Think Like the Bank: How David Van Horn Used Leverage to Build a $1.8 Billion Real Estate Firm

David Van Horn (00:00)
That sets in line your goal setting. Because when I say to you, Scott, you know, do you want to double… you know, a lot of companies, because I— I had been doing some consulting when I was away from the CEO role, you know, a lot of businesses will be like, “I want to 2X my sales or double sales and revenue next year.” But if you said, “Scott, what if you wanted to 10X or a hundred-X your business?” The answers are different. Your goal setting’s different. There could be 30 ways to double sales, but there’s only one or two to 100-X them.

Scott Bursey (02:03)
Welcome back to the Real Estate Pros Podcast powered by Investor Fuel. I’m your host, Scott Bursey. And today, pros, we’re thrilled to be joined by Dave Van Horn, the co-founder and CEO of PPR Capital Management. With over 35 years of experience as a licensed realtor, contractor, and successful fundraiser, David is a pro in the industry. As a national speaker and author, he has dedicated his career to mastering distressed assets and mortgages. Pros, expect a masterclass on how to navigate complex real estate markets today. Dave, welcome to the show.

David Van Horn (02:41)
Thanks, Scott. Glad to be here.

Scott Bursey (02:43)
It is awesome having you here, Dave, and to help our listeners get up to speed, please give us the ninety-second highlight reel of how your career ignited and where you’re pouring your fuel now.

David Van Horn (02:54)
How my career ignited: I got into real estate because I couldn’t get a job. No, I had… it’s funny, I finished college and I had a degree in management, and I was struggling to get a job and I was working in construction. And I was married and had a son and had to move back in with my mom. And yeah, that’s not… I don’t recommend that if you can avoid it. But anyway, no, mom’s great. But the… I was struggling, and my mom actually came… you know, I was coming home from construction all grimy and, you know, wasn’t in love with it or anything. But she said, “Why don’t you try real estate?” And I did.

I went and got my license and started as a regular salesperson, and then, you know, switched to investment real estate ’cause I was handy and I had access to deals. So then I started buying houses. I guess it was in… became an agent in ’87, 1987, and bought my first property in 1989. And it was a duplex that I ended up living in the first floor. And— and then I eventually built commercial garages on the same piece of— of property. And I— I held it for over thirty years— about thirty-three years I had that property. And I don’t own it today, but I— I owned it a significant amount of time. That’s how I started.

Yeah, I eventually acquired more and more properties. I was using… this is gonna sound a little crazy, but I was using cash advance checks from credit cards to fund my way in the beginning. I bought my first dozen properties about… by borrowing against the credit card, paying cash for a house, fixing it up with a credit card, refinancing it, putting a ten— or putting a tenant in it, refinancing it, paying off the credit cards, and then doing it again. I don’t recommend that. It’s easier to use hard money or private money these days. But back when they first came out, they didn’t have the cash advance fees that they have today, so it was— it was almost like free money. It was like a— a once-in-a-lifetime thing, you know, in the marketplace that was quickly fixed by banks.

But for— so for a couple of years there, I was able to do that, and then eventually they kept upping my credit limits, and I was probably close to a half million in access. And then eventually, you know, I got to a— a local portfolio of about 40 units, and the values had jumped up in the properties. And next thing you know, I had a couple of million dollars in equity and I became a lender, a hard money lender. And I had lines of credit— at one point, I had 11 lines of credit— and I became a hard money lender, and then eventually… you know, I used to run a real estate investor networking group, and then I used to interview the speakers, and one of them was raising capital for pools of delinquent mortgages out of New York, and I’m based in Philadelphia.

And then we got into that business and I went… started buying institutional mortgages, and the rest is kind of history. We co— you know, my partners and I co-founded PPR Capital Management. It was actually called PPR Note Company in the beginning back in 2007. We were asset managers then. We actually started in junior liens, then worked into first mortgages. And today we are PPR Capital Management. We’re less of an asset management shop and more of a capital management company. So evolved quite a bit. We have about 40 folks, about 1.82 billion in assets. We do have… we’re about almost fifty-fifty in mortgages— first mortgages, one-to-four family residential nationwide, as well as… I think last count was nineteen commercial pieces, primarily multifamily. We do a lot of build-to-rent right now. We do have a small portfolio of car washes spread throughout the US, third development plays. So we have a couple of things that we do these days.

Scott Bursey (06:49)
Wow, Dave, what a story! That is super fantastic. And you know, what really caught my attention about you was the way that you’ve been able to build such a resilient investment firm focused on distressed assets over the last 35 years. And digging into that history, what was the biggest transformative moment where you realized you could scale from individual deals to managing an entire fund?

David Van Horn (07:16)
Well, the— in the very beginning, we started out with our own capital, and then it was friends and family. And prior to starting PPR, I was raising capital for commercial real estate. We were doing… I— believe it or not, we were doing mobile home parks in the Midwest. We were doing in Michigan and Indiana and s— and Pennsylvania, and storage. And then I was doing some commercial office condo construction. So I had been raising money prior to PPR when my one partner, John, reached out to me and said, “Hey, why don’t you help raise money for these mortgages?”

So that was one side of the world, but I guess the big change was we started out with our own capital, tested the model, then we brought in some friends and family, and then we started to raise through regular, you know, Reg D offerings. But today, I think the big pivot is when we got institutional capital, because once that came into play, where, you know, we’re getting higher levels of institutional financing going alongside us… so then we raise capital from high-net-worth investors, real estate investors typically, and we marry that with some institutional capital, and then we get a blended rate. And that kind of lowers our cost of capital and enables us to scale and get more economies of scale and preferred, you know, access to assets.

Scott Bursey (08:31)
And on that note, Dave, curious to know: after three decades in the game, what do you consider the core superpower or strength that keeps PPR ahead of the curve?

David Van Horn (08:42)
Well, we have pivoted a couple of times. Like I said, we were asset managers. You gotta be somewhat resilient, you gotta be somewhat willing to change when the market changes. I think that’s where a lot of people kind of get messed up. I mean, I always look at things as we have controllables and then we have uncontrollables. We can all work on the controllables. It’s the uncontrollables that are tough, but we can position ourselves.

So one of the things we have at PPR is, you know, we have an economist, chief economist on staff, who’s a MarketWatch forecaster. So we get a lot of really good intel, we get a lot… we buy a lot of data as well. And so we don’t… I’m not saying we know everything, but having that… a lot of information, it enables us to position ourselves for those uncontrollables. I don’t know that we can prevent them, but we can, you know, participate or not participate based on, you know, how things are looking. It’s just like, do you wanna swim with the tide or against the tide, kind of thing.

Scott Bursey (10:34)
Dave, wondering how you look at your own operational blind spots. What’s a weakness you’ve had to actively manage or mitigate as you’ve scaled?

David Van Horn (10:46)
Well, we— we had several. When we were in the junior lien business, we started to outrun the business. So junior liens were abundant after the crash, and then, you know, banks stopped writing second mortgages, right? Or the— the guidelines became stricter, and then you had Dodd-Frank came in, the regulatory environment changed, and it was one of the reasons we morphed into first mortgages, because we were raising more and more capital, and the… you know, the first mortgage space is probably seven, eight times larger than the junior lien space. So it was a good opportunity for us to change and pivot.

And then similar, as years went on, we got into the capital management side because that was our uni— unique ability, is what I’d call it. So I think figuring out, you know, the ideal situation is when not only can you figure out your unique ability as an individual, but you can figure out the unique ability of the company, and then hopefully at some point have your staff being able to work in their unique ability. And that’s what starts to enable you to have more of what I would call a self-managing type of organization. Today, we do have a board of directors, we do have an investment committee, so it’s not like Dave raises money and he can do whatever he wants. It’s very structured. We, like I said, we have, you know, a whole committee on acquisitions and things like that. So our economists will give us an allocation thesis—where we invest, why we’re investing—and then we proceed accordingly like that.

So and there’s a lot more accountability built in as well. So, you know, every company has things they could do better, though, I’m sure. I’m sure every company has some kind of gap. I mean, we do gap analysis every now and then as well. You know, where could we use more talent? Where could we use… you know, usually it’s capital, product, and— and scalability and talent. You know, it’s the three pillars, right? Capital, sources of deals, and scalability. But yes, and you know, a lot of times that gaps can be filled with whether it’s new hires or whether it’s JV partnerships or whether it’s a new board member. You know, there’s a lot of ways to bridge the gap. But I would be, you know, amiss to say we don’t have any gaps, we don’t have any flaws, and we don’t have any weaknesses. I d— I— I think that’s kind of silly to say that. But yes, I mean, I’m sure we have other ones. I— I don’t know that I’m pointing out all right now. You know, it is a— a little bit of a challenging environment on the commercial real estate side—there’s some headwinds right now, so… especially with cap rates and things like that, so—

Scott Bursey (13:25)
Dave, we’d love to hear your take on the current distressed asset market. Where are you seeing the biggest untapped opportunity for investors currently?

David Van Horn (13:33)
I guess the biggest… it— it’s probably not so much on the residential side, because it would take a significant downturn. And I think they… the government made a lot of corrections after the last crash in ’07 and ’08, so a lot of things were put in place. There’s a lot stricter underwriting, so that was one of the things that happened last time. So it’s a little bit different this time—it’s more of a… like a heart condition than a severe heart attack. You know, there’s… it’s kind of that difference. But the commercial side is probably where I— I would see some opportunity, as some of the distressed assets in commercial will start to work their way through, where you’ll start to see deals on office space. Malls, for example, were a big, you know, conversion now where you’re seeing former malls being repurposed in a lot of times into some kind of multifamily retail-type scenarios, things like that.

So you’re gonna see some distress, especially in— in the multi-side where they had a lot of bridge financing, and the, you know, the interest rates and cap rates are not that favorable right now. It’s very difficult to refinance or to get favorable terms. There’s a lot of multifamily real estate where the debt that’s owed is higher than the value of the properties. So those— those are types of… they’re the type of assets that should start to be coming back to some of the community especially. And I think that’s where there could be some opportunity in the not-too-distant future. Some of the operators… doesn’t mean they were bad operators, they just got caught in a bad timing situation where, you know, rents weren’t able to keep going up, banks themselves are in trouble on some of their balance sheets as well, so there’s not a lot of leeway there.

And a lot of times, there’s been a couple of capital calls and the investor base is exhausted, so when you extend those timelines, the yields go down. So what was originally forecasted in the multifamily deal, you know, in 2021, call it, or whatever, it’s not panning out very well right now, because they can’t exit and they can’t refinance, and there’s no equity there, that kind of thing. And, you know, sometimes the banks are calling for this and calling for that, so it’s getting more and more difficult. And after a couple of capital calls, some of those assets will start to go back to the banks, and I think that’s where you’re going to start to see some of the opportunity.

Scott Bursey (16:01)
Dave, thank you for that excellent breakdown. And interested in your thoughts on the macro headwinds: what is the biggest threat you think most investors are currently ignoring?

David Van Horn (16:12)
I don’t know that they’re ignoring it—it— it’s just there’s a lot of uncertainty, is what I would call it. You know, obviously, we ever since COVID, and then, you know, it’s hard to predict… it’s hard to predict a COVID, it’s hard to predict a Ukraine, it’s hard to predict ice, you know? I’ve— I’ve seen ice impact a multifamily complex before. It’s hard to predict those types of things. And, you know, where will the next one be? The next Iran. Even if it is resolved, so, you know, energy prices could impact us, but I don’t know that it’ll impact every sector—in that case, it’s mostly energy. I’m not saying that doesn’t mean anything, but, you know, it— it… the question will be how long does it last, that kind of stuff. And that’s very… you know, I don’t have that crystal ball any more than the next guy, but I think you can start to position yourself into some of these areas, whether it’s to it or away from it.

But yes, it’s hard to predict the next Cuba, Greenland, whatever… where— where do you want to go, you know? And— and we are in a very unpredictable environment with the current… especially with the current leadership. They’re not easy to figure out, I don’t think. Maybe there’s some people at higher powers would be that might know more on AI or data centers and things like that, which sure, I— I do believe there’s gonna be some investment. Some of that is predictable, I guess, in the sense of, you know, favorable for real estate—you know, things like bonus depreciation are here and, you know, things like that. So there are some meaningful things that can be somewhat forecasted, and then you have the uncertainty piece. So I— I guess it’s a balancing act, just like any administration, you know. And that’s the other thing: the administration can change, and then, you know, all bets are off. We’re playing in a new stadium again, you know, so—

Scott Bursey (18:06)
You highlighted the balancing act and the volatility and some of the things that are predictable. Where do you see the company, PPR Capital Management, here in the next 24 to about twenty-four months… next— next several years?

David Van Horn (18:58)
I— I believe we’re in like a tempered growth mode. We’re not a— a company that is, you know, AUM at all costs, grow, grow, grow, raise money, raise money, raise money. In fact, some of our funds right now, we’re more or less pulling them apart, and we’re only allocating as we acquire the assets. There were past years when the, you know, market… real estate market was going like up, up, up, up, where we were just raising as much money as we could, because we just had so much deal flow. We do have significant deal flow, but the capital raise side, there’s a lot of uncertainty in— in the investor’s mindset right now, which I— is totally understandable. So now we’re more of a cautious, stick to our coordinating, raise the capital as, you know, and acquire as we raise, as opposed to, you know, making big commitments and things like that. I think it just makes more sense to be a little more prudent right now.

Scott Bursey (19:55)
Thank you for that, Dave. And let’s talk… would you say your approach to fundraising has changed fundamentally in the last five years compared to when you started?

David Van Horn (20:04)
In the last five years, yes. Well, I mean our model changed. We were, you know, we changed from asset managers to capital management, so that was a big change. And then yes, it’s— it’s changed today as far as, you know, the way we raise capital, the type of investors we look towards. But we have, you know, long-term investors that have been with us. We’re coming up on two decades right now, and some of the investors were with us prior to PPR, so it’s been a long run for some of our investor base. But yeah, I don’t foresee that changing, I just see us expanding that with new… some new opportunities. We do like housing. We’re not, you know… I don’t know that you’ll see us do crypto or… nothing against crypto, by the way, to the people out there that are, but I’m just saying it’s just not what we invest in—it’s not our core business.

Housing-wise, yes, we like— we like residential, we like housing, we— we, you know, we do like some of the commercial aspects. But, you know, could we go into senior housing or something like that? Yeah, I could see that in the future or something, but, you know, it’s not on the table today. We like what we do today, and I think we’re just gonna keep going deep and wide in what we do and— and go on from there. I don’t know that we’ll be buying any, you know, McDonald’s franchises or anything.

Scott Bursey (21:31)
For those starting out, what is the one trait when building a partnership for your network when it comes to fundraising?

David Van Horn (21:39)
Well, on the— on the investor side, it’s— it— it’s a little different. On the counterparty side, the co— you know, people that we— sponsors we work with, things like that, might be more in line with, you know, what traits do we look for. But I think a big one is— is experience, reputation, things like that. It’s not… we don’t deal with a lot of novices. We’re looking for best-in-class typically, because we have to be good stewards of the capital we manage. So it’s not, you know… we’re not typically going to go out, you know, on Facebook looking for the next, you know, wannabe multi person or something. Nothing against, you know, hey, everybody starts somewhere, I did too. And it doesn’t mean, you know, we don’t respect folks, but we do… but we tend to l— drift towards more institutional-like, you know, counterparties. And it’s because of where we’re headed, you know, and, you know, we’re trying to build a multi-billion-dollar company, so—

Scott Bursey (22:43)
And let me stay on that path: what does your professional network look like right now, Dave?

David Van Horn (22:49)
You know, we’ll probably… you know, sometimes it— it depends, there’s— can be a slowdown a little bit, but sure, I— I can definitely see us having over five billion in assets. Not that that’s a, you know, prerequisite to anything. Like I said, we’re— we’re satisfied with the growth we’re d— we’re having, we’re not heading in any particular direct— direction with that. We appreciate the community we have, right? PPR stands for Prosperity, Purpose, and Relationships, right? So we do have a foundation and things like that, we care about our employees a lot. We were just awarded Best Places to Work in Philadelphia for our— a company our size, we were first place. So that’s important to us—to the community we have, and the people we have, and the charities we have.

So that part’s very meaningful to us, so a lot of it is about impact more so than, you know, how many doorways we have or anything. I don’t think I’m gonna be remembered… “How many doorways did Dave have?” on his tombstone or anything. That’s not really what’s meaningful to me—it’s more about the impact we’ve been able to have. I— I do believe there is an affordable housing crisis in the US, and if we can assist some of that, that would be meaningful, you know.

Scott Bursey (24:07)
Dave, getting to the heart of it: if you had to put all your capital into one single asset class for the next decade to guarantee wealth preservation, what would it be and— and why?

David Van Horn (24:18)
You know, it’s… if you said the next two, three years, I would say build-to-rent. But I don’t know that I could say build-to-rent for ten years. I… you know, it’s— it’s funny. I was listening to a billionaire, and he had a very simple portfolio. He had roughly half in commercial real estate, he had half in the markets, and— and then he had, I forget, five or ten million liquid. And that was like almost the extent of his portfolio. He figured he was riding the two biggest waves and he was fine with wherever that landed, you know? And he had a, you know, a line against his stock portfolio, just like you can have lines of credit against your properties, and he had… so he had plenty of access to capital, which is important. And he had some cash, and he had, you know… so he had a lot of his bases covered. And it was such a simple model.

Now, I’m not saying… I’m not saying I advocate that, or that’s what I have or anything, but it was interesting. So yes, I do believe in… would I have the bulk in traditional markets and the bulk, you know, on a personal level, the bulk in traditional and the bulk in real estate… and— and then I would be looking to some non-correlated asset classes, and if I could get 10 or 12 of those, I’d be hat— really happy. I don’t know that I would have dramatic amounts in those other areas, because I believe in investing in what you know—I think there’s value in that. But yes, it’s common for family offices to have a core business and a core model where they made a lot of their money, and in my case, it’s real estate. I’ve lost a lot of money in real estate, too, so it doesn’t mean it’s always rosy. You can win and lose, but hopefully you win more than you lose, which was the case for me.

But the… so yes, there’s downturns for all of us in real estate. There was a downturn in 2008, ’07 and ’08, and there is one now in commercial real estate and there’s a lot of people being impacted by that. But I think a lot of it is how we respond to conditions like that, and how we, you know, position ourselves, and— and not necessarily have all our eggs in— in one particular basket, yeah.

Scott Bursey (26:34)
Excellent advice. Thank you for that. And Dave, you have given our listeners just a tremendous amount of excellent advice today, but is there any additional golden nugget or two that you could leave with our pros?

David Van Horn (26:47)
One of— one of my coaches used to say to me all the time—and I still s— ask myself this question—it’s, “What’s the one thing that you can leverage that will catapult you in the next six to twelve months?” And you can ask that question about anything. You can ask it about your business, you can ask it about your personal life, your Little League team, your church, your… whatever, your date— your dating life, your what— you know, your— your significant other, whatever. I mean, you could— you could ask that question in a lot of areas. And it’s very interesting question, because there’s a specific choice of words there around, “What’s the one thing,” not twenty or thirty things, “that you can leverage?”

And everything’s about leverage. That’s… if I were to look back at my success, or whatever you want to call that journey, it would… the— the word “leverage” would be there. You know, I utilized banking. The… you know, it was funny, I went back to my university and spoke and they were… it was funny, they were like, “What was the most important class?” And it was a class I wasn’t even thinking about. It had nothing to do with… I was a business major, originally an accounting major, but it was a class on money and banking. And when I took the money and banking class, I was like, “I well never use this. What’s this for?” And that is the number one thing I’ve utilized in my life was thinking like the bank, and being more like the bank, and— and it’s been amazing.

Doing the opp— you know, the bank is on a retail side is, “Park your money with us and put it in a savings account.” And if you realize what they do, they leverage everything. And whether I use an institutional bank, a private bank, I’m… I become a bank, I’m my own bank… all the above is I’ve been in every seat along that corridor, so to speak. And, you know, it— it’s back to that leverage: it’s what can you leverage? And there’s a lot of things you can leverage: education, people, technology, you know, on and on and on… capital, partners… it just goes on and on. And when you ask yourself that question, the word “catapult”‘s meaningful, too, because that sets in line your goal setting.

Because when I say to you, Scott, you know, “Do you want to double…” You know, a lot of companies—because I— I had been doing some consulting when I was away from the CEO role—you know, a lot of businesses will be like, “I want to 2X my sales or double sales and revenue next year.” But if you said, “Scott, what if you wanted to 10X or a hundred-X your business?” The answers are different. Your goal setting’s different. There could be 30 ways to double sales, but there’s only one or two to 100-X them. And it really changes your focus on what’s most important and what you should be doing and your— and your core… really, it’s focus. Focus is the thing and leverage is the thing. What is that thing that you can leverage right now, going into the, you know, the next six to twelve months in your real estate business, in your regular business, in your personal life, whatever that is, that’s really gonna catapult you to another level? And it— it is meaningful to keep asking yourself that question.

Scott Bursey (30:41)
And Dave, with that in mind, you wrote a book. Could you tell our listeners the title of the book and give us a little bit of a— a rundown of the book?

David Van Horn (30:51)
Sure. Real Estate Note Investing. Now, this is a book I wrote back in 2018, and it was just an introductory book into the world of note investing. I am a firm believer that we are all in the note business. I just… most people aren’t participating in it or knowingly participating in the note business, but there’s trillions of dollars’ worth of debt in the United States, especially where we have student loan debt, auto debt, medical debt. I am… I like collateral-backed debt like mortgages.

So and what appealed to me about the mortgage space was instead of writing checks to the bank, I like the idea of receiving checks and getting passive income. And for me, it was much more scalable than owning hard real estate. And I think what opened my eyes to it initially was I had this… you know, I was a property manager at a RE/MAX, I had my own portfolio of like 40 places, so to speak, outside Philadelphia, and then I was a hard money or private money lender. And what I noticed was I was going to court every week with my rental portfolio, but my mortgage portfolio I wasn’t. And very rarely did I have to, you know, do anything on the legal side or take a property back or something. And— and then I got into distressed mortgages on the institutional side, and it was very, you know, much more scalable and less hands-on actively.

You know, everything we did was mostly by computer and phone, which was much different than, you know, having to do all the other things when you actively own real estate. So it— it fascinated me that, “Hey, I could buy assets at a discount with a high yield with collateral.” And I think that’s what first really got me turned on, especially into delinquent mortgages, and then, you know, the rest is history, kind of thing. But I do think there’s a place for every in notes, yeah.

Scott Bursey (32:42)
Wow, that’s fascinating. That is really, really fascinating. And pros, you’re gonna want to pick that publication up. For those of our listeners that want to keep this conversation moving, stay in your lane, or collaborate with you, Dave, what’s the best way for them to reach you?

David Van Horn (32:58)
Probably through our website, which is pprcapitalmgmt.com, like management—so pprcapitalmgmt.com. I’m also on LinkedIn and things like that—people can reach out to me, I do answer people there.

Scott Bursey (33:15)
Dave, thank you for joining us today on the Real Estate Pros Podcast.

David Van Horn (33:19)
My pleasure.

Scott Bursey (33:20)
This has been just an outstanding conversation. And to our listeners, we appreciate you. If you receive value from today’s episode, please subscribe. We’ll be filling your tanks with the lineup of elite guests, just like Dave Van Horn, who are accelerating and setting the pace for the rest of the industry. Until next time, keep your standards high and your vision clear. We’ll see you in the next episode, everyone.