Note Investing And Business Success

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What does it take to have long-lasting success Today we welcome Dave Van Horn to share important lessons he learned during the course of his 30 year career He started out as an agent and has been involved in residential and commercial real estate as a licensed Pennsylvania realtor investor title company partner and commercial fundraiser Networking is key for those looking to start or scale a commercial real estate business as well as being comfortable in going after bigger deals He also gives emphasis on being trustworthy and authentic in building meaningful relationships with colleagues and clients Serving as the President and CEO of PPR Note Co Dave talks about what we need to know about non-performing loans and offers his perspective on the constantly changing market 00 01 – 04 25 30 Years of Expertise Dave discusses his vast experience in real estate Creating a real estate networking event helped him raise capital for CRE and notes Starting PPR Note Co and focusing on commercial real estate and non-performing loans 04 26 – 09 21 What We Need to Know about Non-Performing Loans What strategies they re using in dealing with NPLs Dave sees risks in the nonperforming loan space and is always looking for ways to mitigate them Downturns are usually beneficial They consider unemployment as the biggest economic indicator We can make money in any market what matters are our exit strategies Dave talks about his team and having almost 600 million AUM 09 22 – 20 58 Lessons Throughout His Career Using leverage sooner to accelerate the business Focus on one goal and avoid shiny object syndrome The ultimate end goal is generating passive cash flow to reach financial freedom Be trustworthy and kind in order to build credibility Learn from the experiences of others through shadowing or mentorship Real estate is a team sport Capitalize on other people s strengths 20 59 – 21 58 Closing Segment Dave s final advice Don t be afraid to go big and invest in commercial real estate Reach out to Dave Links Below Final Words Tweetable Quotes There s one goal in life and that is to get as much passive income as quickly as possible – Dave Van Horn It s about being authentic and being yourself and being real being kind and being human – Dave Van Horn Success leaves clues You can learn a lot from people that are really successful at doing it – Dave Van Horn —————————————————————————– Connect with Dave through the PPR Note Co website and find him on BiggerPockets and LinkedIn Resource Mentioned The ONE Thing by Gary Keller and Jay Papasan Connect with me I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns Facebook LinkedIn Like subscribe and leave us a review on Apple Podcasts Spotify Google Podcasts or whatever platform you listen on Thank you for tuning in Email me sam brickeninvestmentgroup com Want to read the full show notes of the episode Check it out below 00 00 00 Dave Van Horn And I just think it s being authentic and being yourself and being real and and being kind and being human and all these things that people talk about today But it s it s quite simple really it s are you a trustworthy person Do you go above and beyond even when the chips are down I mean I ve had deals that went south but I did every you know I did everything under the sun to try to save those deals or hire attorneys at my own expense and try to you know do everything I can And I think people know that 00 00 41 Sam Wilson Since 2007 Dave Vanhorn has served as president and CEO of PPR Note Co It s a holding company that manages several real estate and mortgage investment funds Dave welcome to the show 00 00 52 Dave Van Horn Hey how you doing Sam 00 00 53 Sam Wilson I m great sir And yourself 00 00 55 Dave Van Horn I never had a bad day 00 00 57 Sam Wilson Wow That s awesome I love the positivity there man I don t hear that very often I need I need more of you in my life I ve never had a bad day Tell me this Dave there are three questions I ask every guest who comes to the show in 90 seconds or less can you tell me where did you start Where are you now And how did you get there 00 01 13 Dave Van Horn Where did I start Well I m in Philadelphia I ve been here my whole life So I guess I started and ended here I started as an agent back in 86 87 was I first licensed And then I bought my first rental property which was a duplex that I built some commercial garages on And I bought that in 1989 So that s where I started And then I had gotten up to about 40 I had about 40 rentals I was also years ago I ve been investing like 35 years So a lot of things happened in 35 years but I was I had been a contractor so I was a contractor for 22 years So I was a realtor a property manager I owned a title company you know a lot of different things I did over the years but I had accumulated quite a few properties And then I managed a lot of properties for other investors as well And that s pretty much it but you know I just kept scaling that and then eventually got into raising capital and was started out raising capital for commercial real estate and then started raising capital for notes That s how I met my partner I used to run a real estate event pre-meet up pre-all the technology you see today It was really simple We sat down had a meal got to know each other That was and you could bring your deals That was how simple the meeting was But the meeting actually grew from 12 people out of lunch Over a six-year period ended up being in five states six cities from Baltimore to New York And we had 8 000 people in our database So it grew quite rapidly this little have a meal and talk about real estate thing So that s kind of how that network actually became in a way my bank you know how I raised capital for other folks deals how I raised capital for myself and even PPR today if you think about it we re the you know we re kind of our own bank so to speak with our private equity right 00 03 00 Sam Wilson Tell me about what does PPR do today for the listeners that may not already be familiar with you 00 03 07 Dave Van Horn Well we started out doing believe it or not we started out doing delinquent second mortgages and we started as investors So it was somewhat of an accidental business In fact we used to have a short sale company and that was the main business and that went out of business and the note company took off So who knows right And then we went from junior liens as we kept raising more and more capital and growing we went into first mortgages and then you know have morphed into commercial notes as well And now back into commercial real estate again so the company s grown and diversified quite a bit although we re relatively new to commercial real estate recently I guess the last year and a half two years you know we first started getting into short term business loans commercial loans construction loans bridge loans We actually aggregate those up We buy them We have an affiliate that does hard money lending and has an REO platform online that sells REO properties And then we you know we also finance that stuff as well So that s just some of the things we do And a lot of that we do to regulate capital but still the majority of our business is in the non-performing loans space We do like the commercial real estate though because it gives us tax advantages depreciation things to offset the carried interest from our bulk of the business in the loan side of the of our company you know 00 04 26 Sam Wilson You said the bulk of your business is nonperforming loans 00 04 30 Dave Van Horn Yes I think last year we did about 325 million nonperforming loans 00 04 34 Sam Wilson And what s your strategy there Get them to be reperforming loans and then sell those off or just reperforming and then hold them 00 04 41 Dave Van Horn Well there s a couple of strategies but no you know we have a JV partner we acquire a lot of assets They have a trade desk in New York so we can access their desk and acquire assets It s kind of like dollar cost averaging as you purchase So it s kind of like this we hurry up and purchase assets and aggregate them over time and get them you know reperforming in a lot of cases and then we do go to securitization So it s a kind of a race to securitization so to speak And that usually takes like 15 to 18 months And then once we securitize which is another way of saying refinancing a pool of mortgages down to a lower rate we kind of derisk our portfolio by doing that Then we re often running to you know wind down that fund It takes about I guess 33 to 36 months is the typical timeframe there And then you can turn around and you do it again You know you go out and you aggregate more assets And we use a combination of our private equity with some institutional capital That lowers our cost of capital by you know marrying the two together 00 05 40 Sam Wilson Right Yeah absolutely absolutely Do you see any risks or I guess any stormy weather on the horizon in the non-performing loan space 00 05 49 Dave Van Horn Oh absolutely So I ll give you an example In the first quarter of this year we didn t purchase any NPLs but although last week we just purchased 73 million So but that was intentional because of the market fluctuations and waiting for some things to settle down But what we re seeing now is some things are loosening out right now And you got to realize the last gosh 5 or 10 years almost it s been an upmarket so right No prices are in direct correlation to real estate values So the margins were actually thin And then we tend to take off the most when it s a down market So it s funny some people are like well what happens if there s a recession Normally that s beneficial for us because that increases you know the foreclosures things like that But usually the biggest economic indicator for us is unemployment The thing that s strange right now where you know we may see what we call a technical review session where you have two-quarters of negative GDP Meanwhile unemployment s still low you know so it s never happened before So that s what s different Now if unemployment was high yeah we would probably be high five in a little bit and go in this you know not that we wish bad luck on anybody but it s just the nature of that business What ll happen in a down market is assets just get you know cheaper pricing wider margins That s really what it means We can make money in any market What happens is your exits shift You know the way you exit your deals the way you work your deals Perfect example of that is deed in lieu Usually these are one to four family residential properties nationwide right So a deed in lieu is a good technique for an exit in an up market It s not a good technique in a down market right does that make sense Yeah Cause you wouldn t have enough equity to take the deed in lieu right So you could see how exits shift That s just an easy example of that And then when pricing shifts or the loan of value and and the equity that s back in these assets shift the way you do your workout agreements or you know what do you call it loan modifications They could vary you know so you just make adjustments just like anything else in real estate right And you know you can make money in all markets It s just you have to shift your strategy right 00 07 59 Sam Wilson Yeah absolutely absolutely I would imagine a lot of people processes procedures you know building the team around handling nonperforming loans has has probably been a work of art Can you talk about that a little bit 00 08 13 Dave Van Horn Yeah it s funny you say that cause for many years we were asset managers We used to do a lot of that in-house and there is a lot of compliance but today we outsource a lot of that So we re primarily capital allocators more so than asset managers And our JV partners on the West Coast actually have you know they have under a hundred people but you re right If we did all that in-house at some point we would be a large firm like that Whereas today we re at like 27 people and we have considerable AUM where like we re just under hair under 600 million under management Now we recycle a lot of our money though So it s a little different than if I said I was in multifamily and I had you know a billion dollars worth of property usually that s with leverage or but in our case a lot of that private equity keeps moving and keeps turning So it s a it s a little bit different than that where it s you know I bought an asset and parked the money you know 00 09 05 Sam Wilson Right right Completely understand As you rewind your 30 what d you say 35-year real estate 00 09 12 Dave Van Horn And growing yeah 00 09 13 Sam Wilson 35 00 09 14 Dave Van Horn 30 something I can t count that far back 00 09 18 Sam Wilson Says the numbers guy in real estate I can t count that far back Tell me this Dave what s one mistake that you can look back on that you said man I wish I hadn t done that that you could help our listeners avoid 00 09 30 Dave Van Horn Wish I hadn t done that Well a lot of it is knowing who you re doing business with is definitely one cause we ve had all had scenarios that didn t work out or lost money or whatever bad partner But I think really I think the opportunity thing would be about leverage about utilizing leverage sooner And you know even in you know I have a lot of coaches and mentors and and that s one of the things that s a common theme with some of the coaches and mentors I ve had where they ll ask the same question which is what s the one thing that you could leverage that ll catapult you or your business in the next six to 12 months you know and that s an interesting question that I paid a lot of money to have asked of me But it was good money but the question sometimes would stay the same and you go back with my coach six months later and he is asking me the same question but things change right I could leverage technology I could leverage people I could leverage a lot of things a JV partner I could leverage capital And that number one thing will shift for people based on where they re at with their business or their personal life Oh your personal life could be something else What s the one thing it s almost like the book The One Thing what s the one thing that I can do such that you know everything else becomes easier or unnecessary that you know who s it Gary Keller right So you know it s a great point Great book The other thing is what s the one thing what s the one goal and by that I mean you know I was a very ADHD type guy where I had shiny object syndrome like a lot of real estate investors and control freak and you know all those things But a friend of mine used to say this you know there s one goal in life and that is to get as much passive income as quickly as possible by retirement age at the latest and to have much as much tax-deferred or tax-free as you can It s an interesting goal right it doesn t really reflect your passion or what you re good at but it does kind of sum it all up in a way because that s where we re all trying to get to with you know financial freedom or whatever that is to get freedom of time to get freedom to be able to go where you want when you want with who you want cause ultimately that s probably the bigger success Now that could be different things for different people but you get the idea 00 11 50 Sam Wilson Gotcha So if I hear you correctly are you saying that maybe earlier on you would ve defined I guess the one thing that you said Hey if I paid more attention earlier on to this this is what will move my business forward And then also the other thing I m hearing is that Hey earlier on I would ve said look I m going to really hyper-focus on creating as much passive income as I can Does that sound about right 00 12 09 Dave Van Horn Yes And not 21 things right That s why and then the other thing is like being willing to have utilized more leverage sooner Like I ll give you an example of that was I used to sell 75 80 homes a year when I was a RE MAX agent to fellow real estate investors 00 12 26 Sam Wilson Right 00 12 27 Dave Van Horn And looking back I go well that was dumb I had the capital I had the hard money lenders I was like reluctant to use hard money cause I thought it was too expensive In reality what did it cost me to give away 75 80 deals I was focused on the wrong thing I m focused on commission I m not focused on increasing building wealth or cash flow Like I was focused on commission Think about that That s ridiculous almost And most people can t find 75 80 deals I m selling em to other people and I m going why I m not thinking about I could have bought all of em I should have been buying 75 80 houses a year myself That s a perfect example of me like can t see the forest from the trees kind of thing It was all right in front of me I had all the resources cause we don t what s that saying What Tony Robbins used say we don t lack resources we lack you know 00 13 20 Sam Wilson Creativity 00 13 21 Dave Van Horn Yeah it was all right there in front of me And you know sometimes we just don t see that you know 00 13 28 Sam Wilson It s funny you say that I m not quite to the same extent as painful of a lesson but I go back to when I started in real estate in all the houses I flipped I mean dozens and dozens and dozens It s like why did I not just hold those again Like here I am 10 years later I m like I m an idiot I should have just bought em and held em I was buying em right Same idea Same exact idea Yeah that s great Thank you for sharing that I certainly appreciate that Tell me this You know what s one thing you feel like you ve done really well Something when you said man this has been a key to success that I feel like other people should be implementing 00 14 00 Dave Van Horn For me you know I was always a sales guy and it was you know my unique ability is the ability to raise a lot of capital a lot of equity very quickly you know Like I ve had cases where I raised 30 million in a month you know which is significant right And a lot of people can t really do that But a lot of that where that comes from I think is probably from trust over a long period of time So you re able to you know be able to connect with people you know you re authentic It s just like having a a large network but it s more than having a large network right Cause you could buy a network but if you have an organic network And the other thing is like the more you give the more you get for sure And I just think it s being authentic and being yourself and being real and and being kind and being human and all these things that people talk about today But it s it s quite simple really it s are you a trustworthy person Do you go above and beyond even when the chips are down I mean I ve had deals that went south But I did every you know I did everything under the sun to try to save those deals or hire attorneys at my own expense and try to you know do everything I can And I think people know that They know that I m going to treat their capital like it s my own or I m going to go above and beyond to make sure everything s above board and can have a favorable outcome Now things can happen But I think a lot of it s how you handle it and how you communicate and things like that 00 15 29 Sam Wilson Excellent Excellent Appreciate that Tell me this When you look to the future and you say Hey in five years this is where I want my companies to be this is where I want to be What does that look like 00 15 40 Dave Van Horn Well I I might be retired in five years Now retirement s a funny word I don t see me stopping like in the traditional sense let s leave it that But now I think my company well we already know We already have a 10-year vision and things like that In five years we ll be at about 3 billion under management We ll probably be at around a billion in private equity And then hopefully we can build a lot of good as well along the way So you know we do a lot of things to try to impact the community whether it s affordable housing type things and other programs that we re working on So hopefully we will be able to give back more and take care of our all the stakeholders our staff our investors and help others build wealth really It s that whole share build and preserve wealth concept 00 16 26 Sam Wilson Right No I like that I like that Dave here s a question for you When it comes to scaling or starting out or somebody that s saying Hey look you know in the name of the show is How to Scale Commercial Real Estate So the idea you know is that somebody s going I really want to grow into commercial assets What s one piece of advice you would give to somebody if they said Hey I m ready to go large How do I do it And they came to you What would you say 00 16 48 Dave Van Horn Well for one is you got to learn what you re doing to a point So one of the things I did was I shadowed other people doing it So when I first started raising capital I actually went to work for a company in New Jersey and they hired me to help raise capital But I learned a lot from them about not only raising capital but commercial real estate cause that was what the money was being used for So you don t necessarily have to do everything yourself You can shadow or mentor with someone who s already doing it which makes a lot more sense than trying to go out and be the trailblazer or the first person with arrows in your back so to speak Success leaves clues You can learn a lot from people that are really successful at doing it And if it s an area that you re not familiar with build a team that is I know the one outfit that I worked for they were doing mobile home parks and they had never done em before And they were doing storage as well But they brought a crackerjack team together You know they had people on their board I mean the one guy was a a mobile home developer for the last 35 years you know that kind of thing Same way with their attorney and their accountant were well versed in these areas right So they brought in experts They also had a management company that was you know around forever They also had a commercial broker who just specialized in mobile home parks in the Midwest You know it was like they didn t just go oh well we don t know what we re doing and we re going to wing it you know It was yeah it was a lot more than that They went out and built a team that did even though they didn t necessarily have all the skills but most of these are commercial real estate especially it s a team sport You re not going to be good at everything anyway And if you think you are that s another problem I think We all like to think we re great at everything but I know I m not right I know I m not an excellent underwriter Does that mean I don t know anything about commercial real estate No I absolutely do But there s people that like to sit in Excel all day and play around That s not me right But it that guy that s playing with Excel probably can t raise the capital either It s a team sport just like property management that s its own thing right Just like construction management that s its own thing Cause you know I ve built a lot of stuff And when I was a contractor a lot of our customers had four to 600 units and we used to do the monthly turnovers right so I do have a strong sense of what that takes to turn over X number of units each month and things like that So they re all different skill sets They re all different things And it is a team sport It s just figure out what you re good at and bringing the folks that are good at the other parts You know some people are great at operations right Some people are great at managing people Just because you know not all leaders are managers right 00 19 23 Sam Wilson Yeah like you said you know build the team around you find the people that are really good at you know what it is that you re not and build them around you Yeah that s critical You mentioned a lot of things I m not good at underwriting man That s a tough one I don t know like I m just not great at it So that s really really cool Dave I thank you for coming on the show today Is there any last piece of advice you d like to share here with the listeners before we sign off 00 19 45 Dave Van Horn Piece of advice Don t be afraid to get started But I think a lot of it has to do with your you know it s always the same things It s the sources of deals It s the capital It s the people right So it s networking I think all those things help put the elements together and don t be afraid to do it I mean commercial is just bigger numbers right You know I m very comfortable doing commercial deals It doesn t even phase me I know a lot of people get nervous at that but I think there s actually some advantages to it The larger the loans get You know I was telling some of the people on my team that were newer they were a little rambunctious about you know Hey we re getting into commercial it s bigger deals But I go Hey guys there s a professional appraisal done There s a bank that s doing a lot more due diligence than us on this asset cause they wouldn t want to do that loan otherwise right So there s there s other parties that can help out in some of these areas that give you a better comfort level So that you know we don t have to be like you said experts in everything There s other people that are coming along for the ride with us whether it s our real estate broker our lender our you know title company all these different things They re there If it was that crazy they wouldn t do the loan right To a point right 00 20 59 Sam Wilson That s awesome Thank you Dave for sharing certainly appreciate coming on the podcast today It was an honor and privilege to have you on here If our listeners want to get in touch with you or your PPR Note Co what is the best way to do that 00 21 10 Dave Van Horn Probably the best way is pprnoteco com You could definitely sign up We have all kinds of resources on there and definitely reach out to me I m also on BiggerPockets and LinkedIn I have a distressed mortgage group on LinkedIn You can seek me out there On BiggerPockets we answer a lot of questions in the forum So anytime somebody has something we re glad to help out you know 00 21 29 Sam Wilson Awesome Dave thank you so much Certainly appreciate it 00 21 32 Dave Van Horn My pleasure Click here to visit this podcast episode