*NOTE: This episode was recorded in May 2022.*
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You’re listening to Lender Lounge with Kevin Kim, a podcast dedicated to the private lending industry. I’m Kevin Kim. And my goal is sit down with key figures in the private lending industry to talk about their business and their personal lives. We’ll get their takes on market conditions, the industry at large, and their personal stories. Overall, I really want to learn more about how they started and grew their businesses. So whether you’re a lender, a borrower, be a vendor, an investor, or anyone just interested in learning more about private lending, this podcast is definitely for you. Thanks for tuning in and enjoy this week’s episode of Lender Lounge with Kevin Kim.
Kevin Kim:
Hey, guys, Kevin Kim coming to you again. This time we’re on location at the Irvine offices for Aureus. I am here with a friend and honored and esteem guest, Trixy Castro. Please introduce yourself to our audience and we’ll get started.
Trixy Castro:
Thank you so much for having me. I’m super excited.
Kevin Kim:
My pleasure.
Trixy Castro:
And, thanks for coming to our little spot here.
Kevin Kim:
You drove all the way down to the headquarters. This is like a 15-minute drive for me.
Trixy Castro:
Any excuse to come out here and see you guys is awesome.
Kevin Kim:
I appreciate you coming down.
Trixy Castro:
Thank you, super excited to be here.
Kevin Kim:
So, tell us a little bit about yourself and then we’ll get into the company.
Trixy Castro:
Absolutely, so Trixy Castro, and I’m just a serial entrepreneur. I have a passion for this space, a passion for housing in America as a whole. It could be definitely being first generation here, and having seen the struggle my parents went through, definitely, I think was an influence on that, but I created a company called Genesis Capital as well as Genesis Auctions, which became Hudson & Marshall. It was a great run, I had a wonderful time, and I waited out my non-compete and I’m back.
Kevin Kim:
And, you’re back.
Trixy Castro:
I’m back.
Kevin Kim:
And, you’re back, and so we’re really excited. We’ve had about a little bit less than a year back and forth trying to get this set up, and you spoke at our conference back in the springtime. And so first of all, welcome back to the space. We’re so excited to have you, and when heard of Aureus, when we saw you guys at our first… I think it was at the IMN Show in Scottsdale. The name had been coming around. I think one of your people had called us about loan documents and we were like, “We got to get to know more of these people.” We went to your cabana, you guys had that little room and I was like just, “Wait a minute, you’re…” So, let’s get into Aureus first. We have a lot to talk about Genesis for sure. It’s a story that we cannot just gloss over, but definitely I want to talk about Aureus. So, it’s Aureus Financial Group?
Trixy Castro:
Yes.
Kevin Kim:
Aureus Financial Group and now you’ve been in operations for about a year now?
Trixy Castro:
Just under a year, yep.
Kevin Kim:
Well, almost one year anniversary.
Trixy Castro:
Yep.
Kevin Kim:
Oh man, and you guys have kind of bootstrapped and grown very quickly.
Trixy Castro:
Yes.
Kevin Kim:
Now the team is, what? You hired some pretty impressive people and you brought back some of your old partners from your Genesis days, correct?
Trixy Castro:
Yes, we’re close to 65 people.
Kevin Kim:
65 in less than a year, and then you have an LA office, you have an office down here in Irvine. This is a satellite office and then is there another office anywhere else?
Trixy Castro:
Yeah, so we’ve got Florida as well, we’re opening up Arizona and Texas, so we want to have regional spots all around the country.
Kevin Kim:
Very good, and then so let’s talk about kind of the business model for Aureus. I know you guys came back to the market. The industry is completely different-
Trixy Castro:
Completely different.
Kevin Kim:
… Than when you left, and so how did you prepare for re-entry and tell us a little bit about Aureus’ current structure.
Trixy Castro:
So Aureus, there was so much thought put into it versus the first time around you’re just trying to figure it out as you go. You’re kind of doing this. With Aureus it was, what can I do? What could I have done to improve the model? What can I do in today’s environment to be helpful to the industry, to the borrowers? How can I really be that debt partner to where we are today and where we’re going right? Fast forward 10 years, what’s that demographic going to look like? So, I really wanted to make sure I had the right capital structure and had the right capital partner. I didn’t want to go back to the well, I didn’t want to have capital be my constraint because in a past life, raising money was one of my largest challenges that I had.
Kevin Kim:
Sure.
Trixy Castro:
So, I really wanted to get the capital stack right, making sure that we were in a partnership, that we were aligned, that it was a global player backing me. We were able to do that, wanted to come out with all the product types. So, the idea being all the way from A to Z for the borrower. So, there wasn’t an actual product I couldn’t deliver on outside of commercial. Anything resy, we’d be able to. So, the team teases me that I must have abandonment issues because I don’t want my borrowers to ever leave. I’m like, “They can’t leave. They have to…” Exactly, they have to stay. So, we have to produce products at work for them.
Kevin Kim:
And so, let’s talk about that real quickly. So comparatively speaking, and I knew this about you guys, but for our audience, the big difference maker for you was capturing the institutional capital partner, and that allowed you to have all these different verticals. Now, let’s just confirm the verticals. We’re doing all the above in residential and business purpose, we’re doing fixed and flip.
Trixy Castro:
Yep.
Kevin Kim:
Construction, rental, bridge, but this is all business purpose, right? We’re not doing anything on the consumer side.
Trixy Castro:
No, nothing on consumer.
Kevin Kim:
Aside from the advent of rental, which term rental is kind of a newer thing, all of the core food groups though translate back to your experience with Genesis.
Trixy Castro:
Correct.
Kevin Kim:
Now, you guys chose to go national right away because I remember that phone call and Nema and I talking about it. They’re going national right away? Okay, they’re serious. Talk about that really quickly. How did that planning begin? Because as an entrepreneur, I know all my clients are entrepreneurs and a lot of times it’s, all right, let’s do this, and then they kind of add bites at a time, and they kind of take on what they can handle. Taking on a national project like that is very daunting and getting licenses in all the states you need to, brick and mortar set up, staff, LO’s, that requires a lot of planning. Talk to me about the planning phase for the Aureus launch.
Trixy Castro:
We did for about a year.
Kevin Kim:
About a year? I felt it long.
Trixy Castro:
Yeah, it was a good year. We got all the licenses in place-
Kevin Kim:
So, that was during that one year?
Trixy Castro:
Mm-hmm, we did the one year. We self-funded, so we wanted to make sure that we were up and running, testing the market. We went out and did it ourselves. We wanted to be a borrower on the other side of the table, see what was working, what wasn’t. We went out as far as [inaudible 00:07:29]-
Kevin Kim:
Hold on, so you were the borrower on your own deals?
Trixy Castro:
Not with Aureus, we just became-
Kevin Kim:
So, you wanted to test the market-
Trixy Castro:
Test the market.
Kevin Kim:
From a borrower’s perspective.
Trixy Castro:
Exactly.
Kevin Kim:
That’s actually a novel concept. So you said, “All right, well I was the lender for X amount of years. Let’s see what this industry’s like now, and let’s become a customer.”
Trixy Castro:
Correct.
Kevin Kim:
That’s really cool.
Trixy Castro:
And, I had never been a customer. And so, I wanted to be a customer on the toughest product types. So, let me be a customer in different states, not California, than I’m used to. So, I did that. I wanted to as a rental market client, as a bridge client, then went out during COVID and went and bought lots, actually walked lots.
Kevin Kim:
You went and did it?
Trixy Castro:
Yeah, walked lots, and that was fun.
Kevin Kim:
How about focus grouping?
Trixy Castro:
Right, we had to just go out and do it, so walk lots, I was going to do like 15 lots, I ended with 900 because that’s normal.
Kevin Kim:
I feel I’ve gotten to know you pretty well now and that makes sense for you, but I think our audience will understand by the end of this episode at least that you don’t do anything half baked. You just jump in head first.
Trixy Castro:
Yep.
Kevin Kim:
So, you took the role of the borrower, you jump in head first, and then what did you discover actually? I want to ask about that.
Trixy Castro:
I discovered that it was… Well, first of all, it was amazing that there’s so much capital in this space now and it’s a thing, and it’s an actual asset class, and it runs a machine. So, to me that was so rewarding, and so just inspiring on another level. On a personal level, it was just really rewarding, but then I realized, my God, if I’m the borrower, it’s kind of messy, meaning it’s going to cost me more money because I have to send this product type to this group, this to this group. So it’s a bit scattered, a little fragmented and I’m an organizer, I can’t help it. I want to bring it all together and make it easy, make it cost effective. So, I definitely realized that. I realized the same types of things that we’ve all worked through like efficiency, execution, speed of execution, certainty of execution, especially in looking at the market where it is today, I felt that we were going down this path. So, looking at it from the perspective of rates are going to go up, two years ago or whatever, thinking that it would be where we are today, I wanted to make sure that borrowers never felt like they were going to be left at the altar, that they weren’t going to be retrained, they weren’t going to have to deal with the fluctuation in the marketplace, meaning that we could be that trusted partner, and I experienced that on the flip side. It was very helpful to do that. So, we did that for a good year, and we developed the product types. We wanted to make sure that we could make it simple, that we weren’t coming across to the borrower as just the lender. We wanted to come across as a lender that really provided value add in different areas, and that we knew the market. So, it was going and getting out there and staying in an area, in a market for three weeks and taking my kids and the dog and the nanny and going out there and really getting to know the local markets, understanding who’s doing what.
Kevin Kim:
But, you yourself were doing that?
Trixy Castro:
Oh yeah.
Kevin Kim:
That’s interesting. You weren’t working with other developers and just asking them questions. You’re out there borrowing yourself.
Trixy Castro:
Right.
Kevin Kim:
That’s very interesting. And so, you created this decision that you want to create this sticky environment, but also this value add experience for your borrowers, but at the same time you must have discovered the commoditization.
Trixy Castro:
Absolutely.
Kevin Kim:
And, the level of kind of standardization that came to the space and the institutionalization lends to that, and a lot of times it requires an increased level of saying no, and as one of the more newer kind of institutionally partnered groups, to me at least, it sounds like there’s a challenging balance to have because saying no is going to be a requirement for what you’re doing. It’s an absolute must in our space, but maintaining that discipline, but also, how does that balance with keeping these borrowers sticky in this type of kind of inclusive environment you want to create? How do you guys manage that from an internal perspective?
Trixy Castro:
So, one of the things that I wanted to set up was the relationship piece. So, my entire career has been based on relationships.
Kevin Kim:
Sure.
Trixy Castro:
But, also taking it a step further in the relationships with the borrowers and actually going to their shops and going to their locations. So, when you send someone there and they’re able to say to them, “Okay, for these reasons we need to lower the loan amount,” or whatever it is that we have to say no to and explain it, it’s a much softer landing for us, and it also demands a level of respect that, hey, we know what we’re doing. We want to help you grow. So, we have no problem saying no, it’s just for us, we want to make sure that what we’re saying no to is valid and that we’re not missing something from having been out of this space for a while.
Kevin Kim:
I’m trying to key in on that key features, two pieces. The relationship component, so that means that you actually have people on site, and not just in the state, but in the city that your borrowers are, and they can go visit with them, and that’s quite a staff to build out.
Trixy Castro:
And, I’ve been so fortunate to have such incredible people working alongside with me that there’s that level of trust and experience. So, it’s really interesting to see. I have past groups that I lent money to that now we work together and they help me with onsite visits and stuff. And so, there’s a level… I’ve got five people today that are on the road for close to 300 days.
Kevin Kim:
Wow.
Trixy Castro:
And so, they love it, they’re amazing at it. And so, there’s a different touch and feel, along with brick and mortar of smaller shops. We’ve all had to adjust with the new COVID environment. Rather than having the large offices, we want to have the smaller, regional, very local boots on the ground. I’ve worked a lot with borrowers direct, with contractors, with builders, with title reps, with escrow. Everybody who touches the file, we’ve wanted to get to know in each individual area. So yes, it was a lot of kind of this going on.
Kevin Kim:
You’re trying to effectively establish scale before even launch really. And so, let’s talk about launch because was Scottsdale the actual kind of coming out party for you guys?
Trixy Castro:
Yeah, that was our biggest one. So, we had been to IMN prior, but on a very small kind of scale because we were still positioning ourselves with the capital partner and stuff.
Kevin Kim:
Right, and so Scottsdale was after you guys had formalized everything with your partner?
Trixy Castro:
Yep.
Kevin Kim:
So, that was an interesting event. The highlight was meeting you guys, but it was an interesting event for us because I’m not really that in tune with the terminal market because I’m on the security side and I create funds for a living basically. And so, how you guys were capitalized back at Genesis is I still do that to this day, but the rent terminal market had… Well, at the time I could tell that it was a very frothy market where obviously had our trials and tribulations of the past six months, but you guys came out… Was your initial kind of foray into the market, kind of that was your concentration, and we’re going to concentrate on this as our kind of lead product because that was where we met. So I was wondering, is that our… Because that was the trend at that time-
Trixy Castro:
That was the trend, and that’s the part I didn’t have before. I hadn’t done that before, so it was like, “Let’s make sure we have this right. Let’s make sure that we experienced it from one side of the table, but let’s become experts at it, so that we can be the right fit for everybody on that.” So, that was our initial go out to market because the rest we’d done and then obviously build to rent and all of those things that are all kind of newer to this space, but you could throw me a mid-flight construction, it doesn’t cause us to flinch, but we wanted to make sure we knew that DSCR piece pretty well.
Kevin Kim:
Because it’s a totally different product, and so when you’re a smaller shop, just originating and selling to Wall Street, it’s relatively easy to add that to your book, but when you’re trying to scale before launch effectively, nationally, adding the policies, procedures, and just even the minute closing process of a term rental loan, it’s a lot different, and the funding, then the moving it off the line, and getting into wherever it’s meant to be, it’s a very complex process and what I’m heading toward is kind of staffing and getting the people to move the levers of commerce. When you guys came out it was… It still is so hard to hire and find key partners, but you guys were able to add 65 you said, right?
Trixy Castro:
Mm-hmm.
Kevin Kim:
I met Brittany and Brittany now. There are two Brittanies. So, I met both of them, and those ladies were with you from the days of-
Trixy Castro:
From day one.
Kevin Kim:
From day one. They’ve been with you since day one and they’ve kept on with you and they joined you back with Aureus, but the rest of the executive team and even the LL production, and back office processing and all, how did you guys fill the seats that fast?
Trixy Castro:
I think when you really love what you do and you love the people, and it’s more than just one thing, it’s part of a greater cause, people feel that. And so, I really, truly did stay away. I really honored my commitment. I told you, I went to Europe and did everything I could there because I was so bored, and needed a challenge, but it was an honor to see that people were wanting to come back and work with me and build something great, and it’s probably one of the greatest accomplishments of my entire career, more than selling the companies was having a team that is willing to go to battle with me every day and then come back a second time, it gives me the chills. It was something that was incredible, and then people got better and better and better. And so, people grew in their careers, and people knew other people, and people had kind of understood this space better because now there’s a way to do things. We’re not just making it by the seat of our pants. And so we got very lucky, we got very fortunate, and I think that we have always been very transparent. Some people worked with me in the past, some people were new, some people were my competitors, it was a little bit of everybody. Some people were from auction, that the talent was just incredible, and I’d seen them five years ago and thought, “My God, someday I want to work with them.” So, it’s a big honor.
Kevin Kim:
Was there a certain kind of messaging? Because you get really excited. I can see the excitement and passion, not just for the industry as a whole, but also the end community that it serves. I think that’s what excites you the most about what we’re doing in private lending. And so in that regard, I want to ask, was that kind of the elevator pitch to bring back… These people were likely at different shops killing it in their own right, asking them to take a gamble and come back with you into effectively a startup.
Trixy Castro:
Absolutely, it doesn’t get any more startup than where we’ve been.
Kevin Kim:
So to come back in, what was the elevator pitch? Was it just the housing market story and was it the passion or what was it? It’s hard to-
Trixy Castro:
It’s a good question.
Kevin Kim:
Because it’s such a hard time. At the time it’s everyone had an amazing package at their firms. They were all doing it, everyone was killing it, and so I’m sure the Brittanies were doing quite well and everyone-
Trixy Castro:
And, Derek-
Kevin Kim:
Derek was doing just fine with the clients-
Trixy Castro:
Derek’s amazing. I was like, “Oh my God, I hope he takes my call.”
Kevin Kim:
Right, so what was the pitch like to get them on board?
Trixy Castro:
It’s a good question. I think just be real with them and said, “Hey, this is what I’m doing. I would love to work with you and explain the vision,” and I think they know me well enough to know that I want to win and I want to come in and do something really special and unique and I want to do it together, and maybe I just talked to them to death. Maybe I just wore them down.
Kevin Kim:
Did you charm them?
Trixy Castro:
They were just like, “Go away.”
Kevin Kim:
What do you think that is, that do something different part? I heard stickiness earlier and I think that’s a piece of the puzzle, but in your own words, what’s the different thing? Because right now the industry is so standardized. Shops that kind of look like Aureus from a third party’s perspective kind of serve the same food groups, may concentrate on one more than the other, maybe concentrated in a particular geographic area, or do better than others, maybe are cheaper, who knows? From your own words, what is that difference that you are wanting to bring to the table?
Trixy Castro:
So, there’s so many nuances, and so many little pieces that we think are a big deal to us that are going to be different that make the end result better and the experience better, but it’s also really creating additional opportunities for our borrowers. And the perfect example is with Genesis, their problems became my problems. So, now I’m invested emotionally on my borrowers. We’re telling them at the time, “Hey, we don’t have any REO.” We are completely having to shift our model. We have to do all these auxiliary businesses and pest control and escrow and all these different things that are in my mind are distraction from their core business to be able to continue to have the revenue flows. So, I kept thinking about that, more like obsessing about that, and that’s what prompted me to build out the auction model. So, it was forget what everyone else in this space is doing, put my blinders on and look at what are their needs? Their needs are they need inventory. How can I be a part of that solution to help them do that and how can I make it better? So at the time, what people were going out to the courthouse steps and they have the morning of to do the diligence and the wads of cashier’s checks and… It wasn’t good for the hair. I’m not going to stand out there in the rain. So, I was selfish on that piece. It was not going to happen, but realizing, okay, here we are. How can I create a better, faster solution that gives more time for diligence? When we first started, it was like 15 days of diligence, which is much larger now. But at that time, that’s a big difference, 15 days versus four hours. Right now you can actually do the required work needed providing a lot of the documents up front. All these little nuances, and it’s the same type of mentality, the same type of thinking that we have today. So, Aureus is the beginning of something that I think is going to be really unique and special in the marketplace that is always geared towards, how can we improve the borrower’s revenue and cash position? Because we want them to go out and buy more and grow their models and create jobs in the US, that’s a really big deal to us, but also, how can we be that solution for them throughout the entire process? So that being said, we don’t limit ourselves in any of our thinking. We really want to understand where the challenges are and how can we be a part of the solution.
Kevin Kim:
But, that requires a level of entrepreneurialism and creative thinking that I honestly say is kind of missing in this industry right now, and I think a lot of it has to do with the institution. So, how does your capital partner, your institutional partner feel about that level of kind of, I guess, entrepreneurialism and value add? Because it’s not usually, most institutional investors right now, it’s not within the box. If I can’t securitize this, if I can’t sell it to a pension fund, it’s dead to me. I don’t know, how did you guys present that capital with them?
Trixy Castro:
It took me a year to find the right capital partner that understood me, and the vision, and I have to tell you, they’re excited about it. They’re excited about it because they don’t need to call and motivate me any day of the week and be like, “Hey, Trix, do your job.” No way, it’s me going the other way saying, “Hey, I want to build out A, B, C and D.” And so, we have strategic plans in place to be able to do that, but they’re 100% the perfect partner for me and for what I’m trying to accomplish and for what the team and I are doing on a day-to-day.
Kevin Kim:
That’s good.
Trixy Castro:
It’s really exciting. Listen, it wasn’t easy to self-fund for a year and write that check every month and be like, “Have I been out of the game for so long that did it change so much?” So, we took a gamble on ourselves, so they are-
Kevin Kim:
A lot of meetings-
Trixy Castro:
A lot of meetings, and-
Kevin Kim:
A lot of, what do you call it? Not humiliation, but kind of having to do a little bit of that dog and pony show with them.
Trixy Castro:
A lot of that and-
Kevin Kim:
It’s never fun.
Trixy Castro:
And, then reading between the lines of, well, what is their initiative? What are they really after? Because we all start off here, but where does it end here?
Kevin Kim:
And, they can only just be more direct, just say no quickly.
Trixy Castro:
And I’ll tell you, my capital partner during COVID was one of the only groups that I saw that doubled down. A lot of people took a step back in the marketplace.
Kevin Kim:
That’s true.
Trixy Castro:
They doubled down and I was like, “Oh my God, that is amazing. I love that.” And I have to tell you, I had nightmares about them re-trading me, I was waiting for it. Never, I’m still waiting for them to re-trade me. No, I’m kidding.
Kevin Kim:
Without telling the audience who they are, because confidentiality is important, but it’s important to think about that type of relationship, whether it be your investors and you’re smaller and you’re working with high net worth or institutions or just aggregators, it’s important to have someone that has shown that ability to double down during a crisis, which COVID is a really good example, that five months of just pure, unadulterated chaos for our industry at least, it’s a really good kind of pedigree to show that you double down. All right, you’re hinting at it, so I want to make sure we talk about it. So, let’s take a step back. Let’s a step back, and we had kind of touched on it a little bit, I want to get to know your story about Genesis a little bit more because for our audience who are listening, most of them have heard of the name Genesis. For those of the listeners who have been in the industry for a while and… I feel like being in this industry is like dog years because I’ve only been in this industry about eight years now and I feel I’ve been in 20.
Trixy Castro:
Right, same.
Kevin Kim:
But, I remember it was like the second or third APL conference that I went to, and the only thing that everybody could talk about was that Genesis Capital had just been sold to Goldman Sachs, and it was effectively the first big institutional acquisition in the industry, and it was the first kind of like, holy crap, they’re taking us serious. Let’s take a little bit before that, let’s get through Genesis first, so the foundation of Genesis.
Trixy Castro:
So, I think the story goes back even further. So I think the story goes, 14 year old Trixy moving. My parents do the unthinkable and say, “Okay, we’re moving sophomore year in high school.” I was fine-
Kevin Kim:
In LA?
Trixy Castro:
No, I went from LA to Camarillo. So, it was a very big difference. So, I went to school there, and made it to the varsity soccer team and cheer, two very different sports, and I was super excited, but each sport was $1,000 let’s say. So, here I am like 14 years old, got to come up with $2,000, which was a big deal. My family was trying to just put food on the table and figure it out. So I thought, “All right, well, let me get a job.” Well, it turns out at 14 you need a worker’s permit. I didn’t have that and you need a ride to get to wherever you’re going. Do you remember the old computer paper with the bubbles?
Kevin Kim:
Yeah.
Trixy Castro:
They had that, took that, I have two younger sisters, 10 and 11 years younger than myself, I took their magic markers and made business cards, Trixy’s tutor time. I went across the street to their school because they were in elementary school, and went to the principal and said, “Hey, my name is Trixy. I have a tutoring company.” I explained to him what I was doing. Can you introduce me to the teachers? Swear to God, within 30 days I was making more money than both my parents combined, cash under the table. So, if the IRS finds out-
Kevin Kim:
14 years old.
Trixy Castro:
14 years old, and so then I realized, my God, this is amazing. If there’s a will, there’s a way. I could start teaching the fifth and sixth graders to actually help me and I can have oversight and I can expand to other schools. So, this became a whole production. So then I said to myself, “All right, well, let me go into banking because I’m going to make myself legit.” I’m going to go understand how the banking sector works.
Kevin Kim:
You wanted to understand how money works.
Trixy Castro:
How money works, how can I follow the money? And, I started at Wells Fargo and that’s truly how the concept of Genesis came because my largest… First of all, Wells Fargo didn’t know what to do with me at all.
Kevin Kim:
So, you walked to a branch and said, I want to work here?
Trixy Castro:
I would like to be a teller.
Kevin Kim:
How old were you?
Trixy Castro:
I said, “I’m only 17,” and they needed you to be 18. They still gave me the job. So, I was very excited. So, I went and I realized that my larger depositors were in tech, real estate, or gamblers. So, I knew that the tech, I could barely turn on my phone, so that wasn’t really in the cards for me. Gambling, I wasn’t trying to go to jail for counting cards. So real estate, let me go figure out what these groups are doing. Now at the same time, by this point, I’d already moved, I was in school, living in a dorm, and it was really interesting going to the courthouse steps, and these groups were hiring my friends with wads of cashier’s checks to make these purchases at the courthouse steps, and I would say to my clients, “Hey, do you mind? Can I just tag along and learn? Because you’re doing something that I want to learn.” So, I went and understood it, then I went back, figured out how to get to the CEO at the time of Wells Fargo and said, “Hey, listen, I really would like to help Wells Fargo kind of have this new division, this type of partnership with these developers.” I explained the whole thing, and I was like young-
Kevin Kim:
What year was this?
Trixy Castro:
Oh my God, I was, gosh, a sophomore in college.
Kevin Kim:
Oh my goodness.
Trixy Castro:
A sophomore in college.
Kevin Kim:
Well, you went to a CEO of Wells Fargo-
Trixy Castro:
He thought I was there to babysit his kids. He was like, “My wife will be here in 10 minutes for you to take the kids.” I’m like, “Okay, that’s awesome.” And, I sat down and kept telling him. I don’t even know how I got the meeting. Anyway, years later we’ve talked about it since. So, it was pretty [inaudible 00:29:22].
Kevin Kim:
There you go.
Trixy Castro:
The long story short, what I heard was, “That’s a great idea, but we, Wells Fargo, can’t do that because that’s not conventional lendings-“
Kevin Kim:
No bank would still to this day.
Trixy Castro:
So I heard, go build it yourself. That’s what I heard. I don’t think that’s really what he said, but that’s what I heard, so I said, “You’re right.”
Kevin Kim:
That’s a similar trend with you.
Trixy Castro:
That’s what I heard and I’m like, “You’re right, I’m going to do that.” So, I decided to open a mortgage shop and that would be like my bread and butter so to speak till I graduated from college, and do that and then set up-
Kevin Kim:
Wait, so you opened a hard money lending shop in college? Oh my-
Trixy Castro:
Don’t tell. So, it was fractionalized lending. Today we call it crowdfunding, so it was like going to high net worth individuals and you give me 100, that person [inaudible 00:30:10], old school.
Kevin Kim:
I’m very familiar with the model. I educate our listeners and also our clients on the core capital structures in the private lending space, it hasn’t changed. That’s still the fundamental, baseline, getting started kind of strategy. So, when was this? This is pre-recession-
Trixy Castro:
Yeah, this was like 2000, 2001, 2002 that I started doing this.
Kevin Kim:
So, this is pre-Dodd-Frank, pre-regulation. At the time, it was easy to get loans. It was not as much… ATR wasn’t a thing, but banks were still very conventional. This was kind of a subindustry that was barely a thing. Fixed inflate was barely a thing. Auction buying and speculating was still a very popular-
Trixy Castro:
Absolutely.
Kevin Kim:
… Topic at the time, but there was no money to be had from a capital source that would remotely even look like a financial institution. It was all kind of just retirees funding stuff. So, the initial mandate for you is, I like this type of product, there’s an opportunity here…
Trixy Castro:
I’m going to go do it.
Kevin Kim:
I’m going to go do it. So, how did that evolve?
Trixy Castro:
I was too young to raise real money, and I could see that and I’m like, “All right, step number one, graduate from college first. Get out of living in a dorm.
Kevin Kim:
Get a degree.
Trixy Castro:
So, the blessing in the curse was I was doing it all. I was a processor, the underwriter, the doctor, you name it, I was doing it because I wanted to learn it. And then it was, “Okay, how do we put this together on a larger scale and how do I raise money and overcome that?” So, Brittney Fairweather was my first employee. I think I started to tell you the story. She was 14 years old and she came to my brother’s shop. He actually used to run gyms at the time and she wanted a job and I happened to be there and she was going to the prom. She needed to buy a prom dress and I said, “Wait a second, why are you going to the prom at 14? Wait, wait, wait, who is this boy? Where’s your mom? What’s happening?”
Kevin Kim:
Right.
Trixy Castro:
So, she was my first employee. So if you can imagine, my phones were answered from three o’clock on, and then we started to get busy, so she hired her best friend, also Brittany Starkey. So, then when one of them got the school play, the other one was there. So, this was my dream team. I hired my nephew to be my videographer. So, this is pre-Matterport or anything. This was like back in the day, so he would take his pit bull and he would drive around and he’d take pictures for me and video, and that’s how I would look at some of these houses when I couldn’t get to 15 places at the same time. So, this was my dream team. This was my dream team, along with my nephew had a date one Friday, so he hired an intern. So, this is how we built it. So when people say, “Did you bootstrap it?” Are you kidding? I had a homeless guy that would rob me every Friday. For whatever reason-
Kevin Kim:
Did you have an office?
Trixy Castro:
This was in Thousand Oaks. I was starting to get legit. And so my brother, the big workout guy, would come and walk me to my car on Fridays.
Kevin Kim:
Security.
Trixy Castro:
Yeah, because I was going to get robbed and I’d offer the guy a job every Friday, the homeless guy.
Kevin Kim:
Way to turn it into an opportunity. That’s just crazy because it’s so funny to think about. I love these stories because we’ve heard these from other people before, but never to this degree because it always kind of starts… For a lot of our guests, it always kind of started out as kind of a hobby, as a side investment, and then they turned it into a legitimate practice and they’ve got this crazy pedigree of having worked in… Some of them worked with Steve jobs, in different institutions, this, or all that, but this is so different, and I love this. It’s literally a college kid figuring out there’s an opportunity… And, it’s also unique because when I was in college, I wasn’t thinking about how could I make money and how could I make a business? I was thinking about, where am I going to go buy some beer?
Trixy Castro:
Oh, I thought about that too.
Kevin Kim:
So, there’s the initial bootstrap and that’s so awesome, and it’s such a cool story that you guys built that out. How did that start becoming into that big first milestone? How about a big first milestone for Genesis?
Trixy Castro:
It took a while because we did the whole mortgage conventional lending to keep the lights on so to speak because at that point, getting a PPM before meeting you, that was like $100,000 let’s say. I had to write a check, so it was figuring out how to do that. So, I launched Genesis. I think we formed the entity in like 2007, launched it 2008, and then Madoff happens. So, then the downturn starts to happen. So, now you’re raising money. So at this point, I had already gone… Friends and family, I told you were my family, I told you my friends were in college. So, that was out.
Kevin Kim:
It was tough.
Trixy Castro:
High net worth individuals, family offices, I graduated to the first 30 million, but my demand, because I was out there originating, I was out there meeting with all of these groups, understanding their model, my team and I understood it sometimes better than they did. So we were like, “No, no, no, work the math the other way.” And so, it was talking about a product on a mass scale when a product they didn’t even know they needed because these developers and flippers were using their own cash, or they had friends and family money, so they didn’t really understand how-
Kevin Kim:
[inaudible 00:35:20] capitals works.
Trixy Castro:
Exactly, so kind of working it backwards that way was really beneficial. So, it was kind of creating the need for ourselves. So, kind of doing that piece really taught us the business, all of us. So, we’ve been in the trenches together for a long time, and then we started to get larger and larger and then we got some of our competitors. We started to realize that they had some real teeth, and so we made some-
Kevin Kim:
Who were some of your competitors at the time?
Trixy Castro:
At the time it was mainly Anchor.
Kevin Kim:
That’s about right.
Trixy Castro:
It was Anchor, that was the main group and-
Kevin Kim:
The timelines match up. Robert Wiseman-
Trixy Castro:
Robert Wiseman, so we were able to bring him over. And so, that was really great because now you had he and I that both wanted to go out and originate, light the world on fire, so that was great, and we were able to talk to Oaktree, and so Wells Fargo was actually the ones that introduced me to Oaktree.
Kevin Kim:
So, that ask actually produced some fruit.
Trixy Castro:
It really did, and they were actually the ones that represented me at the sale to Goldman.
Kevin Kim:
Oh, that’s so cool.
Trixy Castro:
So, Wells has been with me, near and dear to my heart forever. So, we were able to get Oaktree. They were the first in this space to take a gamble. They gave me my first 250 million in equity. That hadn’t been done before.
Kevin Kim:
So, you had some institutional exposure pretty early then. Oaktree was one of the early institutions to jump into this space and saw the opportunity.
Trixy Castro:
Absolutely.
Kevin Kim:
They had placed the three different groups at the time. You guys were one of them and they were like, “We believe in this product.”
Trixy Castro:
Yep, I think we were the first that they did it with.
Kevin Kim:
You were the first? And, they did a few others over the years, and we recently saw kind of this M&A timeline and I was going to use it as a slide when we had a panel, but it didn’t belong to me and I felt bad using it, but it was this timeline and it showed in the early stages, pre-2015 was all these allocations by Oaktree. And so, they had provided you a lower cost of capital, a larger ticket size. So, did that take you guys to the household name? Was that it?
Trixy Castro:
Yeah, that was it. Having Oaktree took us to that next level. We would’ve never been able to have done it just on our own without them. We needed to not have to go back to the well, so we did… This was pre-securitizations in [inaudible 00:37:25]. This was like, “Okay, go find how to create leverage-“
Kevin Kim:
Back then, credit lines were starting to be explored. Warehouse lines were kind of a thing. There were some banks doing it. It wasn’t well thought out, and it is today, but back then it wasn’t. You didn’t quite understand the short term product. And so, do you also get leverage at that point?
Trixy Castro:
Mm-hmm.
Kevin Kim:
Wow.
Trixy Castro:
And so, we went out and, where are these people? I want to do it all myself first and make sure I do it, and somewhere in there I started the auction company too, pre Oaktree. So, it was also navigating that world and understanding the default space, and understanding the liquidation strategies that the banks and servicers had.
Kevin Kim:
Which was a high demand strategy back then.
Trixy Castro:
High demand.
Kevin Kim:
It was the means of this industry feeding.
Trixy Castro:
Yep.
Kevin Kim:
It was what everyone did, and to this day there are still lenders in certain markets who still do the whole courthouse step marketing.
Trixy Castro:
Absolutely.
Kevin Kim:
And, they’ll draw checks on the spot and then stuff like that, but that’s a far… What I’m hearing is a very big contrast to kind of that… By the time Genesis had sold, and those kind of three or four years before that, you guys had really become-
Trixy Castro:
We grew.
Kevin Kim:
You were the shop.
Trixy Castro:
We grew.
Kevin Kim:
When I first joined this industry as an attorney, I had asked the partner I was working for, his name is Tony, not Anthony, but Tony, and I asked him, “Who are kind of the big shops in this space?” And, they were like three or four. They were all kind of West Coast operations, and you guys were one of them. And at the time, it was kind of like… I think it was you, like Bono, Anchor, and a few other shops. One big difference though back then was we kind of did a little bit of everything back then. Everyone did a little bit of everything. Rental wasn’t a thing, but commercial was a thing back then too, or were you guys purely resy?
Trixy Castro:
We were resy.
Kevin Kim:
You just-
Trixy Castro:
We were always just in resy.
Kevin Kim:
And, auction primarily was driven through-
Trixy Castro:
All resy.
Kevin Kim:
So, let’s talk about the add-on of auction then because it wasn’t auction at the time. It was-
Trixy Castro:
It was Genesis-
Kevin Kim:
Genesis Auction, then that became-
Trixy Castro:
Then, it became Hudson & Marshall.
Kevin Kim:
Hudson & Marshall. I was going to mix the Hudson & Marshall. So, was that added early on as kind of like, okay, we need this inventory component for our borrowers, we need to have an auction management solution for them, or was it later towards when we kind of got to that institutional stage, after Oaktree had jumped in?
Trixy Castro:
No, it was pre-Oaktree. It was pre-Oaktree. It was, how can I help solve this problem?
Kevin Kim:
Value add.
Trixy Castro:
How can I create the value add for the borrowers?
Kevin Kim:
Fascinating.
Trixy Castro:
Because, hey, I can only lend you X amount because that’s all I have, and I need to charge you Y. Let’s not talk about that, so it was I needed to have a differentiator in this space that was a value add to them. And so, we were just determined to go out and do it, and we understood real estate and we understood lending, so we knew we could help the banks and servicers understand what they had on their books and how to facilitate that moving all the way through the chain. So, it was a race to the finish line in that business. And so we got Oaktree, and so both companies started to grow. Both companies really got to a point where, I’ll never forget, we were on the 17th floor in an office in Woodland Hills and it was like roller skating basically throughout the office. Part of it was the auction company here, and then lending over here. And so, we never lost the touch. I never lost the touch of being in it with the team, with the borrowers, really understanding the marketplace and saying, “Let me go figure it out.” And same as now, let me go actually there and talk to the people and understand what is happening and how we can protect ourselves and protect them. So, it was never a conversation of, hey, you said no to me and I’m upset. It was, you’re right. You caught something I may have missed. So, that was always a perspective. It was relationship building, coming back into this space, and seeing how so many of these groups when we first started out, they were amazing, but now they’re phenomenal. They’ve created generational wealth that is unheard of.
Kevin Kim:
The guys that have flipped their first house in ’02 are now billions of-
Trixy Castro:
It’s amazing.
Kevin Kim:
It’s crazy right now. Translating that story to sale though, it was not a discussion topic at the time. No one was really thinking about it, even your competitors at the time. I had interviewed, Steve Pollock, and he said, “All right, I’ll be on your cast.” He was about to retire and I wanted to make sure we interviewed him, and even him, in ’15 he wasn’t really thinking about sale. He was trying to get his cost capital down, and there were a couple other companies that had contemplated it and Colony was one of the stories out there, but you guys were the first one to get one of the biggest institutions out there to buy the company. How about that process real quick? It must have been a couple of years of diligence? What was that like?
Trixy Castro:
It was a lot and it was a lot because at some point prior to that, the companies both got so big that I had to be able to put others and position them to be able to do what I was doing.
Kevin Kim:
Sure.
Trixy Castro:
So being like this, I got to do it right, I would put two people and as co-whatever, COO, whatever it was-
Kevin Kim:
So, you had already stepped way from Genesis.
Trixy Castro:
Yeah, and so I was overseeing it and on the board, all of those things, but it had gotten to a level where it was a machine. And so, then I was able to focus on auction and that’s the company that needed me at the time on the day-to-day, in the trenches. So, positioning it that way was really helpful, but the goal was to monetize it, and Oaktree obviously was incredibly helpful with that.
Kevin Kim:
And, they assisted you… Tell the story.
Trixy Castro:
Absolutely.
Kevin Kim:
Because it’s all about that, it’s all about being able to tell the story in the right way to bridge the gap to an institution who speaks a different language. They could understand the financials all day long, but if they don’t understand the story in their own kind of parlance… So, how did that work?
Trixy Castro:
Well, I had a lot of practice with Oaktree. They were really great teachers in kind of how to do the entire thing and this with the finesse that they’re used to seeing and looking at things in the institutional way. That was always a big goal of mine was always to create this synergistic view between both, because to your point, it was a little bit more of the Wild West back then, which would then impact the borrowers because they’re looking at it, they’re raising equity, which is really hard to do in general, much more even then at the time. So, they’re having to do all these dog and pony shows on the daily. So, they’ve got 45 LLCs, let’s say, with 45 different investors, which just creates more of a headache for them. And so it was, how can I help institutionalize this process and make it smoother, make it where they have the ability to count on when it’s going to happen, it’s actually going to happen and it’s-
Kevin Kim:
That’s because you want to translate that to the institution.
Trixy Castro:
Exactly.
Kevin Kim:
You got to go translate a story to them.
Trixy Castro:
Exactly.
Kevin Kim:
They need to send the process.
Trixy Castro:
They needed to… And, they needed to not treat it like a bank. So, you don’t have 30 days to do it, you have two weeks, or whatever the case may be with the product type. So, it was really understanding how to get them to see that touch, feel, and see it and be willing to take a gamble on it, and to see that it is something that is incredibly lucrative. And so, I think we just kind of dug in. I will tell you, for four years I don’t think I saw the light of day. I think I was just in the office like everybody, morning, noon, and night, and you just put your head down and do it and make sure that it’s perfect because at the end of the day, there is no one else to blame other than you. If it works, great, you get the pat on the back. If it doesn’t, everyone’s mad. And so, I put a lot of pressure on myself on that.
Kevin Kim:
That’s a lot of work.
Trixy Castro:
A lot of work.
Kevin Kim:
It’s a lot of work and a lot of uncertainty.
Trixy Castro:
Absolutely.
Kevin Kim:
Because any minor misstep, any pushback…. And, how did you balance that? I run into this a lot when we start getting term sheets from semi or quasi institutional companies that want to buy a small stake of the company and the client is worried that this is going to sour the deal, but they really feel passionate about it, but they’re also balancing that with like, “I can’t go back their X, Y, Z hedge fund or institution. They don’t care about me. We should probably give them what they want.” I’m like, “Hold on.” As their attorney I’m telling them, “Hold on.” On your end at the time, was there anything that really-
Trixy Castro:
On both transactions I will tell you, I leaned on my attorneys a lot because they’re experts at this, I’m not. I wanted to learn it.
Kevin Kim:
[inaudible 00:45:36] the buffer helps.
Trixy Castro:
Absolutely, and I did take with what they said to heart and would really try and learn from that because they’re in it every day. To them, it’s as if this is a normal course of action. To me it’s like, “Oh my God, this is the biggest thing,” but just having done the personal sacrifices that an entrepreneur does, I can only speak for myself. I can tell you as a woman in this space, I waited on having kids even because Genesis companies were my babies. That was all that it was. My focus was a 100%, so in my mind, and in my timeline, it was okay, putting it all in at this point to be able to create something that is so built on passion and dedication that it is right, and that an institution would want to buy it.
Kevin Kim:
And the story was translated, so they could understand it.
Trixy Castro:
Right, exactly.
Kevin Kim:
So, there was two sales then, it wasn’t just a one package sale. Goldman just didn’t buy everything.
Trixy Castro:
No, I sold Hudson & Marshall to Fidelity nine months prior to the Goldman sale happening. So, I did that one, myself and Brittany Starkey, and we had Shepherd Mullen and David Sands that helped us, and we did that one in record time in four months.
Kevin Kim:
Four months?
Trixy Castro:
Four months.
Kevin Kim:
A four months close?
Trixy Castro:
Yeah, a four month close.
Kevin Kim:
That’s unheard of.
Trixy Castro:
And, it was completely under wraps, so it was news to everyone.
Kevin Kim:
Just quiet, quiet, quiet.
Trixy Castro:
It was a great experience.
Kevin Kim:
So now in the afterglow, after everything’s done, you’re still working for the company, you’re on the board or are you done? You walked away?
Trixy Castro:
I’m done entirely.
Kevin Kim:
So after the sale happened, you’re on, off to the side, which is also rare. We talked about that on the panel. It’s a very rare instance to see a founder being able to wash their hands completely.
Trixy Castro:
It’s very bittersweet.
Kevin Kim:
I bet, this is your baby.
Trixy Castro:
And, especially because I had to transition earlier than the sale. So, it’s one thing if you’re like, “Okay, I’m going into a sale, I know I’m going into a sale,” and that’s it. This was a gamble of, I hope that I did a good enough job that the rest of the world can see what I’m trying to showcase. So, that was bittersweet.
Kevin Kim:
It was the first instance.
Trixy Castro:
Yeah, it was really like-
Kevin Kim:
And, everyone’s looking at you.
Trixy Castro:
Right, and so it was bittersweet and it was hard. It was sending off your kid to college or something like that. It was really tough because that’s all you’ve known for 10 plus years of your life. It’s what you eat, breathe and sleep. So on the other one, I stayed on with Hudson & Marshall and it was great, and I did all of that, which was a wonderful experience. That was the first time I ever ran a company where it was someone else’s money and not mine.
Kevin Kim:
You had a boss.
Trixy Castro:
What is happening?
Kevin Kim:
You had boss now, right?
Trixy Castro:
Exactly.
Kevin Kim:
It’s different.
Trixy Castro:
It was totally different. It’s an amazing experience, and fulfilled my obligations, and then-
Kevin Kim:
I want to make sure that everyone understands that, NDAs and non-competes are part of the story.
Trixy Castro:
Absolutely.
Kevin Kim:
You have to accept that, and you have to negotiate. Yours were pretty long, so you-
Trixy Castro:
They were long and they were rough and they were-
Kevin Kim:
Your counterpart is Goldman Sachs. They’re going to hit you hard on that one.
Trixy Castro:
Exactly, and I would… Listen, they honored their word, I honored mine, and it was great.
Kevin Kim:
After you left the company, a couple years off… How many years off actually?
Trixy Castro:
Almost four.
Kevin Kim:
Four years off.
Trixy Castro:
Almost four.
Kevin Kim:
Like I said, dog years. In this industry, it’s like dog years. A lot happened in those four years.
Trixy Castro:
My son is going to be four in August.
Kevin Kim:
So, you had your son right after you-
Trixy Castro:
Yeah, the first one.
Kevin Kim:
You told me this in private, so you went over to Europe.
Trixy Castro:
Yeah.
Kevin Kim:
And, started all over again, doing more… You couldn’t rest. You had all these years, you had from sophomore year of high school, all the way up to here you’ve been working, building, building, building and knowing you, you’re in it because you got to know it.
Trixy Castro:
Mm-hmm.
Kevin Kim:
You couldn’t take a break.
Trixy Castro:
I tried and it lasted a weekend, and then Monday I started driving to the office and I’m like, “Oh wait, I’m supposed to go to yoga. Wait, what?”
Kevin Kim:
So, you went to Europe and-
Trixy Castro:
And I learned, and I tried to challenge myself, and understand what everything looked like there, how it worked in the different countries, what it was like to be on the commercial side, on the hotel side, on all sides. So, that was really fun, and I really never went to Europe till… I didn’t travel at all. I was working until mid-30s or whatever. So it was, okay, this is what sunlight looks like. And so it was great, but it was constantly this passion of mine to-
Kevin Kim:
Still real estate related over there?
Trixy Castro:
Yeah, all real estate related, and it was just me doing personal investments and teaming up with other groups and understanding how the other lenders did it out there. What can I learn from them? We were looking at volumes that were huge numbers, huge. They were looking at a demand of 500 million a week. How did they underwrite all that? How did they process all that? I’ll never forget going to one of the shops and just talking to them, and they were friends of mine and they were like, “Hey, if you want us to send a car for you to take you shopping, get out of our office, we can. I’m like, “No, no, I’m good. I’ll stay here.”
Kevin Kim:
What countries were you at?
Trixy Castro:
I was in 13, 14 countries.
Kevin Kim:
What?
Trixy Castro:
It was a lot of fun. It was super fun, it was amazing. I got to practice my Spanish in Spain. So, it was an amazing experience, but obviously I wanted to come back to America, and-
Kevin Kim:
It was tough tail end of this trip, and this mission in Europe, was there a signal that you’d be freed of your non-competes or how did that work? You knew, this is my opportunity to come back or were they telling you, okay, it’s now in Europe?
Trixy Castro:
No, I knew. I had the date highlighted-
Kevin Kim:
On your calendar.
Trixy Castro:
Oh yeah, no, I knew on both.
Kevin Kim:
I’m coming back to the country.
Trixy Castro:
On both. I knew, and I wanted to have both of my sons and stuff. So, I knew exactly on that piece.
Kevin Kim:
Oh man.
Trixy Castro:
It was a really amazing experience, but I have to tell you, it all went back to passion and for me it was, how do I help create jobs? How do I create housing opportunities in America? I’m so grateful right to be in this country. I need to earn my keep. I have to add value, and so it was, how do we get in there and really create an environment where we can help facilitate that?
Kevin Kim:
So, you had that experience contrasting the real estate markets and the job creation and the different types of approaches in real estate. How does the US market contrast to the European markets? Because you’re kind of applying a sense of a little bit more of an entrepreneurial spirit and a lot more of a kind of bootstrapping perspective to the US side, but it’s not like Europe. Europe is more corporate?
Trixy Castro:
Yeah, for sure. Absolutely, more corporate-
Kevin Kim:
More government-run?
Trixy Castro:
Yeah, and every country’s different. Here across all of our states, you have the same governing agencies. It’s still all very consistent, where it’s very different in Europe. At least I found it to be different for me-
Kevin Kim:
Even with the EU, it’s very fractured.
Trixy Castro:
Even with the transactions, like MLS for example, things like that. We have where we all 50 states use it, and so it’s very different. I also looked at Mexico and different opportunities there. So, it was definitely a great experience for me to understand how the rest of the world does it, and what am I missing and how can I learn? I’m the person that goes to dinner and has her notebook out and says, “Do you mind if I take notes?” And, I’ll sit there and write it out.
Kevin Kim:
So, you felt the need to come back, you knew that you were going to come back.
Trixy Castro:
Oh, for sure.
Kevin Kim:
And so, I want to pick your brain on this because we ask all of our guests, but it’s a different perspective because you’ve really been part of the formation of this industry. Really, it’s evolved so much. You left, you came back. You must have been shocked when you came back.
Trixy Castro:
Completely speechless, shocked.
Kevin Kim:
So, what about it surprised… Let’s talk about specifically, what about the industry shocked you when you came back?
Trixy Castro:
It’s so good.
Kevin Kim:
It’s so strong.
Trixy Castro:
It’s so strong, it’s amazing. We’re talking about for years and years and years, people don’t understand what I was talking about. They were like, “You do what, how, when, what?” And, now it was-
Kevin Kim:
Oh, hard money, that’s loansharking.
Trixy Castro:
Exactly, and so coming back and seeing how efficient it is was so just incredible. It was really incredible. Not to say there isn’t still opportunities of improvement, there always is, especially, I think, when you know it from the beginning and the ground up, you can see where we can improve, but it was incredible to see its efficiency, the velocity of which it is going, how tech has come into it, and data. So being an entrepreneur, it’s always a struggle of gut and data. So, usually it’s the entrepreneur, myself saying, “Hey, let’s go, charge, and then backfill the data,” versus now I wanted to combine the two, and really move accordingly, and I feel like the industry’s done that. And so, I think the institutional players have come in and in many ways made it more of a formalized process.
Kevin Kim:
They forced it. They forced us to really… Geraci is a byproduct of that, and we’ve grown immensely because of the standardization and institutionalization, and we’re a middle market player. From your perspective though, it must have been challenging coming back because you’re early stage person that sold their company, walked away, came back, and in the past year or so, has there been any challenge like, oh, she doesn’t know what she’s talking about, this is a different industry now, we’re totally different now, is there any challenges there?
Trixy Castro:
If they think it, they don’t say it. No, I haven’t-
Kevin Kim:
You’re too nice for them to say it to you.
Trixy Castro:
I haven’t had that at all.
Kevin Kim:
That’s good.
Trixy Castro:
But, I think it’s because we did spend some time really understanding and learning. My philosophy in life has always been, hey, if you’re the smartest person in the room, you’re in the wrong room, and that’s truly that I live by that code because I want to constantly learn and in turn make my team constantly have those opportunities to learn and to grow themselves personally, and as a company. So no, we didn’t experience that because we came in with a very open mind to, what is different and how can we be a part of it?
Kevin Kim:
It’s a level humility too.
Trixy Castro:
Absolutely, I was behind the scenes the whole time. I never came out and said, “Hey, I am Genesis, or I am auctions, or I am this,” or anything.
Kevin Kim:
That’s true.
Trixy Castro:
I was always behind the scenes per contractual agreements and per the way that it needed to be at the industry, at that mark, and I didn’t do it for that. I did it because I love it, and I love all of it.
Kevin Kim:
I hope you’re enjoying this episode so far. Private lenders, let me tell you about the most reliable and robust software to service and originate your loans. So, I’ll kind of break out our crystal balls a little bit because you’ve been through a couple… We have these minor cycles in our space and kind of COVID was one of the indicators. I think we had the Fed meeting today. You guys just got back from a big terminal conference in Miami, the big SFR East show, and I’d to get your thoughts on kind of where we’re headed as an industry from a kind of national, macro perspective because it is a weird time. Mortgage rates are climbing, Fed rate is climbing, mortgage rates as record high, and we hit sixes recently. Term rental in the past six months has had massive volatility. Everybody was affected by it. I don’t know how you guys fared the past six months, if it affected you negatively or not, but one of the things I like to ask is kind of a perspective of where we’re headed because a lot of people think that the volatility is behind us. Where do you think we’re headed, and what are you guys working on to make sure that you can kind of stem that tide and you’re here for the long haul?
Trixy Castro:
Absolutely, so I think having had only us to rely on ourselves, you look at the world a little bit differently and you always expect the other shoe to drop. In this case, it’s not that I expect the shoe to drop, it’s that we really feel that rates are going to go up and we know what’s going to happen.
Kevin Kim:
It’s coming.
Trixy Castro:
It’s coming. We all just have to prepare for it, and I think it’s just get lean. Get lean on it, watch expenses, look at the growth trajectories, really looking at the normal business practices that one would look at, but really understanding how that’s going to impact the space. So, when I look at it and when we talk about it collectively as a team, we look at, how do we get in front of it? So, deliver bad news quickly. That’s always the motto. We’re not going to string our clients around, and I think I can, I hope I… No, it’s-
Kevin Kim:
No ostriches.
Trixy Castro:
No, absolutely just get to it because we’re all business people, and we can recover from whatever it is. I do think there’s going to be a lot of opportunity. I see it now. I think it’s going to come down to a few major points, one being the capital partners because I think-
Kevin Kim:
Can they withstand this?
Trixy Castro:
Can they withstand it? Do they have the stomach for it? Do they have a bigger vision, or how limiting is that? I think a lot of where we rely on you guys for help too is a lot of the local state level legislation that’s coming down. I think that’s a factor that I didn’t have that to deal with before. This wasn’t looked at. Nobody even knew who we were. It didn’t matter, so now that’s something definitely to factor in, and I think that we all have to kind of team together for that, and to be able to respond to that and get in front of that, but I see opportunity. I’m really trying to build out a broker piece as well because that’s something new to me. I always borrowed direct, but I think that’s a broker community is incredibly strong and is going to need good debt partners that they can rely on for their clients. My view is different than other people. I think that the client always needs an advocate and they should have it if they would like it.
Kevin Kim:
Well, that begs the question though because that was kind of the theme for the show, you guys are working with your partners and your borrowers as partners. You’re trying to be as helpful as possible to make their dreams come true effectively and their business work, but at the same time, when you’re going third party origination and you have brokers and other originators coming to you, it becomes a little bit of a challenging exercise because it’s very hard to convey discipline when you’re not direct to the borrower. I feel like if you were direct to the borrower you can kind of help them there, but now you’ve got another layer to deal with. What are you guys doing to make sure… Even with your borrowers as well, how are you guys preparing to have, and instill that level of discipline with your counterpart? Because it’s so hard.
Trixy Castro:
It’s so hard. So, it’s so funny because when I was thinking about this, I want to say two months ago, the hardest challenge for me was exactly what you just articulated. Forget everything else, coming back to this, there was no hesitancy on my part-
Kevin Kim:
Tell them to eat their vegetables, it sucks.
Trixy Castro:
Exactly, it’s like, “Wait a second, you want me to let go and wait, what?” So, that has been for me personally, it’s all relationships, and I want to understand who I’m dealing with. Who’s on the other side of the table? So, it’s really just learning on the broker’s expertise and really understanding from my side of the table that I can’t be all things to all people and that just has to be okay, but that is a new world for me, for sure. It’s a completely new world and I’m still navigating through it.
Kevin Kim:
Sure.
Trixy Castro:
But, there’s a lot of trust in our broker partners, so it’s an interesting type of selectivity.
Kevin Kim:
I was going to ask about that, the selective process must be very iterated. All right, cool.
Trixy Castro:
And, I learn a lot from anyone that has more local knowledge than I do, I think is incredible. So, I love to just really try and listen and learn.
Kevin Kim:
That is important. That’s why TPO does work well because you have local concentration. All right, well, we’re running out of time. We forgot to ask our kind of these lightning round questions, and you already answered one of them. First job was Trixy’s tutor time. So, we have that answer on your first job. The next question’s going to be about this, and if you’re not out there just dominating the industry and lending world and getting out there and building businesses, what would you be doing?
Trixy Castro:
Funding other entrepreneurs.
Kevin Kim:
Really?
Trixy Castro:
100%, I did that while I was-
Kevin Kim:
Like a venture partner?
Trixy Castro:
Absolutely, like my own little Shark Tank with my… It was really fun and it’s amazing. So, I’ve got several that I’ve worked with and it’s been an incredible experience-
Kevin Kim:
Very cool.
Trixy Castro:
… To get to help them build their dreams.
Kevin Kim:
That’s awesome, and you talked about that at one time, so you’re actively right now acting as a venture partner. That’s very cool.
Trixy Castro:
I love it.
Kevin Kim:
Very cool. All right, so one last question, and that has to do… I want to make sure I get it on here because I don’t want to mess it up. All right, this is what business tool can you not live without? Because you said cell phones aren’t really your thing, you’re not really a tech person, is there a business tool that you just have to have in your day-to-day?
Trixy Castro:
My phone, but if it was up to me, I would be on my Blackberry.
Kevin Kim:
You miss your Blackberry?
Trixy Castro:
I miss my Blackberry because I could type under the table because I had the keys memorized.
Kevin Kim:
I remember the Blackberries and it’s funny because we there’s talk about it coming back and there’s still some folks out there, one of our old guests, I remember seeing him at a conference. He still has a Blackberry. He’s like, “I can’t let go of it. I need the keyboard.”
Trixy Castro:
I need it. The other thing I cannot live without, absolutely cannot is my Post-it notes.
Kevin Kim:
Oh, so you’re a Post-it note person.
Trixy Castro:
I am a Post-it note person and it’s super annoying, and I have my Post-it note list of things to do and I cannot live without it.
Kevin Kim:
So, you’re a journal handwriting-
Trixy Castro:
Yep.
Kevin Kim:
Very good.
Trixy Castro:
And, then that way I don’t forget, but I would feel like I’m sitting on my hands.
Kevin Kim:
It’s old school, I like that.
Trixy Castro:
Old school, for sure.
Kevin Kim:
I like that.
Trixy Castro:
I’m an old soul.
Kevin Kim:
All right, well, I think that’s all the time we have for this show. I want to thank you so much for joining us on the show. This episode flew by. Thank you so much for joining us and I’m really excited to see what Aureus is going to do for the industry and we’ll see you at the next event, I think.
Trixy Castro:
For sure.
Kevin Kim:
And, this is Kevin Kim for Lender Lounge, another episode for you guys, signing off. Thank you very much.
Thanks for listening to Lender Lounge with Kevin Kim. I hope you enjoyed this episode as much as I did. If you did enjoy, please leave us a five-star view on your podcast platform and be sure to follow our show to be notified of new episodes. If you’re on YouTube, don’t forget to smash that like button and hit subscribe for more content from all of us here at Geraci. Lender Lounge with Kevin Kim is available on all podcast platforms. Referrals really help us spread the word, so please send this over to someone you think might enjoy. See you next time. This is Kevin Kim signing off.
