Why Real Estate Investment Is More than Numbers with David Pfotzer

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This is a podcast episode titled, Why Real Estate Investment Is More than Numbers with David Pfotzer. The summary for this episode is: <p>To have success in real estate investing, you need a combination of strategy, knowledge, and a little luck. This week we’re joined by <a href="https://www.linkedin.com/in/david-pfotzer-28576040/" rel="noopener noreferrer" target="_blank">David Pfotzer</a>, Owner and CEO of <a href="https://www.pfotzerproperties.com/" rel="noopener noreferrer" target="_blank">Pfotzer Properties LLC</a> to discuss how all of these things come together in his real estate investing plan. David shares his unique journey in the industry, starting with a "hold and collect" approach that led him to regret not flipping properties earlier in his career.&nbsp;</p><p><br></p><p>With valuable insights and lessons learned, David highlights the importance of understanding the construction aspect of real estate and how it can set apart successful investors from the rest. We also dive into the challenges and opportunities in managing single-family homes versus multi-family properties and the importance of building personal relationships with investors.&nbsp;</p><p><br></p><p>Join us as we discuss:</p><p><br></p><ul><li>The secrets to success in the ever-evolving world of real estate investing</li><li>When to hold onto properties and when to flip them</li><li>How the construction aspect of real estate separates good investors from the rest</li></ul><p><br></p>

Speaker 1: Welcome to another episode of The Real Estate of Things. I'm your host, Nate Trunfio with Lima One Capital and today's guest, David Foster, with Foster Properties brings some really unique perspective and a lot of diverse experience in single family investing, new construction, multifamily. He's going to talk about his perspective on how he's grown, why he's grown, and how he's transitioned through investing in these multiple asset classes. And we got a lot to learn from David. So let's jump right in. David, my dear friend, welcome to the Real Estate of Things podcast. How you doing?

Speaker 2: I am so excited for today.

Speaker 1: Man. For those of you listening in, hopefully you can hear the smile on David's face and not surprising that you're essentially on a job site taking this, whether you can see it or not. You're always working, man. You're always moving and shaking, and I'm excited to let the audience hear a little bit about your journey. But let's start in the here and now. What are you currently focused on in real estate investing? What's your focus and what's your goals?

Speaker 2: Sure. So for me, it's all about scale. And that's, I want to say by default, led me to where I'm going. And so started out in single family, tried to scale. It's too difficult to stay in the single family world and scale. That led to multifamily. And then you're just navigating, man, how do you scale bigger and multifamily? It's permit ready and we're ready to go vertical and build. And we're excited. Man, I've learned so... The listeners right now, wait until they hear what's going on and they're going to learn everything about real estate in this podcast.

Speaker 1: I'm excited. So again, let's stay in the here and now. What does scale mean to you and why scale?

Speaker 2: Okay, so for me, my net worth is enough for me to retire and play golf every day if I wanted to, but I utilize what I do as a form of sport. And so I love competing, and so I use real estate as my form of competition. And so I don't need to buy anything. Listen, my wife's happy. I'm on my personal job site right now that I've got a hundred acres out here. We're building a fantastic house. Next year we're going to have a pool. So it's like I don't financially need anything else, but I can't sleep at night without thinking about real estate. And so luckily my wife is along with the ride, she's even involved in the company and whatnot. But man, I just love doing deals. I love doing construction. I love seeing the before and after, and just seeing how to get from this to there, and that's my game. That's what I love to do.

Speaker 1: That's awesome, man.

Speaker 2: And so-

Speaker 1: Oh, go ahead.

Speaker 2: So yeah, so scaling is a big part of the competition. So the more units you have, the more acres, that's how, listen, if I know someone else has more units or land than us, we're competing. I want to know what they do. I want to know exactly how they do and what they do. So hopefully the people who have less units and acres than me could listen today and learn some stuff.

Speaker 1: That's funny. And we all know it's not about the vanity, but it's about your why. And I'm personally big on personality type tests and stuff like that, and StrengthsFinder is one of them. So I would imagine that competition is a pretty big strength and driver for you based on what you just said there. So David, you talked a little bit very quickly about some progressions in different investment strategies that you had over the years. Start me back where your first phase was, which I know was single-family family investing. So where did you start? What did it look like and take us back in time?

Speaker 2: So honestly, I thought I was going to become a professional golfer. So once I realized that wasn't going to pay the bills, I Googled just how do you make a lot of money? And it came up to be real estate was the top. 90% of all these billionaires had real estate in their portfolio. So I didn't know what it meant at the time or what it is. I was like, "You know what? I'm going to be a real estate person. I don't know what it is, but I'm doing real estate." So at the age of 20, I bought my first house. And man, the number one thing that people listening need to learn today is that real estate is slow. Yes, it's very profitable. Yes, you can make a lot of money, but it's not for the people who want to buy Bitcoin and make money overnight. It is slow. It's taking a very long time. But I've created a lot of wealth, a lot of cash. It's all of those books that you read to get rich in real estate, but they don't tell you it's slow. And that's the biggest misconception. And so most people that are listening to this right now need to know you will need to do real estate full time and it's going to take a while, but you'll make a lot of money. And the people who are patient and stick with it obviously stay in real estate and they do very well.

Speaker 1: So what did that look like? You bought your first home, but you built your single family portfolio up over time. I think it's some great points and really important lessons for listeners to hear, but long did it take you to get to X amount of single family homes?

Speaker 2: So man, hopefully my mom definitely will listen to this podcast. And so I bought my first-

Speaker 1: Hi, mom.

Speaker 2: Exactly. I bought my first house when I was 20 years old. I didn't even know what a mortgage was. I'm going to the closing table and you're signing these documents. I don't even know what a deed is or anything. I just knew real estate because I Googled it. And so I bought my first house at 20 and I learned everything about construction. It was a fixer-upper. It was a University of Delaware rental property that I knew I could rent to my friends because I'm 20 years old at the time, and I'm in college. I was like, "Listen, I can make this work." Bought that house. And then I realized I want to do this again. And that's where the true real estate investment started kicking. You need the knowledge and the money to do real estate. I bought one house, learned a little bit of the knowledge, and now I need that other missing piece of, okay, well you need the money to do a second deal. I go to friends and family, " Listen, David, we like you. You don't have enough experience." Rats, okay, I go to mom. Hey, mom gives me a line of credit on her house. Literally, does she know what a line of credit is? Because I don't think she would've done it. But no, we took a line of credit out on the house and ended up buying four or five more single family homes. And that was over probably a two- year process, but I would buy it, fix it up, rent it out. And Delaware is not a good flip market. And this was 15 years ago, so Delaware was never... It's not a good real estate market period, hence all of our holdings and investments is south where the numbers are just significantly different. Delaware, you can't bring on investors. There's just not enough spread. And so people up north read these books how to get rich quick in real estate, and it's based on Atlanta or California stories. And I'm sure, I'll speak about Atlanta because I know it. They'll hear about these stories, buy it for this, sell it for that, and they think they can do it out in Delaware. And it's not the same market. So it's one thing is I've got my nephews that say, " Hey, uncle David, we want to do exactly what you do but in Delaware." I'm like, " Listen, it's not worth your time. The realtors will make more in the commission than you do in the real estate." So I learned after I ran out of my mom's line of credit, " Well, okay, cool, I've got the experience now and the knowledge. How do I find that missing piece of the money?" And I started looking south. I just literally Googled again, hey, cheapest apartments. And I looked in Memphis because it was a thousand to 5, 000 a unit. I'm like, " Wow, I can buy a lot of units there." I take a road trip to Memphis, I survived maybe a couple hours. I was like, " This is a war zone. I can't can't live here." And that's when, I've always been about family, business and stuff, and it has to work out too. I have to enjoy what I do. And so I just couldn't see myself living in Memphis. It wasn't the real estate or the construction or the high crime rate at the time. It was I can't see myself living here And trust me, I'm living on a job site right now. So I have to be able to be all in and comfortable in my happy place. And I'll work 24/ 7. So a friend of mine from Delaware, actually his dad works at Home Depot, moved to Atlanta and I posted on Facebook, " Hey, I'm stuck in Nashville because of the hurricane in New Jersey canceled my flight." And so he was like, " Hey, I'm in Atlanta. Come stop by and see me." I take a ride out here. It blew my mind. You've got the most expensive parts of Atlanta and you've got some of the cheapest parts of Atlanta. It's like, " Wow, I can make this work." And in two weeks I was living in his town home trying to get repositioned down south.

Speaker 1: That's awesome, man. I know the listeners can hear the passion, and I know you pretty well to know you're a very passionate man and that drives you to work your butt off, like you said, 24/7. But I do think it's really important that you need to be passionate about what you do, especially when as you said, real estate's slow and it's not easy. I think that's just a fact. So to my understanding, you never flipped any of these. So you got a great construction knack, which we can get into, but you never flipped the homes, you always held them, I believe, but confirm that and tell me why.

Speaker 2: So I was always on the Warren Buffet, rich dad, poor dad. I've always followed their ideology of like, " Hey, why would you ever sell your gold line?" And so I always saw all of this stuff as, " Wow, I bought it for a great price. Cash flow is positive. Why would I sell a gold mine?" And really again, in Delaware, there's no flip market. It didn't make sense. And for the amount of work that I was doing, it didn't make sense either. So it's like, man, I'm going to pay more in commissions to a broker versus if I hold it, and then if the property value is up, I can take a line of credit out or I can refi, pull money. There's so many other creative ways that I just saw flipping as anti- real estate. At one point I was like, "Ew, you flip? No, I'm not a flipper. No, I own real estate. I collect mail. You can't collect mailbox money if you flip. You're just a high paid contractor." Now looking back on it, I wish I would've moved south sooner. I wish I would have flipped some properties to generate cash to do bigger and better deals. And I'll dive deep into that real quick. When it comes to scaling, I've always had a game plan and I've always had, " Hey, I want to do this and I want to follow my game plan." And it's always just do bigger and better. I did so many single family homes that it, at one point, hurt me to transition into multifamily. And now I don't want to say I did so many multifamily deals because I've only done one. But I knew that when I tried to get that loan for multifamily, they looked at me funny saying, " Well, listen, you've done 50 plus single family deals. You are the king of single family, but you know nothing about multifamily." And I'm like, " All right, well, it's 10% different, but listen, I can bridge the gap. Everything's going to be okay. A two by four is a two by four. Okay, yeah, maybe you're using a lot more of them, but I can do apartment deal." I'm like, " You know what? I will never buy another 48 unit apartment complex again." It'll always be a hundred, 150, 200. Every deal I do now will never be what I've previously done. And so that's something that I learned. And so that's where I go back to real estate's slow. If you're listening right now and you want to get into real estate, which is fine, everybody wants to, it's slow. Take your time, you'll be okay. But listen, a friend of mine asked, " I want to get in real estate." I said, " Listen, if you're okay making no money on your first three deals, you'll be successful in real estate. But if you expect to make a hundred grand on your first deal and retire overnight and all of a sudden become this real estate investor, don't get involved." People, that's their make or break. If they can't make money right away, they get in, they get out.

Speaker 1: That's so true. And look, I have a big smile on my face because as you know, candidly, I was that guy lending you the money on the first multifamily deal, and I did have a little bit of what the heck's this guy going to know about multifamily? Although at the time you did have up to 50 properties, I believe it was, and so I think that's a really important topic that you can really help educate the listener on too here is. So what's the same about single family at the level that you were at? You had multiple properties and experience under your belt, and not only acquiring, but renovating and managing. What's the same between single family and multifamily in your perspective?

Speaker 2: Man, I'm going to give you a two part response to that. So it's one thing, either you're going to be successful no matter what you do or you're not going to be successful in what you do. And I see that all across the board with people dabbing in and then dabbing out if you are. And the best way to relate to that is contractors, because that's what I deal with day in, day out. If I see a new contractor that I'm trying to do business with, they show up on time, they do everything outside of what they're paid to do, show up on time, respectful, they're always looking to learn. I know we're going to be good in business and good on a job site and good whatever I do. And so whether it's single family or multifamily, if you're not willing to learn, if you're not willing to admit your mistakes, if you're not willing to try new things, I don't care what you do, you won't be successful. And that's where they're going to throw in that third party of, " Well, listen, we like what you want, but you need to bring on somebody that knows what they're doing." And so that was a big hurdle for me. I'm glad we got over that. And now that I knew that that's a hurdle, I'm seeing that same hurdle on the new construction side. And so that's why I'm super ecstatic that I'm on a job site right now, building a multimillion dollar single family home for myself that I've learned a ton. I've never done poured concrete or underground plumbing or underground electrical. I'm so glad that I learned on my own house, even though I was going to go build regardless and make it work because that's what I do is make things happen. But man, I learned so much stuff just by doing this. And so when it comes to single family and multifamily, there's so many similarities. It's just honestly on a bigger scale. And that's where the scale does people in. I'm okay with risk management. I'm okay with having multiple crews working and I really get construction. And that's a lot of things that people don't get is the construction aspect of it. Many of my competitors or other companies that are in real estate, they are extremely good at capital raising or the syndication or everything other than the construction aspect of it. And that's why a lot of these lenders or investment companies are so hardcore on, " Well, who's your GC or who's that?" So it's a lot to take on. But if you can do five or six single family homes, I would say go do an eight plex and then start growing your portfolio. And again, real estate's slow, and that's where you need to be okay with. If you've got a 10- year plan and you can stay in real estate 10 years, chances are you're going to be successful.

Speaker 1: No, I like the answer how you talk a little bit tactically at the end, but also lead with it's really mentality and discipline and that grittiness and setting that goal and going out and achieving it. And so what I'm also then interested in is the inverted question here, which is then, there is differences. You started to allude to some, but what did you see as some of the bigger differences or even learning lessons in the differences that you experienced in doing the multifamily deal?

Speaker 2: Sure. So the secret number of multifamily is a hundred units. And so you have to have at least a hundred units to have a full- time property manager and a full- time maintenance manager. A full- time load capacity for work, and then financially the ability to bring them on board. And so many people who don't have that financial capability to buy a hundred units right off the bat have to buy those 8, 12, 24, 48, 60, whatever those units are that they can financially acquire. But honestly, you're a mom and pop organization, so you need to be okay with being a little bit more on call. I would say our apartment residents are a little bit more needy than our single family home residents. The single family people have to cut grass. Our apartments, they don't have to cut grass. And so usually people who are okay with cutting grass are okay with changing a light bulb or, " Hey, okay, yeah, my toilet doesn't work, but I've got an extra one." But then also, okay, David's going to be a couple days before we get out there." Versus an apartment complex, cool, my guy's on site, we can go look at it within five seconds and get it resolved. So there's a little bit of management. It's not enough to say, " Oh my gosh, you should be scared. You shouldn't do it. If you can only do a single family home, you can't do multifamily." There's most definitely a learning curve. But if you want to get into real estate and you want to make a lot of money, definitely apartments is where you need to eventually get to because it's too hard to scale on a single family wall. Right now, at one point I had 30 single family homes and my guy was bouncing back and forth. It was just too hard. And I wish these larger companies who bought thousands of single family homes will just come out and admit, " Hey, listen, it's a good idea, but it's too hard to execute and it's too hard to manage." Right now they're getting lucky with the markets that they bought, for instance, Atlanta. If you buy anything in Atlanta, you're making money on it. So I wouldn't say everyone down here is a real estate investor because some of them don't know what the heck they're doing, but they're buying real estate and they're in a great market. And then I've got friends that are buying real estate in Delaware that the values haven't gone up forever. So luck has a little bit of play into it. But no, as long as you have a strategy and know what you're doing, it'll all work out. But yeah, so there is a little bit of difference in multifamily, but not enough to where if you're a true investor that it's going to keep you out of it.

Speaker 1: Yeah, and I think that as you said, and as we talked about, you brought in a lot of experience from single family and a lot of success, certainly a lot of trial by fire, trial by some realms of failure. Although I know you always made your way through it. And as you exemplified, you got a ton of construction background and you emphasize how that's important. What's some, just whether single family or multifamily, you gave some great feedback on what you look at in a potentially good GC and contractor, but what other construction management advice does David have for the listener?

Speaker 2: So the construction aspect of it is the X factor game changer. It's how I control my own risk. But honestly, that's what separates, in my opinion, a good investor from just your typical investor. Meaning if I go to school, anyone can read a book and learn how to balance. I've got accountants who think they're good at real estate just because they can look at a pro forma and, " Oh, this financially looks sound. That's a good deal. Let's execute that." And then they go in there and you can't execute it. So I know plenty of people who have bought real estate and don't like it, don't do well because it's not something that you can just sleep on. You physically have to touch it and watch it and oh my gosh, a roof leaking, what do I do? And so there's always going to be construction in real estate. Now, honestly, that's what separates these companies because they've got access to tons of capital, but they don't know how to solve the human interaction. Oh my gosh, my toilet's not working, roof's not leaking, but we own 10,000 homes. How do we solve all of this? They haven't figured that. They just see it as, and a lot of these people see real estate as something that they can just pawn off here and there. They don't see it as these are people. I've got a project right now that I'm working on that the road is a two lane road, one way that way, one way this way. And my traffic report is not requiring me to put in a turn lane. But the city is saying, " Listen, David, we would like for you to put a turn lane in." That's an extra a hundred thousand dollars that it's going to cost me to put a turn lane in. Now I can go to them and say, " Listen, it's not required. I'm not going to do it." Or I can say, " Hey, listen, if my tenant dies, they can't pay rent." So to me, a hundred thousand dollars, if I can save one person's life or one of my tenants who pay me rent, that's worth it. And so that's the justification I have of more than just spreadsheets and excels and pro formas and budgets and all that stuff. Most of my stuff, I overpay, I over budget because I do things the right way and I know I'm going to hold it versus my competitors, they're out here, " Hey, we're going to buy it, we're going to sell it in six months because the rates are going down or up and sideways and all this." It's numbers to them. It's not real estate to them. It's just something on a piece of paper on a computer that they can email and send a wire to. Hopefully it doesn't sound like I'm complaining, but there's a big difference. I enjoy what I do. I'm going to make so much more money than what I currently make, but I've already have a ton of it. So you got to enjoy what you do. At a certain part of the day, is Jeff Bezos any happier than I am? He eats the same cereal that I eat, so why? Okay, I'm sure his toilet's just as big as my toilet. So it's like what in the world? How could he be any happier than I am? Okay.

Speaker 1: I love it.

Speaker 2: You have to be able to enjoy the process. This is all the stuff that within five seconds I can tell if someone says, " Hey, I want to get in real estate," if they're real or not.

Speaker 1: Sure.

Speaker 2: Because I'll tell them, " Hey, listen, if you go do three deals and don't make any money and you're okay with that, you'll be successful in real estate." They either stop the conversation or walk off, " I'm not going to break you even on three deals. Why would I do that?" And the next thing I know, they haven't bought anything in forever. They keep going to these landlord tenant meetings that they're trying to learn. And I'm like, " Listen, just go buy something and learn."

Speaker 1: I think what you're really showing too through all is first it starts with mentality, but then it gets to action. And I think that's what separates people who are active real estate investors by definition versus not. And it points you need to take action. You've also emphasized risk mitigation. You need to understand the risk. Are you in a position where you have the experience, knowledge, resources, money to take on risk or not? I think that's another challenge that I see a lot of people fall down the pit into is they don't really have any of those resources and means to get through high risk deals because those ones do typically look good on paper. So I got to ask you this because you probably got a million war stories, and I know you're a great operator and I know you're a great at managing construction, and I know you're great at mitigating risk, but give me a good, it wasn't the prettiest story example here, man, because I'm sure you got a million, but pick a good one for me.

Speaker 2: Oh man, okay. Hopefully my wife doesn't give me a hard time about this. So transitioning to new construction, I'm working on a project now that first off, I can tell you a bunch of civil guys who not to use. One of them had to take to court because they weren't performing. And not knowing the process, it's hard to predict the future. And so when I have a civil guy saying, " Hey, in two months I can get you to a permit, I can get your permits in hand." I'm thinking, " Wow, this guy's got 30 years of experience. I've vetted him out. This is going to work out." And so almost two years later, we finally have permits. And so I thought a year ago I was going to have permits. So I hire a grader who, we're still got a pending litigation on to where I think we're about to do business. I give him 50 grand so that he can reserve my start date to start doing stuff. And next thing I know, we haven't even started the project yet. I say, " Hey, listen, maybe it's not best that you hold the money. How about I hold the money? We still can do business." But now it's turned into, " Hey, listen, I've spent the money already and I can't really give it back to you right now." So those are things to where now that I know how things work, and this is the same thing with lenders. When we were so close to getting permits that I thought we were super close, I reached out to everybody thinking I could get a loan. And now, today I'm still actively trying to get a loan that I spoke to people almost two years ago. So luckily enough, I haven't burned any bridges to where people don't think I'm just shopping around not to use their business. Same thing with contractors. I've got estimates from a year and a half ago that I call them, and at first they're rude and they're just like, " Why didn't you use me on the project? And I'm like, " Listen, I didn't start the project yet. We finally now have our permits. I'm trying to get funding." So I think as long as you're honest and transparent, someone on the other end you will do business with and they will truly understand, " Hey, listen, the guy, either A, made a mistake, he's learning, he's trying, but he's not out there to get you." So I've got great relationships because of that, because people know, " Hey, listen, David's learning." I'll tell them, " Hey, listen, this is my first new construction deal and you can either be a part of our success and be along for the ride, or if you don't want to give me the time and day, I respect that, but I will find somebody who will fund my project, who will work on my project, who will make it, all of that stuff." So I found out that respect, honesty, transparent is always a great recipe, even when dealing with an investor. Tell them everything. " Hey, listen, this is my 10th project. This is my first project, this is my a hundred project. Hey, we're trying something new." People invest in me. They don't invest in real estate. They listen to me talk. They listen to my projects and they say, " You know what? I'm writing a check to David because he tells me everything I need to know." Versus these syndications out there like Grant Cardone, I don't know what he owns. I go to his website. I'm in real estate, and they purposely try to confuse you. I'm like, " I would never invest in that." I can't talk to him on the phone. I have no idea. Why are you trying to push a book and push a conference if you're a real estate manager or a real estate investor? You should be managing real estate.

Speaker 1: No, I think it's interesting because again, your passion really leads you to success. And you made a Bezos reference earlier. I'm reading one of his books right now. One of the core elements and values of Amazon is the willingness to think long- term and have a long- term investment horizon, which is, in my opinion, one of the reasons why you're so convicted on not flipping throughout your career. But what it really has allowed you to do in that example of the story you just gave is you have a bigger picture, long- term investment horizon that allows you to accept so- called failure. Whereas yeah, plenty of people probably would've given up on their first large development, new construction project that you're still going through right now, but you're looking at the bigger picture. You're tying it to your passion and your why, and I think that just really sets you up for long- term scalable success and wealth. And I think it's just an important lesson that I take from your story, tying it into you and Bezos having the same size toilet as well.

Speaker 2: I hope he is listening and I hope he writes us a check to invest.

Speaker 1: Hey, and I hope he's listening too as well for other reasons. But what I want you to tell me, because I know you got great perspective on this, so you want single family, pretty high amount of scattered sites, single family assets that you own, renovate or managed. You transitioned into some multi because everybody goes bigger or go home and David's a go big guy. You got into multifamily, now you're focused on new construction. So why new construction versus the other hard asset classes that you've been in?

Speaker 2: Sure. So first off, renovation construction or renovation buying and fix is so much easier than new construction. But right now at the prices, it's cheaper for me to build new construction. It's easier to manage new construction once it's built from an owner management standpoint. Right now my 48 unit apartment complex that I bought almost, man, almost 30 years ago now probably, I can see why it was built in the 1970s and I can see the 1970s construction. Yes, everything is new roofs, new windows, it looks good. It feels good. But there's certain mechanical stuff, meaning that 48 unit apartment complex is on a single hot water heater that circulates through the whole property. And so when that hot water heater goes down, I got 48 residents that are texting me, " Hey David, hope you're doing great, but listen, I don't have any hot water right now. What's going on? Oh, wow, we lost power. Oh wow, the city's working on the water. Oh wow, we've got a leak and I got to fix it." So I would much rather do new construction, and I've learned from the old construction or from the renovation. Okay, well listen, each unit's going to get their own hot water heater to where I don't have to ruin 48 lives because of one aspect of it. So new construction's easier to manage if you build it right. And keep in mind, a couple years ago, I bought my apartment complex for$35, 000 a door. Right now you're looking at units trade for a hundred door that need 10, 20, 30, 000 per door, and you're stuck with an old building that's renovated versus my price per door right now is$108, 000 to build a unit. My competitors can't do it for less than$ 150,000, and our comps are like$ 170,000, $180,000. So why would I go out and buy something on the market right now for a hundred door and put$10, 000 into it and then still have maintenance issues because it's not fully... You can only fix so much of it. So for us, the new construction, but keep in mind, I am in the construction world. So unless you do construction, you can't build for 108 a door. So if you hire a GC, you're going to be go building it for 150 and now maybe that a hundred a door and you put 10 into it maybe looks a little bit more lucrative or better cashflow because you can't build for 108. But for us, again, being the owner, the manager of it, I see, okay, first off, I'm never worried about how much money we're going to make. I could break even on every single thing that I do, but as long as my principal and interest gets paid down and in 10 years, 20 years, 30 years, my payments go away and I own this asset free and clear. That's the perks of real estate. That's how you become real estate wealthy. And so on this project, I'm okay breaking even. I'm telling the lenders, " Okay, so the debt coverage is 1. 18. It's not 1. 20. So are you guys knocking a loan? I'm okay not making any money on it. I just want to break even and build it. That way I learn and I can do stuff, and I know at some point the rates are going to come down, I'll refi or it pays for itself and in 20 or 30 years, I own an asset free and clear." So keep in mind every loan and every lender and every investment is completely different. It's not tailored to people like me. I mean, everything is always, what's your exit strategy? How quick can you get in and get out? I will sell the contract or sell, get in and get out. How fast can you get in and get out? I don't want to get out. I don't want to sell my gold mine. You know what I mean?

Speaker 1: It's funny, but there's an important note for many of reasons. Not everybody is like you and way more good reasons than other. But no, I think this is such unique and great perspective, man. And again, the passion and the discipline that you have to your beliefs and your success, I just commend you for us. I've always really been attracted to you, man. But so last topic I want to hit on here is you alluded to it earlier in the show, raising money. So you talked about raising money pretty early or trying to, and then I know you went back to it, so what's been your capital raise strategy and mentality over the years and talk to us about that?

Speaker 2: So you have to have access to capital. In order to grow scale, even buy your first property, you have to have knowledge and money are the two things that I tell my oldest daughter to be successful. You have to have knowledge and you have to have money. I don't care what business. Lima One capital, you guys have to have money in order to lend out money. And you guys have a lot of experience and knowledge. So you guys are good at what you do. You guys hit those two little buckets, the knowledge and the money. In real estate, you have to have the knowledge or the money. And so you either have a, let's just say high net worth investor who has no real estate experience but understands the lower the high qualities of it. And so they find operators like myself. Okay, cool, you're in real estate. And then on the other hand, you have operators like myself who are extremely good at real estate, who we need access to the capital. And so investors are a great thing in real estate. You have to have access to capital. And so a couple things on our end that makes us different than your typical syndications out there is we don't offer any true equity in our business. In my business, I'm a hundred percent owner of it. We pitch it as, " Hey, listen, invest in David. He's going to be a good fiduciary to your money. It's more money than you're going to make in a bank." And we tell our investors, " Hey, listen, it's typical to a CD. We tell you when you're going to get paid, how much you're going to get paid, when you're going to get your money back. And it's that. It's a fixed debt investment." And so many of our competitors use the whole syndication in 90/10, 70/ 30, 8% preferred, all that stuff. So equity is the most expensive aspect of real estate, especially since we build it for so cheap. If I was building it for 150, I would probably go out and have a trillion investors because I would offer them a hundred percent of the company, and I'd keep the cash flow aspect of it because the property's worth what they paid for. So it's one of those things to where you have to have investors. And so that's one thing that usually people on the backend of real estate are really good at. They can do a nice pro forma. And that's honestly where I need improvement because I'm good at the construction, but I don't know how to truly make a pro forma look good to where you can compare apples to apples. And I've got people on Wall Street that are saying, " Hey, listen, we don't know about this David guy in Atlanta. His balance sheet doesn't really look... It looks like he did it on Excel and he looks like he doesn't know how to..." I know how to add and I'm actually really good at math. " But it looks like he doesn't know how to do all these formulas and stuff like that." So you have to know what an investor is looking for, and you do have to have investors. And usually that's one difficult hurdle to where if you don't know how to raise capital, that's going to keep you from getting into real estate. If you don't know how to manage investors, that's going to keep you out of real estate. So you can go out and buy a couple single family homes yourself. But again, if you want to read that book on how to get rich in real estate and become that wealthy person, you at some point will have to have access to capital, meaning you have to have investors. So you have to learn that aspect of the business.

Speaker 1: I know you also have a unique and pretty broad perspective on the investors that you work with. Can you divulge into that a little bit?

Speaker 2: So to me, an investor is more than just someone who has money. I don't see tenants as someone who just pays rent. I want to make sure that they have transportation to get to work so that they can pay the rent. I want to make sure that they're educated and say, man, when I bought those 48 units, I had residents who didn't even know the Internet existed. And I'm here thinking, " Wow, well, we require our tenants to pay rent online." You can't pay cash. You have to pay your rent online. That's how we scale, that's how we manage. And I'm looking at them thinking, " Wow, if I work at Walmart and I can't email you a schedule, or I can't get in communications with you quickly, I'm going to go to the next person who I can email and give them the promotion. Wow, Billy, you can check your email. I would like for you to come into work tomorrow." Versus someone who doesn't have Internet. I don't have to work till Saturday. Today's Monday. Will I go in? " Oh, y'all needed me to work on Wednesday? Well, you should have called me. Oh, my phone was off." So it's crazy how tenants, investors, I don't see them as money. I don't see them as a username on a spreadsheet. I see them as real people. So when these investors, " Hey David, how are things going?" It's more than just writing me a check. I want to know who they are, what they do, and I want them to understand our business. So I go above and beyond explaining to investors, " Hey, listen, this is what we're trying to do." Because at the end of the day, technically I can lose their money. And the last thing I would want to do is say, " Hey, listen, you wrote me a check for a hundred grand. Maybe you didn't know what I was actually going to do with it, but I actually lost your money. Now I feel bad." And so that is the stuff that it's not about how much money you can make or how much money you can lose. It's, hey, listen, some of these investors, I consider family now at this point. So it's like they come and visit, they text me, they call me, they know where I live, they know everything about me. They know I'm having a boy come Christmas. They're texting me every month, " Hey, David, how's your wife doing?" So it's the same thing. Jeff Bezos has investors, but is he that intimate with his investors? So it's more than just making money in real estate. I enjoy what I do. You got to enjoy the process. I bet you Jeff Bezos loves his process and loves what he does, and he's extremely good at it. And so everybody at the end of the day, enjoy what you do, enjoy the process, and life is good.

Speaker 1: Well, man, again, I think some unique and really valuable perspective, but I don't know if there's a better way to end it than the quote that you just landed there, man. So I just want to say, David, I just really appreciate you, man, and it's been awesome just to know you over the years and see your continued success. No matter what you're doing, you find a way through it. And I'm just continuously impressed, man. So thank you so much for being on the show and sharing a part of your mind and your values and your experience with the guests here. And I can't wait to catch up with you soon and continue to hear about the next big and best thing that you're going to be accomplishing and succeeding at.

Speaker 2: Hey, once we get done with the new development, we need to do a part two and I'll give you a follow- up. And by then you'll have all these viewers that say, " Hey, we want to talk to David. We got some questions for him." So we'll circle back.

Speaker 1: You're going to have some good friends slash investors lining up and out the door for you, man.

Speaker 2: There you go.

Speaker 1: You've really shown your expertise here and I just appreciate you for all you do.

Speaker 2: Absolutely. Thanks, Nate.

Speaker 1: Thanks again to David Foster with Foster Properties. This was another great episode with again, some very unique perspective given. Please make sure to subscribe on your favorite platform and check us out on Tuesdays for the next episode to drop. And you can always find all things on the Real Estate of Things at our website, www. realestateofthings. co. We will see you next time.


To have success in real estate investing, you need a combination of strategy, knowledge, and a little luck. This week we’re joined by David Pfotzer, Owner and CEO of Pfotzer Properties LLC to discuss how all of these things come together in his real estate investing plan. David shares his unique journey in the industry, starting with a "hold and collect" approach that led him to regret not flipping properties earlier in his career. 

With valuable insights and lessons learned, David highlights the importance of understanding the construction aspect of real estate and how it can set apart successful investors from the rest. We also dive into the challenges and opportunities in managing single-family homes versus multi-family properties and the importance of building personal relationships with investors. 

Join us as we discuss:

  • The secrets to success in the ever-evolving world of real estate investing
  • When to hold onto properties and when to flip them
  • How the construction aspect of real estate separates good investors from the rest