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 to 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, 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 everyone. Welcome to another episode of Lender Lounge with Kevin Kim. Today, I am honored to have as our esteemed guest, the CEO of Renovo Financial and a man with a great name, Kevin Werner. Thank you for joining us all the way from Chicago. Welcome to the podcast.
Kevin Werner:
Awesome. Thank you Kevin. Great to be here. I love your name.
Kevin Kim:
Great name.
Kevin Werner:
Very smart. Just makes… It’s a smart name.
Kevin Kim:
Exactly. And we both wear glasses too, very cool. So we’ve been following the company’s growth and success for years now and we really got able to get connected through a mutual friend of ours who now works for you, James. And I’ve been wanting to have you on the podcast for a long time. Because you guys have a great story.
Kevin Werner:
Thank you.
Kevin Kim:
But you’re also in the Midwest. And so it’s a interesting story as well. So first of all, why don’t you introduce yourself and the company and then we’ll go from there.
Kevin Werner:
Well, I’m Kevin Werner. I am a co-founder and CEO of Renovo Financial. Renovo started 10 years ago. This is our 10th year anniversary. And you’re right, we’re from the Midwest and we’ve been growing this business very slowly out of the Midwests really to build a solid long term business. And now we’re, in 2021 we’re expanding pretty aggressively in a lot of major U.S. cities at the moment.
Kevin Kim:
So tell me about the lending business. So you guys have always been in the resi space?
Kevin Werner:
Yeah. So just to go full… So yeah. Renovo is a private real estate finance company. We lend to single family and multifamily residential real estate investors and we land in all types of residential real estate investment projects.
Kevin Werner:
Meaning, whether it’s someone who’s buying to renovate and sell to a homeowner or someone that’s buying, fixing and renting, building new construction, our obsession is to be the best partner for residential real estate investors that there is.
Kevin Kim:
When you guys started back 10 years ago, now first of all happy anniversary. That’s amazing, 10 years.
Kevin Werner:
Thanks. Thank you.
Kevin Kim:
How did things start? Was it just you and your partner and just lending in Illinois or was it a different business back then?
Kevin Werner:
Yeah, no it was… So I’ve been in this industry now for 23 years.
Kevin Kim:
Okay.
Kevin Werner:
So I’m 43 and so it’s been about 20… It’s been a long time. And prior to the housing crash of 2007, 2008, 2009, 2010, I was running a family finance company that my dad started. And I was running it with my brother in the real estate lending business, not terribly unlike today’s industry.
Kevin Werner:
So I had a company then. The housing crash happened. We ended up shutting, unfortunately having to shut down that business and then actually I never thought I would want to be in the lending business again after going through that horrific housing downturn, I’ll be honest.
Kevin Werner:
It was bad. I talked to some family friends and some really close friends encouraged me and said, “Gosh, you learned so much by going through the housing crash in this industry and losing 10s of millions going through this just massive bad situation.” And doing a great job by the way. We did an awesome job collecting on our portfolio for our investors and our lenders.
Kevin Werner:
So we learned so much through the housing crash that some family friends said, “Gosh, you should do it again. You really should do it again. Why would you waste all that education?” And I didn’t think… I wasn’t thinking of it that way. I was thinking of the amount of pain that I went through and I don’t want that much pain again in my life, so maybe I’ll go do something else.
Kevin Werner:
But the more I thought about it, the more I agreed with them, and I’ve always loved the lending business. And I love the real estate business and I love real estate. So it was a natural thing for me to want to kind of get back in the business. And in 2009, it was around Christmas time, I actually bought a notebook and I made a list of all the investors that I knew that could help potentially financially back me to start a new business.
Kevin Werner:
Because the one thing I did learn prior to starting Renovo is I really wanted to start Renovo with institutional capital backing day one. A good friend of mine told me, “Look, if you can’t get institutional backing day one, don’t do it.” And I thought that was a good idea. So put together a business plan and I made a list of the institutional kind of private equity firms and asset managers that I knew. And I went and pitched about, I don’t remember the number, 20 or 30 of these different groups.
Kevin Werner:
And I had breakfast, lunch, and dinner with… I was gaining weight left and right pitching the idea of starting a new residential real estate finance company. Now in 2009 and 2010 as weird as it sounds, most of them told me, real estate is dead and is never coming back. They were not correct in that [crosstalk 00:05:56].
Kevin Kim:
They’re back in now.
Kevin Werner:
Now most of them are back in. At that time, I ran across a guy that I knew at a private equity firm called Granite Creek Partners, and I ended up pitching them on the idea, and we ended up cutting a deal. And then at the same time I started working again with one of the guys from my old company, Daniel Rosen.
Kevin Werner:
And I said to Daniel, “Hey, I think I’m going to do this again.” We were sitting at a Starbucks on Armitage and Sheffield in Lincoln Park, in Chicago. And I said, “I think I want to do this again? Do you want to do it together?” And I was very lucky. It took him about 10 seconds to say yes. And that was a great decision for both of us to decide, “Hey, let’s do this.”
Kevin Werner:
That’s how we got started. And even though we had institutional backing we weren’t in a hurry to try to go for scale or anything like that. We really, by the way coming out of the downturn we were so scared of making mistakes that we walked very slowly forward. And yes, we only focused on Chicago in the beginning. That was it.
Kevin Kim:
Just Chicago? Not even the rest of the state?
Kevin Werner:
No. No, no. Just Chicago. Well, the Chicagoland area. So we [inaudible 00:07:27] the suburbs but… I mean the Chicagoland area has 10 million people in it. So it’s enough. [crosstalk 00:07:34] It’s enough. Yeah, major metro. It’s enough to keep you busy.
Kevin Werner:
So for the first five to six years, we just focused on Chicago. We started building our team, building our servicing capabilities. Something we were very obsessed with since day one is customer service and providing a customer experience that was, hopefully amazing from beginning to end. So that’s why it was important for us to build a servicing arm of the business that we can service our own loans.
Kevin Werner:
So right now Renovo still to this day has always serviced our own loans and that’s been an important element to keep the customer service from beginning to end, so we can provide the borrower with a great experience. And I’ll tell you the reason we got so obsessed with customer service in the beginning is because we had no money to spend on marketing.
Kevin Werner:
And if you want to grow, you better do a good job for your customer, so maybe they’ll tell one or two people about you and you can grow. So we got obsessed about customer service for mostly that reason, and now it’s embedded so deep in the company. We’re still to this day, a lot of us, we say we’re in the customer service business before we say we’re in the loan business.
Kevin Kim:
Right, right. I mean service goes so far. It’s so important. You can’t operate… Lending is still service. Your borrowers depend on you for reliable funding, your borrowers depend on you to be a partner with them not be that hard ass, so to speak. Those clients, those lenders they lose… They have to go on volume. And the marketing dollars make up for it, I guess you can call it, right?
Kevin Kim:
So let me ask you this though, so you guys concentrated in Chicago for five or six years. So you opened in ’09, so until, really until… It wasn’t until a couple of years ago, you guys started to expand then.
Kevin Werner:
Yes.
Kevin Kim:
So when was that… What was the crystallizing moment for you guys [crosstalk 00:09:44]?
Kevin Werner:
Well, we always wanted to grow outside of Chicago but it wasn’t a priority. It wasn’t a priority. And we always looked at it and said, I mean there was enough in Chicago to grow a big business.
Kevin Kim:
At the time, in early… In that time, because I remember the industry back then, there weren’t a lot of lender, private lenders in Chicago.
Kevin Werner:
Correct.
Kevin Kim:
So you guys had the whole market cornered in a lot of ways. You guys currently have dominant market share in the Midwestern region I believe, but what was it? What was that moment that [inaudible 00:10:17] realized, “Okay, we’ve got this down pat and let’s start looking at other avenues.” It’s different than a lot of folks who started up back then, because we started seeing a preference to go multi-state about five years ago and five years ago you guys were still focusing on Chicago. So what was it?
Kevin Werner:
Well, it was the fact that we were building a big enough business just in Chicago that we viewed it as a distraction. For a long time I would attend conferences or I would talk to people, and they would say the names of national companies. So and so is national. Well I knew we were doing as much volume as them in one city as they were doing in 10 cities. So we do about $200 million a year in Chicago. And I think that’s a good thing.
Kevin Kim:
Fantastic [crosstalk 00:11:16].
Kevin Werner:
So what we’re looking to do is try to be… We believe in going into a market and going very deep in the market. We’d rather have hundreds of projects going on in one city rather than have them spread all over the place. Now on one hand some would make the argument that you’re taking too much risk because you’ve got the Chicago risk. True, but we’ve got a phenomenal team that’s overseeing those assets on a week by week, month by month basis, and we can keep our eyes and ears, and what we’ve built in the cities that we go in, is we’re trying to build an ecosystem.
Kevin Werner:
We’re trying to build a network and a system where we know the realtors and the insurance people, and even the bankers and our competitors, we want to know everybody. And I’ll tell you, you know what Net Promoter Scores are?
Kevin Kim:
Yes. We do it here.
Kevin Werner:
Yeah, so we were big believers in that early on. So we’ve embedded it deep into our culture, and our process. And anytime we fund a loan, we’re 50% through the construction or a loan pays off. Our system automatically sends our borrower an NPS ask. Like, “Hey, how are we doing? On a scale from one to 10, how would you rate us and can you give us some feedback?”
Kevin Werner:
And Kevin, what happens is when the borrower responds, the entire staff at Renovo gets that email. The reason I point that out is that embeds great customer service culture.
Kevin Kim:
Oh, yeah.
Kevin Werner:
Because there’s nowhere to hide that Renovo [inaudible 00:13:03] bad service.
Kevin Kim:
Right.
Kevin Werner:
If a customer gave us a bad NPS score, I personally might call that borrower and say, “Hey, what happened? Oh, you were left at the closing for two hours and no one told you what was going on?” Or, “We charged you a fee we shouldn’t have charged you.” Or this or that. And we do our best to make it right.
Kevin Werner:
So when we go into new cities, we’re going in with that mentality of how do we build a great relationship with that borrower and then how do we get to know [crosstalk 00:13:33].
Kevin Kim:
[crosstalk 00:13:33] transaction, you’re doing it on every single close?
Kevin Werner:
Oh, yeah.
Kevin Kim:
Wow. Wow. And the entire organization… So from your staff, your interns, all the way to the CEO, everyone is getting that email. That is impressive. Now let me ask you this, so you mentioned how [crosstalk 00:13:50].
Kevin Werner:
And with very detailed response. [crosstalk 00:13:54]
Kevin Kim:
Oh yeah, borrowers, they don’t pull punches.
Kevin Werner:
Oh, no. And often, and early on I’ll tell you, I’ll never forget. This was like, I don’t know three or four years ago. It was a Saturday night. I was waiting for my wife to get ready so we can go out to dinner and I was sitting looking at my phone, and a very bad Net Promoter Score survey came in to the email. And it was a borrower who gave us a very low score and he said something about the fees.
Kevin Werner:
He was very disappointed about how we charged him the fees. So I knew my wife was going to be another 20 minutes. So I literally went into the, I didn’t know this borrower. I went into the system on my phone and I called the borrower within five minutes of him doing the survey. And he was like, “Hello.” I’m like, “Hi, this is Kevin from Renovo.” I didn’t tell him I was a CEO. I’m like, “Look, I got this email response that you just did. I’m very curious. What happened?”
Kevin Werner:
And he was like, “Wow, I didn’t think you’d call me right now.” First of all the guy said, “I didn’t think anyone would call me. The fact that you’re calling me now…” I said, “Well, tell me what happened.” And he said, “When you guys closed my loan, I noticed that you calculated something wrong.” And one of the fees I forgot what it was, but something was calculated incorrectly and he was overcharged by like a 100 or 200 bucks.
Kevin Werner:
And I said, “Let me look into this.” So on Monday morning, got to the office, grabbed our ops head, and said, “Can you look into this? What happened?” He’s like, “Oh, my God. You know what? The guy is right. We miscalculated that and we overcharged him.”
Kevin Werner:
So we called him. And we found out a good restaurant right by his house, the borrower. So we sent him… First of all, we called him and gave him his money back. We sent him a gift certificate to a restaurant right by his house and I called him and said, “Look, I’m really sorry about that. Thanks for pointing that out.” And he’s like, “Wow. I can’t believe you’ve called me, and you took care of it, and…” He’s like, “I didn’t even want the money back. I was just wanting to tell you guys you calculated it wrong. I said, “Yeah. But that’s what we do.”
Kevin Kim:
That’s… I mean, that’s unheard of, first of all in the lending industry. That’s fantastic. But again, I got to ask. That creates a lot of expectations internally, right? And you guys must have a very thorough hiring process because to get talent that’s willing to live up to that kind of expectation and perform at that level, right? Tell me more about your hiring process then, to be able to get entrenched in this type of culture. You guys have a hyper transparent level of accountability and a very high expectation of service, and I commend you for that.
Kevin Kim:
And we [inaudible 00:16:38] have the same values here but it also makes it challenging for us to teach that to, especially to seasoned professionals. Right?
Kevin Werner:
Yeah.
Kevin Kim:
[inaudible 00:16:47] in, teaching that type of business practice and biz ethics is very hard for us.
Kevin Werner:
It is really hard. It is really hard. I mean a lot of the people at Renovo have been here now for a long time. And we probably… We get criticized sometimes for not having people that have joined with a tremendous amount of outside expertise. We didn’t get someone with a pedigree from Chase or from this place. You know, big lender. It’s too hard to deprogram the bad service and culture that they’ve infused into [crosstalk 00:17:27].
Kevin Kim:
Bad habits. Oh, yeah.
Kevin Werner:
So hard to deprogram that. Rather kind of teach someone the loan business who’s got a great attitude that wants to learn, wants to give good customer service. I mean customer service is actually, it’s almost like in you or it’s not. I mean it’s almost like a thing that you’re either into or you’re not. And look, we’re not perfect. We make lots of mistakes and we’ve hired lots of people that probably get in here and are like, “Wow, these people are nuts. I want to get out of here. They are too obsessed with customer service.”
Kevin Werner:
But most of us here think it’s really fun and it’s now, because of the transparency you’d be shocked that it’s not that big of a deal anymore. It’s just what we do. And I get very excited right now when I see those Net Promoter Score feedbacks coming in from new cities that we’ve only been in for three months.
Kevin Kim:
I wanted to ask you that. Because you’ve entered new cities recently. You started new markets, right?
Kevin Werner:
Yeah. Lots of them.
Kevin Kim:
Translating this culture, because it’s much easier when you’re local, you know everybody, right?
Kevin Werner:
Yeah.
Kevin Kim:
How have you translated that to entering the new markets? I mean, because you have boots on the ground there, right?
Kevin Werner:
Yeah. Really well. So it’s working really well. And I get ecstatic when I see the Net Promoter Score feedback come and it’s from Boston, for example. And the borrower is saying… We got one last week saying, “Wow, where have you guys been? This is the best borrowing experience I’ve had in 30 years.”
Kevin Werner:
When I see something like that [inaudible 00:19:13] come over, honestly I almost start crying. I feel like, “Yes.” Like we’re actually… It’s working. [crosstalk 00:19:22]
Kevin Kim:
How do you celebrate those wins though? Let me ask that. Because internally a lot of companies have various means to promote their employees and make them feel appreciated. Do you guys do anything like that internally for those types of wins?
Kevin Werner:
I mean first of all, here’s what happens. Because the emails come over and everybody gets them, there’s a frenzy, “Wow. Oh my God. I can’t believe…” There’s a lot of instant gratification that goes [crosstalk 00:19:51].
Kevin Kim:
Right, right, right.
Kevin Werner:
Right? I mean you could be a new team member in New Jersey and their first loan responds to a Net Promoter Score with great feedback and I’m responding to the whole team within two minutes saying, “Great job team. That was awesome.” So at minimum, that’s just built into every day.
Kevin Werner:
Beyond that we do some other stuff. We have a champion. We have the customer service, the world champion of customer service.
Kevin Kim:
I like that. Nice.
Kevin Werner:
We have the belt. I should [crosstalk 00:20:26].
Kevin Kim:
Oh, you have a belt?
Kevin Werner:
Oh, yeah.
Kevin Kim:
That’s fantastic.
Kevin Werner:
Yeah, hang on, hang on. Let me grab it. Hold on. Look at this thing.
Kevin Kim:
Oh, my goodness.
Kevin Werner:
Is that real or what? Look at this.
Kevin Kim:
That is awesome.
Kevin Werner:
That’s what it’s about. So this is the hustle…
Kevin Kim:
Oh, that is great.
Kevin Werner:
You can be the hustle harder champion. That’s our motto, “Hustle harder.” So if you’re at customer service, right now this was in Daniel’s office, but it gets passed around. And this is the customer service championship.
Kevin Kim:
That’s awesome. And it’s stuff like that that makes… I mean, especially today with today’s generation, that instant gratification, but that want to do the right thing for your customer and the incentives that you guys are providing, that’s awesome.
Kevin Kim:
We’ve had challenges with this internally, is that when you have… Because we’re all remote right now. When we have employees in a different state or a different country, translating that culture over has been a challenge. But I find, I think that the fact that you, the CEO are commanding them right away… You said, I mean immediately after you get good feedback. That goes a long way. [crosstalk 00:21:36]
Kevin Werner:
Thank you.
Kevin Kim:
That’s very cool.
Kevin Werner:
It is something that build though. It’s like a snowball. Once you kind of get it going and now there’s 55 of us or so, let’s say at the company. And there’s a lot of people pushing the customer service snowball forward. And so it gets fun.
Kevin Kim:
That’s really cool. And how many states are you guys in now?
Kevin Werner:
About 10.
Kevin Kim:
Fantastic. I mean you go from almost, what? 10 year, eight years in Chicago, and then what? Was it six years in Chicago only?
Kevin Werner:
More probably. I mean it was really seven or eight.
Kevin Kim:
Seven or eight years just in Chicagoland, and then now just going into more markets.
Kevin Werner:
Yeah.
Kevin Kim:
A lot of our people who are… A lot of our clients who are growing, they kind of have a similar story. In a sense that they lend in their backyard, their county or their city, and they’re starting to expand into different regions. My home state of California, little different. We’re over saturated here so a lot of lenders immediately go to different states, but clients in other states like Texas, they want us in their backyard and they’re starting to think about expanding. What has been your path to evaluating a new market and things that you can, I guess some nuggets of advice you can give some of our listeners when they’re looking at new markets?
Kevin Werner:
The way we thought about it, first of all, it all starts with the people. So we go to places where we find the right people, the right talent, the boots on the ground talent. The local partner that we’re going to have join the Renovo team. So it’s a combination of two things. So we’ve made a list of call it 15 or 20 markets that we really like. That we think make sense.
Kevin Werner:
And it’s different for everybody. Not all companies are going to have the same qualifications. But we identify 15 or 20 cities that we thought we can go and be successful at. Then we start looking for people. And the people, the person is more important than the city. So even if it was number 19 on the list but we find a great person, we’re going to probably go to that city.
Kevin Werner:
And it’s even happened recently where we ran across a couple of amazing people that were in markets that were not on our list and we still decided to go to that market based on the people.
Kevin Kim:
So you’re not recruiting originators just as contract, you’re bringing them on board as part of the team.
Kevin Werner:
Oh, we’re opening offices, we’re renting… Yes. We’re bringing them on full time. Our intention is to build local dominating offices.
Kevin Kim:
You’re building branches across the country.
Kevin Werner:
Yes. [crosstalk 00:24:49]
Kevin Kim:
That’s a little bit different than most of your competitors. That’s interesting.
Kevin Werner:
Yeah.
Kevin Kim:
Is it the customer service priority that motivates that decision?
Kevin Werner:
Well, it’s that and it’s also we just believe that real estate is local, and we want to be local. In Chicago, we’re local and we want to be local in the other markets we’re in. So we believe… We don’t want someone from Houston having to call some 800 number in San Francisco or wherever. We want them to be able to talk to our Houston team. And our Houston team knows Houston. And our San Antonio team knows San Antonio. And our Dallas team [crosstalk 00:25:37].
Kevin Kim:
[crosstalk 00:25:38] I’m hearing parallels. Because you’re taking what you did in Chicago, you proved the model there, and you’re just trying to replicate that at these various locales, right?
Kevin Werner:
Yeah.
Kevin Kim:
These various [crosstalk 00:25:50].
Kevin Werner:
Yeah.
Kevin Kim:
Very cool. Very cool. And that’s a very different model and I commend you for it because it’s allowing you guys to grow aggressively. I mean you guys have grown significantly over the past few years, right?
Kevin Werner:
Yeah. Yeah.
Kevin Kim:
So that’s fantastic. I mean so just to give a little bit of color into how you guys are growing, what you’re prioritizing right now. I know you guys are focusing on RESI right now and trying to grow as deep into these cities as possible. Are you guys now expanding into more of a institutional partner with a lot of local lenders? Are you keeping it purely retail? So basically wholesale versus retail. A lot of lenders start getting bigger and bigger and they start taking a wholesale approach.
Kevin Werner:
That’s a great question. That’s a great question. We’re almost exclusively retail. And we really… That is the main business we’re in and that’s a massive priority. We have set up a TPO group that has a couple of select relationships that are in cities that we’re not in. And so that’s a way for us to maybe get some exposure to a market that we don’t have people in but we like the market, and we find a another company that maybe needs capital that we have.
Kevin Werner:
We’ve got enough capital for ourselves and hopefully more. So we’re doing a little bit of TPO but it’s not the lion’s share. We want to be retail. That’s really what we’re all about.
Kevin Kim:
So you guys have just celebrated your 10 year anniversary. So looking forward, what’s the vision for Renovo looking on? I mean we’re, as part of [inaudible 00:27:51] we love watching groups grow and enter new markets and start seeing [inaudible 00:27:56] get more involved in the national scene and so let me know what’s the plan in the next 10 years?
Kevin Werner:
The plan is just to… I just told you the plan. The plan is to keep our heads down and replicate what we think is working for us.
Kevin Kim:
[inaudible 00:28:16]
Kevin Werner:
And that’s it.
Kevin Kim:
Not trying to reinvent the wheel.
Kevin Werner:
Our big plan is to hopefully not get distracted.
Kevin Kim:
And that’s interesting. So as companies grow and with entrepreneurs at the helm a lot of times, it’s very easy to get distracted. Like Anthony and I are kind of the known guys in our office that, “Oh, shiny. What’s that?” And always dreaming of new ideas. How do you and your executive team really make sure your… [inaudible 00:28:48] in Chicago for six years, eight years, that’s a challenge. I mean, I’m sure you guys had a ton of opportunity to jump into, even into the immediate Midwest. How do you guys stay focused?
Kevin Werner:
It’s hard. It’s hard. My team would say the same thing about me. I am a shiny object guy. And I get excited. I’m glass half full every day of the week. So I think anything can work. We should probably give that a try. But at the same time, I have been doing this long enough now to know that if you focus you could win. And to us winning looks like really being the number one player in our space. In this specific asset class. That’s what we’re really focused on. How do we remain very important to our customers?
Kevin Werner:
We really want to make sure we’re very important to our customers and that we add more customers. Nothing else really matters.
Kevin Kim:
And you keep using the word customer. And that’s interesting because I don’t hear a lot of people say the word customer when they’re dealing with [crosstalk 00:30:08].
Kevin Werner:
I usually… Well, that’s true, I’m sorry. I usually say clients. I’m sorry.
Kevin Kim:
Clients, customers. Similar concept, but I see a lot of my… You see a lot of people use the term borrowers, builders. But the idea of you treating them as a customer. And let me as you, how much repeat business are you guys getting in your major markets? [crosstalk 00:30:30]
Kevin Werner:
Yeah, I mean normally it’s very high. We’re trying to get a 80%+ repeat ratio at least, but yeah.
Kevin Kim:
That’s fantastic. Well I mean, so because of your background, you guys came out of the recession. You did this before the recession, and you guys have taken a very slow and steady approach to growing. I’m sure you guys are watching markets across the country, you must analyze them thoroughly before you enter them. We’re in a really weird time in our industry.
Kevin Kim:
I mean the pandemic is still going on. There’s kind of a recession, there kind of isn’t. A lot of people say residential is still doing well. I kind of want to ask, let’s break out the Kevin Werner crystal ball a little bit. You had enough experience in this space to give us some insight from your perspective. Where do you think this market is going from an industry standpoint?
Kevin Werner:
I have no idea.
Kevin Kim:
Good answer.
Kevin Werner:
I don’t. But here, I guess here’s the way we’re thinking about it. So yes. Going through the housing crash and being right in the middle of it made us and made me probably too cautious most of the time. And I would have thought that coming into 2020 we had a lot of wind in our back. And I didn’t see the pandemic coming. I don’t think any of us saw the pandemic coming.
Kevin Werner:
So everyone, it’s funny. In like 2019 I ran into a guy who I hadn’t seen in a while and he was like, “Oh, I can’t believe you’re still in this business. That’s going to go down. The housing market is going to crash.” I was like, “Oh, and you’re the guy who’s going to call it? You’re the guy. I got news for you. If you’re saying that by the way, we’ve got clear skies ahead for years.” So my point in saying that is everyone was waiting for a housing downturn and we got a pandemic that gave us a gigantic housing surge.
Kevin Werner:
So my answer is, I have no idea, but what we are focused on and what I’m focused on every day is how do we build a business that is going to be sustainable and going to be around for the cycles. This is a cyclical business. I don’t know if you’re watching the publicly traded mortgage companies. But if you look at the big ones right now, the big ones in my opinion that are really capturing the market right now have been around for 20 or 30 years.
Kevin Werner:
So they didn’t see a market and hurry up and build a business to try to capitalize on it. They said 20 years ago or 30 years ago, “Hey, we think the mortgage business is a good place to be. We’re going to build a mortgage company, and we’re going to try to be the best mortgage company we can be. And we’re going to try to last a long time and when times are good we’re going to try to do good and when times are bad we’re going to try not to die.”
Kevin Werner:
And that’s our philosophy. I mean literally the same thing. So what we’re saying is, we are in a bit of a uptick right now. I don’t think we’re big enough right now to really capture it in the most amazing way possible, but the next one after this one, I think we will be.
Kevin Kim:
Yeah, I think you guys will be. And that’s an interesting way to look at it. Like you’re positioning yourself for the next round. Hopefully, we’re not in the middle of that transition, I don’t think we’re facing it anytime soon either, but it’s hard to tell.
Kevin Werner:
[crosstalk 00:34:39] if you make good loans, you got to try to make good loans, right?
Kevin Kim:
And you’re servicing internally so you’re not at the whim of anyone else. So that’s important too.
Kevin Werner:
We’re servicing internally. We have most of our loans on our own balance sheet. So we are owning the loan. We own most of the loans that we make, and yeah we’re monitoring. We’re monitoring our delinquencies and our foreclosures and anything possible all the time. But I don’t know where the industry is going. It seems like there’s a lot of capital right now that’s pouring into the space. It is a lot of excitement. We’re very excited. We’re going to continue to grow and we’re going to push hard to grow and if we hit turbulence, we’re going to triage and do our best to stay alive during those times.
Kevin Kim:
And let me ask you this, so resiliency, so we all got tested last summer. Everyone got tested. Resiliency was [inaudible 00:35:46] stress test if you will. What do you think, what are you guys doing to build resiliency? Because it is coming. It’s going to have to come eventually. And without giving away too many secrets, but it’s cultural and it’s business practices. So what are you guys doing internally to make sure you guys are prepared for the winter if you will?
Kevin Werner:
Yeah, I like that. We definitely think that way. Prepare for winter.
Kevin Kim:
Especially in Chicago, right?
Kevin Werner:
Especially in Chicago, yeah. A couple of things. I mean right now we are in growth mode. So we have a pretty much both feet on the gas at the moment. We’re spending a lot of time… I mean we have a robust credit process. I would say it’s probably overbearing at times, but we have a very comprehensive credit process that we do.
Kevin Werner:
We’re monitoring and managing our portfolio I think as hands on as we possibly can. We’re always trying to keep our capital relationships very happy and close. I mean that’s the thing that kills these kinds of businesses, is it when the capital stops flowing.
Kevin Kim:
Right. And you guys are making sure you maintain a strong relationship. You’re communicating with them frequently and [crosstalk 00:37:15].
Kevin Werner:
Yeah, I mean it’s hard. Yeah, we’re doing our best to maintain very good relationships with our capital partners, our banks, our private equity partners. So that’s [crosstalk 00:37:25].
Kevin Kim:
[crosstalk 00:37:26] right. That was the stress test this past summer for a lot of companies. They got the rug pulled out from underneath them, right? From a capital standpoint.
Kevin Werner:
Yeah. The companies, the firms that were buying loans that said they would never stop buying loans, stopped buying loans.
Kevin Kim:
Exactly. Well, listen I mean there’s a lot to talk about but one of the things that we really want to talk about in this podcast also, just kind of like your growth as a CEO. You’ve always been the CEO. You were founder of Renovo, and a lot of our clients and our listeners are trying to grow their businesses and are starting new lending businesses. We’re doing more and more new lending business consults every day. Any word of advice for the new CEOs out there, the new lenders out there who are trying to grow and looking at you guys as kind of an example? Like, “Hey, wow. They really did a good job.”
Kevin Werner:
Well, thank you for saying that. Well, I would say this. This is just speaking for myself. So number one, this is corny. It’s really corny. I think you should love what you do. And if you love it… This is a hard business. I crack up when people are like, “I’m going to start your kind of business.” Like, go for it. Go for… Have at it. It’s hard. And unless you love it, you probably are going to… I want to give up sometimes and I love this.
Kevin Werner:
Hopefully you can tell, I mean I really like this and at 43 I really don’t intend to do anything else. I’ve been doing this 20 years, I think I want to do it forever. So I think first of all you have to love what you’re doing. And if you don’t, honestly you should just go do something else. You should really love it.
Kevin Werner:
Number two is, I think be coachable and seek mentorship from people who have done what you want to do or at least that’s what’s worked for me. So I never went to college. I have loved business my whole life and what I tried to do was say, “Hey, that’s something I want to do. Let me go find someone who’s done it and I’ll ask them how they did it. And if I can’t get ahold of them I’m going to read their book. Or read articles on them.” And I would say, be curious and be coachable and reach out to people. Reach out to [crosstalk 00:40:08].
Kevin Kim:
[crosstalk 00:40:08] humility you need there too, right? A lot of, in the finance world there’s a lot of egotistical types, but what I’m hearing is, humility is required to be able reach out and ask for help.
Kevin Werner:
Look, I know that I don’t know a lot more than I know. And I think there’s people out there that know the things that I’m trying to do. So what the hell am I going to waste my time. I mean I got to just find the people that have done what… Recently, and the mentors change over the years. You maintain good relationships with these people but they change.
Kevin Werner:
Like a couple of years ago I went to my private equity partners and I said, “You know guys, I could really use a new mentor right now. I want to find somebody who has built a multi billion dollar financial services company. Can you help me find someone who’s… Do you know anyone who’s built a multi billion dollar financial service company because that’s what I want to do now? And I kind of need to meet someone who’s done that.”
Kevin Werner:
And it’s funny they quickly hooked me up with this guy who is the biggest name in Chicago banking pretty much ever. And he’s become a really close mentor of mine. And he’s built the biggest banks in Chicago and his advice is invaluable. Going to dinner with him, now he’s in his… I think he’s in his maybe late 60s or early 70s and unless I had done this before, meaning seek mentorship, you might think, “Well, he doesn’t want us. He doesn’t want to talk to me. Why would he want to talk to me?”
Kevin Kim:
Right. I was going to ask you that. Yeah.
Kevin Werner:
He calls me once a week asking me, “How’s it going? What’s going on? When are we going to breakfast? Hey, can we go to breakfast? Let’s go grab dinner I want to hear what you’re doing.” He likes, I’m saying this respectfully, I think he likes the relationship as much as I do.
Kevin Kim:
[inaudible 00:42:23]
Kevin Werner:
Because it’s a beautiful give and take. I’m trying to do what he did. Business is not that different than sports at least for me. I’m not into sports but to me business is my sport. And I think of it very competitively and some of these experienced people like I’m mentioning are happy to mentor the next generation. Like if someone genuinely reached out to me on LinkedIn tomorrow and said, “Hey, Kevin I’m 32 years old. I’m in Seattle and I’m trying to build a lending company. I found… Any chance I can do a call with you?” Of course. Let’s talk tomorrow. Yeah.
Kevin Werner:
And if they’re genuine and they’re serious and humble about it. I’d say come out to Chicago. Let’s go grab dinner and why not?
Kevin Kim:
Right. I think a lot of it is, a lot of people are scared to ask. They’re kind of worried, “Oh, this guy is not going to…” That kind of mentality. And you’d be surprised what kind of relationships you can build simply by asking and having that humility and actual curiosity. And I think that’s also part of it is, I’ve been asked to advise on a lot of projects and you get two types.
Kevin Kim:
You get the type [inaudible 00:43:44] actually curious and doesn’t know what they don’t know and admits it, and is willing to learn. And asks a ton of questions. Then you have the type that acts like they know everything and cuts corners. The kind of egotistical type. And I found that the humility and the vulnerability and the willingness to have a mentor, you see long term success with those folks. And I’ve seen a lot of lenders grow fantastically and fail fantastically, but the ones that last are the ones that have that kind of mentality, they have the humility, the coachability. So that’s great. That’s great advice. Actually, I’m meaning to do that myself, actually reach out to some of my old mentors and ask for a new mentor like you mentioned.
Kevin Kim:
Let me ask you this, so you mentioned some books that you read for people. Are there any good books out there that you’re reading right now in our space? Anything you’re reading that’s interesting?
Kevin Werner:
I would say the one that comes to my mind, I forgot the name of it. You probably know the guy Stephen Schwarzman, started Blackstone. So he’s got a book called… His new book. It came out about a year ago, but I just was reading it the other day and it’s awesome.
Kevin Werner:
I think it’s… I forgot what it’s called but it’s Steve Schwarzman’s new book. I mean there is an example. If you want to… A guy like Steve Schwarzman who built Blackstone from scratch took the time to write a book to tell the world how he did it. If you’re building a financial company and you haven’t read the book, what are you doing?
Kevin Kim:
Agree.
Kevin Werner:
At least that’s my perspective.
Kevin Kim:
No, I agree. And I tell a lot of [inaudible 00:45:29] out there, there’s business books and there’s learning the financials, but there’s also the soft skills that you cannot learn in MB school or any kind of like financial course. [crosstalk 00:45:47]
Kevin Werner:
Here’s the other thing. Here’s one of the other… [inaudible 00:45:50] that guy?
Kevin Kim:
Oh, yeah.
Kevin Werner:
Yeah. So I’m a huge Tony Robbins fan. I’ve been to all of his events. It’s been 20 years of going to his events, reading his books, listening to the podcast. I saw this motivational clip today on LinkedIn so I printed it and just put it up on my wall. But to your point about the soft skills. I mean there’s people skills that you can learn from reading stuff like Tony Robbins and personal development things that it it takes a whole person [crosstalk 00:46:27].
Kevin Werner:
Also life would suck if you were just successful at business. Meaning like you also got to… A lot of us have a family. I got kids. They’re all back there. A wife. I got to be a great husband. I got to be a great father. I’ve gotta be a great business person. Great friend. So those are things that are also important.
Kevin Kim:
And that speaks to the idea of balance, right? And we all struggle with that in our space because we’re all workaholics, right?
Kevin Werner:
Oh, yeah. Especially now. Yeah.
Kevin Kim:
I mean we’re all working long nights. Have you gotten to a place now where you kind of found that balance?
Kevin Werner:
No.
Kevin Kim:
Good answer.
Kevin Werner:
No. Because I had my wife [crosstalk 00:47:14] in my ear [crosstalk 00:47:15]. I had my wife in my ear going, “He’s got no balance. He’s got no balance at all.” I think I do. I think I have a little bit of balance but it goes back to the thing I said earlier. If you love what you do…
Kevin Kim:
It’s not work.
Kevin Werner:
To me it’s a very blurred line. Where does work and my life start and stop? I have no idea. And my wife is going to kill me because I’ll have her watch this video and she’ll hear me say that. And she’ll go, “I know. That’s how you are.” One of my early mentors said that your greatest strength is often your greatest weakness and that’s true for me.
Kevin Werner:
My greatest strength probably is I love this business and it’s a big weakness because it’s hard to do other things sometimes.
Kevin Kim:
Yeah. But it’s a nice way to look at your job though. It’s not a job. It’s your passion and a lot of people aren’t lucky enough to say that. Including people in [crosstalk 00:48:14] industry.
Kevin Werner:
[crosstalk 00:48:15] every day. I feel lucky every day that I was able to find this at an early age and love it, and still love it. It’s very rare.
Kevin Kim:
Well, fantastic. Well, I think that’s a really god way to close on and once again thank you so much for joining us today Kevin. You have the best name in the industry, another Kevin, and we really appreciate you guys joining. You joining us today. Any closing remarks for our audience? Things to lookout for coming from Renovo?
Kevin Werner:
You know, you just got to use Kevin at Geraci and you’ll be in good shape. That’s what’s most important. The key to successes is have the right lawyer and the right firm, and that’s true by the way. You guys have really rocked for us since the day we met you. It’s been awesome.
Kevin Kim:
Well, thank you very much. [crosstalk 00:49:06]
Kevin Werner:
And I’m not the only one here who’s saying that. It’s been really awesome.
Kevin Kim:
Well, thank you so much. We really appreciate that and these types of successes that I’m now, I’m going to take this clip and just like you guys do, share it through the whole law firm and show them, “Hey guys. [crosstalk 00:49:22] good job.”
Kevin Werner:
Let’s go. Let’s go. Let’s go.
Kevin Kim:
And that belt idea. I may have to copy that. Maybe add a spiner or something like that to it. [crosstalk 00:49:31]
Kevin Werner:
[crosstalk 00:49:31] You got to get this. Come on. I mean this is, by the way, it’s heavy.
Kevin Kim:
[crosstalk 00:49:36] It’s a real wrestling belt [crosstalk 00:49:38].
Kevin Werner:
It’s a real wrestling belt. I mean this thing is… It’s real. It’s real.
Kevin Kim:
We got to get you on stage wearing that one day.
Kevin Werner:
All right. No problem. No problem. Hopefully for the Renovo IPO. For the Renovo IPO I’ll wear it.
Kevin Kim:
Ring the bell with it on?
Kevin Werner:
Yes.
Kevin Kim:
Fantastic, fantastic.
All right, well Kevin once again, thank you for joining us today. And all of you out there make sure to like, subscribe and click the notification bell. This podcast is going to be available. We’ve got another one coming soon. Look out for that. And once again thank you so much Kevin, and we look forward to hearing more from Renovo, and we’ll see you out there.
Kevin Werner:
Thanks Kevin.
