TRP091: Scaling and Growing Your Company
May 21, 2020
If you’re looking for honest real world, no BS advice on how to create income, build wealth, and achieve true freedom with real estate, your in the right place. Welcome to another episode of the real estate preacher podcast show where your host Randy Lawrence shares with you his experiences and strategies from over decades as a successful real estate investor. This episode is sponsored by prosperity capital partners. Learn more at prosperitycapitalpartners.net now onto the show.
Randy: Hey, welcome to another amazing episode of the real estate preacher. We have a fantastic episode today. My good buddy Nate is going to be on here. Nate Trunfio from Direct Lending Partners (DLP). So excited to have you on and you guys who are listening today are going to be especially blessed. Nate, welcome to the show brother.
Nate: What a warm welcome and thank you. It’s an honor to be here, man. And I just hope I can live up to that hype, but I’m pretty confident that when we come together good things happen.
Randy: When we were in Orlando, see man, we’re like going off the chain. People are walking by like, Oh, what’s going on here man? So and you know what, Hey, that’s the truth. There’s a great quote I love, I shared this with another dude the other day. Iron sharpens iron. So one man sharpens another. When you got a pro like yourself, my myself come together. Good things happen. and we cover all the bases between you and me, you know?
Randy: Yeah. I love it man. Well, let’s talk about first and foremost, some of the folks that are listening, they may not be familiar with DLP. Another a bunch are, so let’s talk about what’s your role at DLP? What are the main things that DLP does?
Nate: Yeah, absolutely. So, sometimes it surprisingly can be a struggle to explain it cause we do a lot and sometimes I always think it’s better to say what we don’t do because we like, again, we do a lot. So I personally am the president of DLP. Direct lending partners is the lending arm of our business. We lend on all things single family fix and flip single family new construction in multifamily bridge loans. I’m going to circle back to that because I want to talk a little bit about our story and who we are as a core. So I’m very fortunate enough to be on the executive team, in partake with a lot of awesome leaders and in helping drive the business to continue to scale DLP real estate capital. We’re actually more of like investment managers and we started off as realtors.
So we’re not only like a lending institution, we raise money, but we started as realtors. We still run a very successful Realty brokerage up here in Lehigh Valley today. I think it was number eight in the wall street journal last year. So we did a lot of deals and that’s how we got our start and we meaning us as a company, but our awesome owner Don winter, was the founder and owner of all of the companies. So we first started fixing and flipping. We’ve now done a well over 1200 fix and flips as an executive team in our existence. We then started to realize, we needed some additional outside capital. So we opened up the capital, our DLP capital advisors, which is where we raise our money. We raise money into all open-ended funds.
So that is sort of the, where it comes into play for an investment manager perspective. As we started to get the gasoline for the car, the Capitol, we started to say, how can we better deploy it with scale and con and consistently sustain profitability? And we drived on multi-family. So we started going down that route. You know, we started in the smaller unit communities, C class to now growing to a C, B and even touching a little bit of a class a. We own about 10,000 doors right now. We self-manage most of those. So we have a large property management team, and again, we’re very much about being an operator and having control over everything we do. So we raise our money so that we can deploy it in the way that we know it. And then we manage the assets and manage it to the business plan as we can.
On the way we said, we’re tired of working with other hard money lenders, bridge loan lenders. So we decided to open up our own. That’s where direct lending partners came into play. And essentially those products that we lend on, single family fix and flip, single family, new construction and multifamily bridge. We operate in, we invest in all those asset classes and strategies, yet we also lend on us. We like to think we can bring an operator’s mindset to how we lend, which allows us to not only sort of be in the gray area, go outside the box at times, but also create relationships with real estate investors. And that’s sort of what we’re all about here at DLP, providing an opportunity for people to grow personally within their business, create wealth. And that’s all across from our investors to our employees to whether our end clients are on borrowers. And thats a little bit about a lot of what we do.
Randy: Yeah, for sure. No, that’s awesome brother. And again, I love the hands on approach in the reality of very similar to us, you know, bringing full integration to it, you know, controlling the process is in, you know talk a bit about how that’s helped you with scaling in the process. You know, because again, a lot of people, you know, whether it’s an attorney’s office or whether it’s a real estate investor or a doctor who’s listening, you know, there is a lot of times that desire to scale, to grow, and how is that served with you guys? Share a little bit about that.
Nate: Yeah. So, you know, one thing that how I want to talk about that is the one thing that we’re like just super proud of as an organization is our culture. And what brings together our culture is what we’re all about and where we’re going and what we’re trying to do. So we’re here to provide real estate solutions as you can tell from a number of different strategies and verticals in order to help improve other people’s lives. You know, so like I said, not only to our investors who invest the money, our employees who help us get there to then, you know, the end client, whether it’s a borrower on the lending side, a tenant on the, on the, you know, acquisition of property management side and so on and so forth. So that’s sort of at our core and at our nucleus is essentially our mission and our purpose.
From there, then we go out and we set our goals. We’re very goal driven and oriented company. So just like a lot of people that have implemented like the EOS platform, we have goals for the longer term, 10 years, five years, three years, always are setting consistently one year goals. And then we chunk it even further down into our rocks, our 90 day world, our 90 day goals. So the goals, it allows us to continue to drive ourselves the mission, the purpose, and our culture allows us to bring in the right people to help drive towards that. And then you bring it down one more level. Granular is we set a, we set a lot of processes and we make sure that we are in tune with all of our people that are helping us accomplish these goals by making sure they know their responsibilities, they know their what their expectations are.
And then we have a culture of accountability. And what’s really cool about that is that we, yes, you need to focus a lot on the accountability factor, but our culture as a whole, people trying to do good for themselves and do good for others is always just one that’s holding everybody accountable to that. And then to their respect of responsibilities and expectations along the way. So I know that’s sort of like high level, broad strokes on it. We started who we are, then we go to where we’re going and then it’s how we’re going to get there. And that’s, you know, through processes and our people.
Randy: Absolutely. I mean, that’s just so critical and again, that you’ve got to have the right processes in place. And again, that happens a lot with people where they may want to grow their business, but they don’t have a quality process. And like you mentioned, the EOS system, that is a great system that a lot of folks use or some variation there in. But it helps to align all the employees focused on a particular direction in establishing those goals. And so that’s, that’s really critical. And then even to making sure that the right people or on the bus right, and then even more from there of having them in the right seat on the bus. And, and, and again, that’s where, you know, I’ve seen that attorneys or doctors or you know, engineer guys that run a company where they’ve necessarily had the right culture, meaning the right people. And so that’s where I think it’s super critical to be able to have that no doubt. And then that’s also why you guys have you know, garnered such success as well is because you have those components together. Everybody on the ship is rowing in the same direction towards the same end result?
Nate: Yeah, I mean we are very much aligned. They’re my friends, you know, and, and you know, I think we’re reading from the same book, probably a lot of Jim Collins type of stuff, but you know, we’re big on, you know, putting the re, bringing in the right people to the bus and putting them in the right seat. And then the, I think what’s one thing that’s missed oftentimes is like, okay, you bring in the right personality for let’s say an acquisitions manager and you put them like, you know, that’s the right person. They fit your culture, they fit your mission and purpose and you know that’s something that they can Excel at, whether it’s based on their experience or based on their personality index and so on and so forth. But then you have to give them not only direction, but also the expectations of how they’re going to go about doing that and define that at its core.
So that’s something that we spend a lot of time on. Not only just who we bring in and where we put them, but then what we expect that seat to do and where we want it to go. And we break that down really prior to bringing anybody board. When with re even starting with our job posts. So we build out a job post based on the responsibilities and the expectations that we want for the end person to have in the given job. We use that to find that type of person and then we make sure when we bring that person on board, they fully know what is it they are going to do and what the expectations of what they’re going to do. They’re going to be held to. So
Randy: That’s huge right there. I don’t want folks to miss that. Like when you’re adding team members that you’re identifying, you know what it is the type of person that you’re looking for based on the expectations of the culture and the job responsibilities so that you’re kind of self weeding out people that are not going to be a match for that. Right. I mean too, oftentimes people just kind of, it’s like the throw it against the wall and see if it sticks and then you got a hodgepodge of crap coming in and people are overwhelmed because they’re weeding through so much stuff that doesn’t, you know, kind of fit or even worse yet they don’t have a process, you know, whether it’s Colby or disc or whatever the, the ultimate personality profiling may be. They’re really, I identify that we do very much the same thing where it’s again, we identify our values and then the expectations and then Lord willing that helps to weed out some of those people that you know are not going to be a right fit.
Nate: And bring it full circle. I like when, when they know exactly what the responsibilities are and what the expectations and we have them and they have of themselves, then you can interest and empower them to help you push the needle towards your goals. And you know, otherwise you’re just, like you said, throwing crap up against the wall and that’s not going to get you anywhere. That’s not with specific purpose, with specific plan and you’re not relying on any specific process in order to fit people into all those PS. They got to know what they’re there for and what they’re going to be held accountable to. And you’ve got to give them that direction.
Randy: Yeah. Well I think too, the thing you said, which people leave out of the mix too sometimes is that accountability. You’ve set the expectations, you’ve put that in place. But then it also requires that maybe continued empowerment, but also the accountability focus too. Oftentimes I’ve seen where guys that are running a business where, okay, the hire the person, they throw them at it and then just to expect to come back and see success, you know, 30, 60 days later and when they check back in at 30 days later and it’s a mess, it’s like, well, how the heck did that happen? It’s like, well, there was no, you know, accountability along the way. There was no iteration and instruction. There’s no, you know, real help that needs
Nate: This is my attempt to being a rapper, I guess, cause this is the only I can connect three rhymes here. So my rhymes to this as always, you know, people respect what you inspect and you have to inspect what you expect. So, you know, to the, to the seat level, they’re not going to, you know, respect anything that you’re not following up on and that you’re not even, you know, helping coach them to and through and lead them on, and then, you know, how can you, you know, look to expect them to do it if, if you’re not inspecting it either. So that’s sort of where I tie that whole boat together, which is very relevant to me to, to accountability. Because a lot, like you said, a lot of so-called leaders think that they can just bring in the right people and they’re going to be self sustaining and helped you continue on your path. But if you’re not along the way, help coaching them and then, you know, sort of inspecting what they’re doing, they won’t respect it. And how can you expect it to get done if you’re not the one helping, you know, make sure it’s getting funded. And maybe it’s not always you that’s doing it, but someone on the team has to at least follow through in order for there to be that big a word of accountability.
Randy: Absolutely. Well, and again, you know, there’s definitely work involved in it, but the reward is then now you’ve got people in process that’s helping to grow. Because again, if it, for those of you listening, it’s like, Hey, if there’s a desire to grow the law practice or grow your, you know, a dentistry practice or grow your you know, professional practice, it’s gotta have more than just your involvement. And that’s going to be those people. That’s going to be that process. That’s going to be the element of scaling, which is so critical. Well, so how did you get involved in real estate? Cause one doesn’t just step in as the president of DLP. How does that work? What does it look like? What’s story behind Nate?
Nate: Yeah. I’m younger ish, I’m on the younger side. I graduated college in 2009, a little bit of a you know, tough time to find employment. There wasn’t a ton of jobs, you know, we all know it was going on right around then, and I actually, I almost followed sort of in your original footsteps getting into money management and was about to take a job with MetLife which they would have paid me X amount of money for six months, which coming out of college, it was a good amount of money for me at the time. And they asked me to go source my own business and I was college kid, I was from Massachusetts, living in Pennsylvania. I didn’t know anybody. So to come up with a whole hundred list, a list of people to go after, it was tough for me.
I ended up luckily taking a job that would pay me minimum wage, but they gave me leads and it was in the mortgage business. So I got my start in anything real estate through residential mortgages, if you remember back to Oh nine Oh 10, it was like the refi boom. And so, you know, I really like learned how learn the corporate world learn how to be successful, which to me was just literally out grinding everybody, you know, I was always going to be the last one out of the office was my mentality. And then I kept wanting to climb the ladder more. So got into management early on and, and really along the way, just found that like yearnings to continue to learn more and become a master my craft. So I worked on mastering the craft of mortgages. I worked on mastering the craft of management, which I don’t know if anybody can ever master, but I tried.
And so, so that got me like really just hooked on real estate, right? Cause obviously mortgage is tied to property. From there I got tired of the red tape of the residential lending industry. So I got out of that and I was director for two different debt funds that lent business to business lending. So lending to the small businesses and then it really taught me all of my like, credit knack. It wasn’t as much real estate focus, but who do you give money to? How do you structure deals to make sure you’re mitigating risk, you know, risk adjusted returns, credit analysis, all that fun stuff. I really learned from my stint for about three years in the B2B lending space. And then I, you know, it was looking to get out of that and just found and stumbled my way into DLP.
And this was just this beautiful mix of like conservative residential lending with a lot of red tape. B2B was the wild, wild West, do sort of anything. And then money is really expensive to find this happy medium and private money in hard money here. So that’s sort of the journey that I took. But again, all of it really bled through. Just like out trying to outwork everybody, trying to put in more, not expect anything to be given to me. Learning as much as I can along the way because it’s, it’s cliche, everybody says it, but if you’re not learning, you’re dying. And if you’re not pursuit in pursuit of something bigger and more to me, which is knowledge it’s really hard to get good at anything and find success.
Randy: Well, you know, this so critical to what you said there just stands out about being a master of your craft. Like really being willing to put in the work right where you are to get better. Right. And I know I don’t even have to ask this question, but I know the answer. It’s like you are always putting in more than you were asking for in return. You know, at every level you’re, you’re looking to become better. You’re looking to do more. You’re looking to outwork the other guy. So as that you can improve. And that’s really, you know, if you want to advance to accomplishing more of what your desires are, that’s really what it requires. And, you know, unfortunately a lot of times today, you know, younger folks maybe don’t have as much of that hunger and you know, it’s just true.
Nate: That was like, that was always a chip I had on my shoulder, right? Being somewhat one of the younger guys in the office and, and so that, that honestly was something that I like, I see it a lot of my peers at the same opportunities as me, you know, without a doubt. I mean, nobody gave me this job. I didn’t know anybody that got me the job that I originally got the, to put me on this path. I was hustling out there looking for jobs, willing to do whatever it took and knew that I had to outwork, you know, all my peers. It was a tough time to get jobs back then. So I’m completely with you on that. And then, you know, the other biggest thing and challenging is, is, you know, from his growth, like I said earlier, as growth and management, and I take a lot of pride in where I’m at in levels of leadership.
I revert to John Maxwell’s book of the five levels of leadership. It’s an old time classic in that. And you know, like I said, to me it’s definitely not a science is probably more of an art and more so just a combination of the two, and that’s, you know, my, my one thing that always revert back to is like what’s my why? And it’s to either, if it’s not a person makes something better if it is a person, just provide impact. And that sort of led me throughout all of that and then ties into sort of what I think makes people successful in management or leadership. And you know, it’s just a topic that hits home with me. I have a lot of passion for it.
Randy: Sure. For sure. Well, no, that’s awesome. I remember in 2000, probably eight, I read the book thinking for a change, which was written by John Maxwell, the course. And it had been, as a pastor to had met him. He actually came and helped our church raise money for a new building program back in the nineties. And then you know, funny enough too, it’s like how the universe works out. God works is then in probably 2010 met Paul Martin Nelly, who then a couple of years later became the president of the John Maxwell team and, you know, was it John 65th birthday party as part of that in Palm beach and stuff. And just kind of neat how God brings all those things together. But myself, from probably 97 being a desire to learn and grow, and that was part of that thing and just seeing, you know, what you said is like, it’s true.
It’s like a lot of times people don’t look to become a better manager, a better impact of working with people. And at the end of the day, everything we do involves people, right? I mean everything. And so even to some people say, Oh, well I’m not a manager. Well you know, well if you have a household and you know, have a spouse and kids, there are some management in people impact going on there. So you know, all of us have interrelationship with people in impact. And so it’s like as you can become better at your people skills, and I love what you said about if it’s a person, you know, how can I make a positive impact? And like all of us have the ability to do that no matter what our title is, you know?
Nate: Yeah. That’s what I, that to me, that’s what a true leader is, right? It’s, it’s not somebody that’s given it by status, but it’s some somebody that people are always attracted to, always want to be around, always want to look to in a lot of the reasons for that is because they first were giving, then they exemplified, they didn’t, like you said earlier, you didn’t expect to get, you just gave to benefit others and impact others and help drive others. It can lead others. And that’s to me where you, you get to that fourth and fifth level of leadership that you revert back to the book is, you know, people that are selfless and you know, just giving for the cause and for the greater good of their people. And that’s what people respect. And that’s when people call, you know, say of this person’s a leader. That’s, that person’s a leader. And it’s really not because of any one specific thing they do or don’t it, it’s more that whole concept.
Randy: Yeah. Well, you know, it’s interesting though too, and see it’s counterintuitive, but it’s also one of the laws, the law of sowing and reaping, right? Like you, you have to be willing to, so that means you’re taking some of what you have, whether it’s time, talent, money, whatever. And you’re giving it, you’re sewing it into this purpose, this person with an expectation or belief that that will come back to you. And it’s like, that’s the truth, you know? Now again, too many people don’t want to give and then they wonder why they’re not receiving. And you know, that’s where it starts. And I go back, just even the simple analogy of like corn, right? With a guy that’s growing corn, you’ve got to be willing to take whatever, call it 20% of your harvest and take that and then sew it to become the seed that then produces that next hundred fold harvest next year. Right? And so that’s part of the thing in any endeavor, whether it’s working with people or your finances, you’ve got to operate by those principles, man. So
Nate: agreed man. And that, like I said, then it ties back into your purpose or goals and all and all of that.
Randy: Yeah, for sure. Well, let’s do this before we close it out. Let’s talk about, you know, I know some of the folks that are listing have definitely an interest in, you know, looking at how you guys define, you know, in the lending criteria. You’ve got a definitely expertise in that. So like, you know, cause again, there’s some guys I know that listen, that they’ve done one off, you know, hard money loans or you know, they’ve invested in that arena as well to somebody. Like how do you guys, cause you guys have done it very successfully, so when you’re evaluating what makes a good loan, right, how do you go about that? What’s your process kind of share with our audience, you know, here’s what you got to look for. The good, the bad, the ugly, you know, cause you see a lot of deals.
Nate: Yeah. So I’ll talk and answer that in reference to sort of like looking at a fix and flip type deal. Single family, cause multifamily, you know, gets a little bit, a lot more deeper layers of review. but you know, essentially there’s, you know, two main, I mean there’s, you can go to the books and still look at the five C’s of credit and, and go down that road. I’m going to break it down from an investment standpoint. It’s twofold. It’s the borrower and it’s the asset. And when you’re looking at the borrower in the world of fix and flip lending, we are first looking for proof of execution experience. Have you done it before? When you’ve done this before and you’ve shown a track record in history of successfully navigating through investment deals, strategies, we are more likely to think that you’re going to be able to successfully do it again. So in, in, in reality, in the fix and flip realm, the more experience you have, the more whether it’s lenient we would be or the more aggressive we would be in the terms.
So that’s one. And then you can go to the other fund, the fundamentals of credit and capacity. So you know, what’s the credit profile look like and how much money do they have. But to us, we try to, like I said earlier, put our operator’s mindset on in a common sense mindset on and we know that sometimes credit can suffer as a real estate investor or you know, you weren’t paying attention in one little late payment and we can get through that as long as there’s compensating factors tied to proof of execution and experience. So that’s like the number one criteria that we look at from a borrower perspective. And in order to have that experience, we just want to see a track record, which is a plug. If you’re an experienced real estate investor or you’re one that’s starting to get experience, make sure you have a repository of the deals that you’ve done and the facts of the purchase price, the renovation amount, how long you, when you bought it, when you sold it, you know all that, all that stuff.
So that’s one thing you always need to have handy cause that’s how we lenders verify your experience. And it’s crazy. You know, even people that might’ve only done two, three, four deals in their life, it’s hard to remember all those facts. So you retain them and put them in in like a tracker to form the other side of the asset. You know, it’s a couple of fold is what are we lending against the asset as it is, what is our leverage on that deal? And then more importantly, what’s the business strategy, what’s the plan and is it viable and then is it profitable? So we’re analyzing first, you know, can the borrower execute on the plan? And then two, what is the plan, which ties to the asset. How are we structured against that asset and is it a good deal? Is it a profitable deal?
If you’re buying at a discount, then we’re going to be a little bit more favorable on the terms just because we know that you’re getting at a discount to market value. We’re not, we don’t give a hundred percent financing. So our leverage amount is going to be a lesser amount tied to that as is value. Therefore, you know, we can get a little bit more aggressive with, with terms. And then we also want to look at what the business plan is, how much you’re going to renovate, how much you’re going to invest into cap backs and so on and so forth. And what’s the ending value. So honestly, you know, you can also look at it as you flip the switch to being an operator. You know, borrower stuff aside, we try to look at a deal, is this, if it’s a viable deal as is as if we were an operator.
And so is there a profit, you know, are you being conservative with the amount and realistic with the amount of renovations you need to have. So we analyze the assets specifically the totality of the strategy mix the two together. And that’s where we sort of come out to terms. I probably made it a little bit more complicated than it than it really is. But that’s just the mindset of how we look at it. You know, in reality we have three different tiers. You fall in the different tiers. We verify the asset and the, and the deal itself and put sort of the different metrics and leverage and proceeds tied to the, to the asset based on the tier you’re in. And that’s, that’s sort of the terms that come out.
Randy: Yeah. No, I think that’s awesome bro. Because again, you know, I think the two elements there that you highlighted are so critical. It’s one is the, the borrower who that person is and their track record. Cause I’ve seen where people have, you know, they had an interest in investing in real estate or whatever. They went to a REIA meeting and you know, they, I don’t know if I’m gonna do it. Well, you know, I’ll lend money to Johnny here and then Johnny just kind of craps his pants and doesn’t get it done. And then they’re left with a mess on their hands and you know, then they’re wondering how did this happen? And it’s like they didn’t have a real you know, quality approach to it to say, okay, well, Hey, is this guy somebody that you know, has executed and performed on this? And then, you know, is the strategy a valid strategy that makes sense and really validates that it can make money. And I think that’s critical, you know, so again, I think that’s great advice for sure. Well, Hey, let me ask you that.
Nate: We’ve seen more often than not, you know you’re relying on who’s going to move the deal, right? And, and make it successful. Who’s going to execute on the strategy? And if there is no strategy, that’s a problem. Number one. And then number two, who’s behind that deal is very important because almost any deal that, you know, like, look, we’re not perfect. We were very fortunate to say we have no low losses on any of our loans to our fund. But at the same time, not every deal has been successful for operators. In all those instances. It was more of the lack of strategy and the lack of execution of the operator, of the underlying borrower that led to the failure. You know, and that’s why we’ve had no loss of store loan fund is because the assets were sound. The strategy, you know, whether they execute it or not was probably there. We wouldn’t have written the loan if it wasn’t gonna be a profitable deal. It’s just there was not that execution which goes to who was leading the execution, the borrower at the end of the day.
Randy: Yeah, for sure. No, that’s awesome brother. Well that’s awesome way LA. How can those who are listening connect together with you and connect together with DLP? What would be the best way to connect?
Nate: Yeah, so please reach out to that. Well first off, check us out on our website, www.directlendingpartners.com you can learn all about us. All of our programs against single family fix and flips, single family new construction, multifamily bridge. Important note is we are lending our own discretionary capital, which we raised in our funds. We’re not tied to wall street. We’re still very actively funding during all this pandemic and COVID stuff. So please reach out specifically to firstname.lastname@example.org and I will make sure you were in the right hands. We have an awesome team of funding specialists and salespeople to help guide you on the way to making sure that we’re the right partner to finance your deals.
Randy: For sure, and I can attest, it’s definitely great, great people throughout the organization. Well, Nate, I appreciate you, my brother coming on and thank you so much. I look forward to seeing you again soon. And for those of you who are listening, thank you so much for tuning in. Thanks for listening to another episode of the real estate preacher podcast. I hope today that you learn something that you can immediately apply in your life or business. Make sure that you check us out on iTunes or at therealestatepreacher.com for more information. If you want to find out more about partnering together with me personally on real estate deals, including apartment complexes, go to the real estate preacher.com and click on the invest with Randy link. I look forward to talking with you personally. Have a blessed and victorious week four. This is the week God has ordained for you.