years ago, I think it had the same linoleum in the bathroom. Itwasn't even the sexy pink or blue tile in the bathroom. It was it was likethree generations before that. They were animal lovers. They were great people.They just hadn't taken care of that property. And the gentleman in the househad a medical condition. And he could not under any circumstances, face anotherNew England winter. Nor could his lovely bride she had, she had a few challengesas well. So in a situation like that what these folks were not in the marketfor was an open house. They were not in the market for somebody to come in andpoint out every single crack and cranny and issue and challenge with theproperty. They were not in the market to, you know, to have an appraiser comethrough and put an appraisal number on the property. They were looking forspeed. They were looking for ease of execution. And they were looking for help.And as a professional house buyer, as I am as my team is, you know, I look atthat situation and I say well there's value for not needing a bank's permissionto buy a house. There's which means I can pay cash, whether it's my cash,whether it's a private investors cash, or what's called a hard money lender,cash. You know, single family buy fix and flip professionals will very oftenuse hard money lenders. And one of my friends said to me one time it's not hardmoney, it's easy money because they underwrite the property rather than theindividual. If you go get a you go get a mortgage on a primary residence. Ifyou've ever done that, I mean it's like sticking toothpicks in your eyes. Everybox needs to be ticked and every process needs to be followed. And it can beincredibly laborious, oh my god, you missed, you know, one payment here or youryou were overdraft there, oh my god, you can't afford your house, you know, itgets a little, it gets a little crazy. But, you know, in the single family andup to four units, you know, in that marketplace speed is is one of the one ofthe benefits of dealing with with a single family buyer like myself. So, youknow, this couple were incredibly grateful for for what I did for them, becauseas it happened, they had a couple of challenges with timing of moving there, they'rethere, they did one of those boxes that you can do in your driveway and storestuff in there. They had some challenges with that move in, and they had somechallenges on the timing of their closing on the the property that they boughtin Florida, because they needed the warmer weather. So you know, I personallylooked at that as as, as a professional, you know, I looked at that, as I was,I was giving them some service. Now, I'll give you another example, there was aproperty that I looked at recently in Winchester. And it was a single ladylived in his house in Winchester. And again, the house had a lot of deferredmaintenance, one of our crazy wind storms have been through there and kind ofbumped up the side of the house and done quite a bit of damage. She was anelderly woman, her husband had passed a few years earlier. And she just shewanted out, she's like, I can't fix the house, you know, I've got a, I've got adeposit on a on a elderly housing environment, which is upscale and nice. AndI'm excited to go there. And her challenge was is that some other We Buy Housesperson had been through there and promised her a certain amount of money in acertain amount of time, and yet was totally incapable of performing andexecuting on on the promises that they have made. So you know, in thatsituation there, you know, this lady had set our expectations of a closingdate, we should be all good. And she's ready to go. And it fell through. So youknow, there are there are people out there that are professionals. And thenthere are you know, some folks out there that may be honest, professional, andI'm not like I'm not gonna, I've never been somebody to tear one person down tobuild another person up. But I will tell you this is that if you entertainselling your house, for cash and for speed, because you have, you know,circumstances that don't put you in a position where you can wait, you know,3060 days to close on a property, then just realize that there are you know,there are a lot of different people, if you will out there there are there are,you know, people that are established and have a track record. And then there'syou know, there's people that don't and, you know, just as you know, going backto to Walters conversation, if you will, you know, his very first deal was awin win win situation, it was a win for the city of Columbus, it was a win forWalter, it was a win for the for the students that ended up having decent,clean, affordable housing. So I think in the single family, you know, buy buy, fixand flip We Buy Houses cash arena, I'm going to pat myself on the back, I'mgoing to elevate my skills, freedom venture homes, ww dot freedom, venturehomes, H o m Is my buying platform. That entity has been up and runningfor a couple of years now. You know, I was buying houses prior to that. Butfreedom venture investments itself, its its mother company, you know, it's itsumbrella company has has a couple of different entities under it. And you know,I really hadn't thought about a single family business, and how much you know,folks could learn about that side of the business until those questions thatcome rolling in. You know, it's it's always, it's a simple math equation. Whenbuying a single family home. It always starts with what we call the ARV or theafter repair value of a property because I'm an investor I'm not going to beliving in that property. So I need to be able to figure out what what is whatis this property worth? Once I've given it the the love that it needs, youknow, and let's say it's maybe a $400,000 after repair value, I pull thatnumber from from sold properties in the MLS and the multiple listing service.Now there's a lot of realtors out there that you know are also investors. Youknow they may come out to look at the property to list it and end up buying it,you know that it's just part of their strategy, if you will. So you know, theycan really dial in the value of a house, once it's all fixed up. The challengethat we've got right now at COVID is, you know, most buy fix and flipproperties right here in New England will take, you know, four to six months,to get them to the point that they can sell. We're going into one of ourfamous, you know, New England winters, we don't know whether we're going to getsix inches of snow or six feet of snow. You know, our weather up here is ahindrance to speed. So when we're trying to figure out that after repair value,you know, that's a challenge. It's a challenge with the winter, it's also achallenge with COVID. Because when this foreclosure crisis hits, and we startto see a devaluation because of the increase in inventory, you know, wait, howdo you value that as an investor, because once once I write that check, or whythat money into the account of my, my sellers, you know, through through theclosing title through the, you know, the attorneys that close the deal for us,you know, are now committed, I don't ever get that, that money, that money'snot coming back, if it's all wrong. So you know, that number is very important.Once we take that number, then I'm an investor. And, you know, it's interest,I'm just talking to you, as I've talked to hundreds of home sellers in mycareer exactly the same way. And I say to them, I say, Look, I'm an investor,you know, I do this to, to feed my family, this is what I do. So that I, youknow, I do intend to make a profit. You know, if you talk to somebody in the WeBuy Houses world, and they don't disclose to you, I am doing this for profit,you know, I'm not doing this as a favor, this is my business model, I thinkit's important to have full expectations and authenticity and, and leteverybody know exactly what's going on in a deal. So after repair value minusmy profit is that going to be 10% or 15% of the after repair value, that's anumber that the investor will put in there. And then after that is the cost ofconstruction. Now costs, the construction is always interesting, right? I had aguy one time told me that he could rewire his whole house for 1500 dollars.Now, this is the guy who had the screw in fuses. And he didn't have onegrounded outlet in the house. Now, if you're an electrician, and you'relistening to me right now, you know, Brother, you cannot rewire a whole housefor 1500. dollars. I think a GFCI you know, non tamper outlet right now isprobably coming in at around, you know, 100 bucks, or something silly likethat. So, you know, the cost of materials is always going up. And the cost oflabor is always is always, you know, right there. We're in New England, youknow, we don't work for free. So, you know, really being able as an investor todial in that construction number is critical. So let's say I've got a house, itcould sell for 400. You know, on 400, I want to make I don't know, maybe 3040let's say 10%. So 400 minus 40. It takes it down to what 360 let's say myconstruction is betray the construction 60 we're down to 300. Well, then I'vegot the carrying costs of this this property, I've got the cost of insuring theproperty I've got the cost of, of all of these other challenges. So we just runall of those numbers and then we make we make our final offer. We can closefast, we can close slow. So if you are in the single family business, talk tome. If you're a seller of single family real estate we're here to help you. Andas I said before a Time's running out I'm getting the lights are flashingreminds me of being back in the bar back in the day but the lights are flashingand Time's running out but we're here for you. Reach out to us a freedomventures calm, freedom ventures calm and next week, we're going to be talkingto one of the top mortgage brokers in our area. My friend George could so sodon't miss next week. God bless stay safe talk to you. So


Intro Voice Over  59:13

anysecurities being offered are under an exemption provided by sec regulation Drule 506 c only accredited investors who meet the SEC regulation d 501.accredited investor accreditation standard or who provide suitable verificationof accredited status may invest into these offers. Any historical performancedata represents past performance past performance does not guarantee futureresults. Do you need again next Saturday at noon for real estate revealedhosted by Dave Seymour, the star of ad libbing Boston and CEO of freedomventure investments in Denver.



ThePrime show was a paid program that does not express the views, opinions orbeliefs of North Shore 1049 the station management its employees or staff