Entrepreneur at Heart | Vincent Balagia, Stallion Capital Management

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For this episode, Kevin took a trip to visit with Vincent Balagia at Stallion Capital’s headquarters in Austin, Texas. Vincent shared more about the history of Stallion Capital and discussed his perspective on leadership and culture. They also had a lively discussion about the local market conditions in central Texas. Listen in to learn more.

Vincent began his career working with banks, investment brokerage firms, and non-traditional asset management companies. In 2005, he joined a private lending firm in Austin, Texas and managed the origination department until he founded Stallion in May, 2007. Since starting with one investor and one loan, Stallion has now deployed more than $250 million into the Texas real estate markets, and, under Vincent’s leadership, produced consistent, high-yield returns for its investors. Vincent has developed expertise across property types through various market conditions, and has a history of hands-on property management.

Vincent is passionate about entrepreneurship and is involved in the C12 Group, a Christian business leadership development organization. He is also an active member of the American Association of Private Lenders, an organization dedicated to excellence, ethics, and education in the private lending industry. He currently serves on the Board of Trustees for the Austin Bridge Builders Alliance, a non-profit which strategically attempts to build stronger links between organizations for the good of the city of Austin.

Vincent graduated from the University of Texas at Austin with a BBA in Finance.

Episode Transcript

Kevin Kim:
All right, guys, welcome back to another episode of Lender Lounge. Today, I am in Texas, I am in Austin. Thank you for having me.

Vincent Balagia:
You didn’t bring your boots.

Kevin Kim:
I do not own a pair of cowboy boots and I am looking to buy some.

Vincent Balagia:
We can fix that tonight.

Kevin Kim:
All right. So for our audience, I’m currently here in Austin visiting our clients, and I wanted to make sure that we recorded the best voice in hard money, I discovered at Innovate. A voice for radio, also face for movies.

Vincent Balagia:
I think it’s a face for radio, maybe a voice for radio, so.

Kevin Kim:
But we wanted to make sure we record an episode down here. And while I was in Austin, I’ve been paying clients a visit, but I wanted to make sure we recorded this episode with you, Vince. Thank you for joining us. Please introduce yourself to the audience and let them know about the company, and we’ll get into it.

Vincent Balagia:
Thanks, Kevin. Thanks for coming down. Vince Balagia, Stallion Capital Management. Kevin, you came down on our 14-year anniversary.

Kevin Kim:
Yeah, I was crazy. I saw these balloons, 14 years.

Vincent Balagia:
14 years, yeah.

Kevin Kim:
To the day?

Vincent Balagia:
Well, to yesterday, but-

Kevin Kim:
That’s fantastic, that’s a long time.

Vincent Balagia:
It is a long time. I got a lot of gray hair, but it’s good.

Kevin Kim:
You’re still looking good.

Vincent Balagia:
That’s all right, just for men works, so that’s good.

Kevin Kim:
14 years of business. Now, have you always been private lending hard money only or were you guys originally builders and what did you start doing before Stallion Capital Management, the private lender?

Vincent Balagia:
So we have been hard money the whole time, and really over the years we have gotten into building. Done some of our own projects in Austin and really around the state, and then done some equity placements here and there. And that’s actually something that we might be getting into a little bit more over time.

Kevin Kim:
Okay, so let’s circle back, let’s run the clock 14 years ago. So when you guys were founded, that’s ’06 then?

Vincent Balagia:
’07, yeah.

Kevin Kim:
’07, we were found in the same year then, Geraci was founded in 2007. So I wasn’t part of the firm then, it was just Anthony, and a server and a desk. So back in ’07 when you guys first started out, it was pure hard money, Austin, Texas only or?

Vincent Balagia:
Pure hard money, I mean, it was really Austin, Texas for the first year, and then we ran into 2008 pretty quickly. And I think we were in Austin and San Antonio at the time, that was really about it.

Kevin Kim:
So is it always been resi?

Vincent Balagia:
Always been resi, but we have dabbled with commercial and continue to do so. We don’t like to get into heavy commercial construction, but we will get into some land development that didn’t go into a commercial product, some multifamily-

Kevin Kim:
Something that’s small balance, nothing too crazy.

Vincent Balagia:
No, I mean, you’re looking at maybe maximum 25, 30 units on a given development, yeah.

Kevin Kim:
Right, because I mean, I was driving through Austin today and the skyline here is a lot different than what I saw 20 years ago. And I mean, you guys got a lot of development going on here.

Vincent Balagia:
It is very different. There’s always a crane in the sky.

Kevin Kim:
That’s fantastic. So ’08 happened, let’s stay back in ’08. I mean, this is during the subprime days, before Dodd-Frank was installed, before the concept of business purpose was created, what was the market like back then?

Vincent Balagia:
Well, from ’05 and ’06, it was wild. And everyone was coming to Austin, which is still kind of what you hear.

Kevin Kim:
It’s a great place.

Vincent Balagia:
It is, it’s hot in the summertime, but really it is a great place. And Texas is great in general, great business environment, great people. But we got our legs taken out from under us, like a lot of other places. The interesting thing here though was that we only had value depreciation maybe of 10%-15% in your big markets, which is really pretty good.

Kevin Kim:
Yes, basically no adjustment.

Vincent Balagia:
Yeah, very little. In the outskirts, your smaller towns, you did have maybe that 15%-20%, so that was hit harder, but we didn’t have a big run-up. And I said it was crazy, it was solid gains but it wasn’t like you’d have in Nevada, or California, or Arizona.

Kevin Kim:
Oh, Nevada was awful. I remember Nevada was just upside down, the entire state, I mean, it was awful. I mean, back then, was it fix-and-flip, or was it?

Vincent Balagia:
It was fix-and-flip but it was also new construction. If you look at Austin, it’s always kind of been a new construction town, some of the other cities in Texas, not so much so, but Austin, people like a new product with everything, fancy, nice technology, because it is a tech town, and so they want the houses to be efficient.

Kevin Kim:
I was noticing this, even in the suburban parts, I didn’t see a lot of like master plan type communities, I saw a lot of custom homes, and a very spread-out big lots, and very beautiful looking homes. And so, when you’re dealing with a borrower here, even back then, their goal was to buy a piece of property, tear it down, build anew.

Vincent Balagia:
Usually so. And what you saw, for those familiar with Austin, East Austin was an underdeveloped area. And so, people were going in there and buying homes that had been built 50, 60, 70 years ago, and then putting up single-family homes, and then that turned into duplexes, and then it turned into multi-family development. And we still see that to this day, there’s just a lot less available out there on the market.

Kevin Kim:
Whereas now around, I mean, Austin, Austin has expanded so much. I mean, you can call it Austin. Like the north parts that I’ve seen, I mean, there are different names in the communities up there but is it north and south, where is everyone going to right now?

Vincent Balagia:
So Central, East, South, and then parts of West Austin, really, you don’t see hard money a lot in North Austin where we are now, just because the price points are not quite there to justify what it would take to go in, take down a property, build and pay hard money right at the same time, so.

Kevin Kim:
So 2008 happens and you’re building the company. And so, you guys currently have two funds right now, but let’s talk about the evolution of the company’s capital structure from ’08 until today. Were you guys just trusting and investing back then, doing trustee placements, whole fractional notes?

Vincent Balagia:
Yes, exactly, whole fractional notes, and that’s really kind of what we knew at the time.

Kevin Kim:
That’s what everyone starts with.

Vincent Balagia:
It’s what made sense for people that wanted to dip their toe in. But ’08 scared pretty much everybody, all around the country-

Kevin Kim:
Even the retail investors.

Vincent Balagia:
Yeah, very much so. But we were able to make it through, and was what was, again, nice was we didn’t have that big a depreciation in value and you still had people coming to town and that still hasn’t stopped. And so, we were able to work through it reasonably quickly. I’d say by ’11, we were back in good shape, and by ’12 everything was great.

Kevin Kim:
So from ’08 to ’11, basically you’re playing asset management mode.

Vincent Balagia:
We were, yeah.

Kevin Kim:
Well, I mean the ’11 happens, you’re going into business purpose. 2012 Dodd-Frank happens, shock to the system until then. I mean, Texas, you’re lucky in the sense that there’s no licensing laws here when it comes to business purpose. But before that, there was no licensing, right?

Vincent Balagia:
That’s right.

Kevin Kim:
And you could do an owner-occupied deal, you can do a consumer deal, no license, right?

Vincent Balagia:
But we always had to be careful with the owner-occupied. But anything that was business purpose-

Kevin Kim:
The homestead rule.

Vincent Balagia:
Exactly, exactly.

Kevin Kim:
But then, 2012 happens and all of a sudden, the industry has turned on its head. I mean, you guys are lucky to be in Texas, but what was that like at the time, how did you see the market change? Because there aren’t a lot of lenders in Texas, right?

Vincent Balagia:
There’s not that many. I mean, there’s been more that have been added over years. What we really wanted to go to is because of the turbulence, even though things were reasonably smooth, relatively the rest of the country in ’08 and ’09, I just wanted to go to a fund model. I was tired of the trustee, the investor where you might have three or four projects that went perfect, two, maybe because of the economy, were dragging on, and then you might have to… We didn’t really have any loss of capital at the time, but-

Kevin Kim:
Right, investors were probably just freaking out.

Vincent Balagia:
They were knocking on the door every day. And so, really, I’d rather have all the investors have the same story, which would be a positive story, than some loving us, than some saying, “Well, we didn’t get the returns that we should have received.” And so, we went with a fund model and really haven’t looked back.

Kevin Kim:
That was in 2012?

Vincent Balagia:
2012, right.

Kevin Kim:
Okay, so you adopted it relatively early then. I mean, I would say it wasn’t a new concept back then, but it wasn’t that popular back then. I think a lot of folks still wanted to do trustees, there wasn’t any institutional capital by any means, but trustees and fractional was still a huge trend until like, I want to say ’13 or ’14. So you guys were ahead of the curve a little bit.

Vincent Balagia:
A little bit. And the thing is we did continue to go fractional for a few more years. And if I could go back, and this advice was given to me, that I would have probably just gone pure fund at that point because still those fractional loans, if they do run into a problem, they can have a drag just on the business itself. And then if you have a common-

Kevin Kim:
Just one asset.

Vincent Balagia:
One asset. And if you have common investors between the fund and a fractional loan, then that’s a problem. So the fund is almost always a better vehicle unless someone just really wants exposure directly to the real estate, I always feel funds better.

Kevin Kim:
I mean, now, today, it’s such a different story. I mean, today in 2021, everyone’s talking about which institution does this and what’s the institution does that, and it’s a different marketplace. But let’s talk about you, Vince, I actually really want to know about your story more because a lot of folks don’t know this, but you’ve been here in Austin, you’ve grown the company over the past 14 years, but you’re also a gearhead, you also race for fun, right?

Vincent Balagia:
Well, I don’t get trophies, but yes, I get out on the track. Investors aren’t going to see this; they don’t need to know that.

Kevin Kim:
So tell me, did you come up in real estate? What was Vince doing before Stallion?

Vincent Balagia:
Sure, so grew up in Austin, have always just loved the town. Have a lot of family in Austin and in San Antonio as well, I’m a family guy. And so, while there was the opportunity to go somewhere else and then kind of figure things out, I stayed close to home, went to University of Texas, Longhorn for any Longhorns out there.

Kevin Kim:
Oh man, I’ve been seeing those signs everywhere. Every car In Austin has a Longhorn symbol on it, it’s crazy, you guys are very proud… I mean, but also so many alumni in the city.

Vincent Balagia:
Well, no one wants to leave. So people come here from other cities or out of state, and once they get a taste of Austin, they don’t want to leave. So it’s good that we have a good job market. But grew up here, had some exposure to real estate, was always more on the asset management side. So out of school, I went and got a Series 7 and worked for a large asset manager for a while. The thing that really got me interested in this business though was a friend of mine that we talked about, my transaction attorney, Ben Williams. He had described to me a new company that he was working for. And what was really interesting is that you could create your own investments versus just selling someone else’s, they’re public securities. And so that was the appeal [crosstalk 00:10:48]-

Kevin Kim:
And the broker-dealer or asset manager, that’s like, “What?”

Vincent Balagia:
Right, it’s like how do you create your own”? And yeah, how do you do this?

Kevin Kim:
Right.

Vincent Balagia:
And so, when I saw the model, and when I saw that it was backed up by real estate, and you could really diversify away from the market and yet have good collateral behind that investment, and we could design those and structure them in a way that suits both the investor and the borrower, I was really intrigued. And so, a few years after doing asset management and banking-

Kevin Kim:
Was it more Wall Street correlated, traditional assets or?

Vincent Balagia:
Yeah, traditional assets, exactly, so funds, individual stocks, things like that. And that’s fine, that world is cool, but it just wasn’t as entrepreneurial as what we do here, and I think that was really kind of the big draw.

Kevin Kim:
The entrepreneurial spirit is a theme in our industry.

Vincent Balagia:
It’s true. So that was back in ’05. I applied for a job, I was able to get one and Ben was actually my boss for a couple of years. And then he decided to go to law school because he wanted to, he says he had joined the dark arts, which for sure, if any attorneys are listening, that’s the truth.

Kevin Kim:
Yeah, it is.

Vincent Balagia:
But we’re still great friends. He actually splits my office with his own work side.

Kevin Kim:
It’s nice to have your attorney literally next door.

Vincent Balagia:
It is.

Kevin Kim:
Makes me feel guilty for being so far away.

Vincent Balagia:
It’s true, because when I need those loan documents or something else, I just go, wait, and keep knocking on his door.

Kevin Kim:
Yeah, that’s a great thing to be. I literally thought he’s just another law firm, I didn’t know that he was your… Yeah, that’s awesome.

Vincent Balagia:
Yeah, no, it’s great and-

Kevin Kim:
And he’s also a good friend of yours.

Vincent Balagia:
Good friend of mine. He’s got a great staff and they take what they do very seriously. And he’s great, he’s not accepting a lot of new clients right now, but the clients that he has, he really serves well. So great, great law firm. So in ’07, he got the call to become an attorney. I got the call to become an entrepreneur. So I launched Stallion Funding in May of ’07, 14 years ago, and he went to-

Kevin Kim:
Of course, you come from an asset management background.

Vincent Balagia:
Exactly, right.

Kevin Kim:
That’s different. Most of the guys that we talk to in this industry, a lot of them come from the builder world, a lot of them come from either real estate background or some of them come from hedge funds, but as an asset manager, that’s a different perspective. So how does that translate? How do you use that knowledge and that, I guess, expertise you’ve built doing that when it comes to this stuff?

Vincent Balagia:
Well, it puts a little bit different twist on things because the purpose for our company, it’s very simple, t’s to put money in good places. And so, we’re trying to be good stewards of our investor’s capital. And really, we’re using the lending side and the real estate side to do that because we think that as we structure these investments for them inside the fund, we can provide what they’re looking for, which is a good stream of income, diversification, collateral backed so there’s good downside protection. But it’s always been with that hat that I’ve looked at things versus just a real estate hat or a lender hat. I think that we’ve grown a lot, we’ve got a lot of real estate expertise now, but it’s always kind of with an eye of, “Are we doing a good job for our investors and keeping their money safe?”

Kevin Kim:
So the role and the lessons they taught you in asset management has being fiduciary and taking care of your master’s capital, but also maintaining… So wait, so I guess then the lessons learned must have been more challenging on the real estate side, the loan origination, the underwriting, that wasn’t your forte initially, where’d you learn from?

Vincent Balagia:
It wasn’t. So a little bit in banking because my career was, I was a pure asset manager and then I went to go do banking with an asset manager hat on, I was still doing traditional investments, and then moved into lending. But really, a lot of it was those first two years in ’05 and ’06 where I was really kind of learning the trade, looking at how things kind of come together. But it was nice because I was from Austin and had seen a lot of the development and the big changes that had already happened to that, much less from then until now, and so I had some familiarity with it. And had some realtors in the family, but yeah, I didn’t have-

Kevin Kim:
Oh, that must have helped a lot.

Vincent Balagia:
It helped, but I didn’t have a pure real estate background or even a pure lending background, but I did my best to catch up as quickly as I could.

Kevin Kim:
And that’s interesting. So from a capital standpoint, you have a lot of interesting skill set. You’re picking up the real estate skills and the underwriting skills. How did the team look? Was it just you? In ’07, Geraci was literally, Anthony Geraci, a desk and a phone. So, I mean.

Vincent Balagia:
So back in ’07, a friend of mine joined me as an employee, his name is Marc Sherrin. He’s up in the Dallas area now. He became an entrepreneur a few years after he joined my company, which is always great to see, to be able to launch someone well. But it was two of us, and it was us and it was kind of a matter of, “Are we able to do this? Can we make this happen?” And really, without knowing the answer, didn’t start with any investors, didn’t start with any loans or borrowers, but said, “I think we can do this.” And I guess so far, we’ve been right.

Kevin Kim:
I mean, that’s interesting because the Austin is unique. So for private lending as a whole, Texas is a very interesting market because there’s not a lot of lenders here, in general, and the whole state is gigantic state. I mean, the largest state in the union, I think. There’s not many lenders in the state. But then, among those lenders, majority of them are here in Austin, are based here in Austin. And whether it’s because of how cool the city is or because of the real estate, I don’t know. But what did the market look like then as you were coming up early on? Was it as busy as it is today, is it less competition, more competition?

Vincent Balagia:
You had less competition. You had less capital chasing, chasing deals right now.

Kevin Kim:
Less capital now, no institutional capital.

Vincent Balagia:
No institutional capital. We would talk to a lot of institutional capital, but people didn’t know what we were doing and thought it was crazy. But yeah, I think the term was pawnshop lenders that we had several times.

Kevin Kim:
Yeah, payday lender, pawnshop lender, loan shark, I’ve had it all.

Vincent Balagia:
All of that. But what’s interesting is now, that’s completely changed, as you know. But you had a lot less competition, you did have better yields because there was less competition.

Kevin Kim:
Let’s talk about that real quick, what was it like back then?

Vincent Balagia:
So it was 5% origination fees and 14%-

Kevin Kim:
14 and five, oh man, 14 and five.

Vincent Balagia:
Those were the days.

Kevin Kim:
Yeah, the only numbers that I’ve heard higher than that come from Uncle Chuck in LA, he was selling like 30 years ago, it was something like 28%. This is like during the recession of the ’70s when inflation was through the roof and the savings and loan crisis just happened. He’s like, “28% and eight points.” What? That’s not a loan.

Vincent Balagia:
Well, if a mortgage was 14% or 18%, I guess you could do that.

Kevin Kim:
Yeah, I mean, can you believe that? I mean, now it’s so funny. I mean, let’s go back to Vince, I really want to know more about you because you are a banker, you were on asset management. I mean, what drove you to the entrepreneurial side? Because the common thread in our space is a lot of the principles in our sector are all entrepreneurs, even the institutional guys, all come from entrepreneurial background. But you were originally working the nine to five, what sparked it for you?

Vincent Balagia:
It was a feeling that I wanted to do more. And I guess maybe this is just the entrepreneur’s problem is I always felt like there was just always a ceiling above me when I was working for someone else. And so, it’s always a compromise, it’s great to have a good job with a nice salary and-

Kevin Kim:
Stability-

Vincent Balagia:
Stability, benefits.

Kevin Kim:
… Especially even within recession.

Vincent Balagia:
That’s right, and not having to worry about how the business is doing, but something about me just wasn’t satisfied with that and I felt like I would rather be kind of leading my own charge than coming in under someone else. When I wasn’t employed on a team, I took that very seriously, worked really hard, but always wanted a little bit more. And I think the only way that I could really kind of scratch that itch was trying it out on my own. And when I did, I think I was 26 at the time. So yeah, kind of young when I started that.

Kevin Kim:
Yeah, most guys, this is their second career, they’re probably in their mid-40s when they jump into this, or at least mid-30s. You [inaudible 00:19:05] early.

Vincent Balagia:
I was, and my thought was, “I think I can do this, but if I can’t, I probably have time to figure something else out, go get a job somewhere else.” And I’ll tell you what, and in ’08, in ’09, there were some times where I almost thought about going to Home Depot because I like Home Depot, I like to go get my tools and materials there. I thought, “I might have to see if these guys are hiring.” But thankfully, that never happened. But that was really it, is I wanted to see if I could do it.

Vincent Balagia:
But the thing is that it really hasn’t been about me, it’s been about my team. I’ve been blessed with great team members over the years. Rachael Holladay has been with me now for, we’re figuring out I think, 11 years, and she’s been an integral part of everything that we do. And I’ve just had great people to work with because I have a ton of weaknesses as a business owner, as a leader, as a manager, as an operator, but I’ve always tried to really supplement my weaknesses with the strength of others. And I think that is one of the things that I really try to do a good job with and it’s really worked out well.

Kevin Kim:
Well. let me ask you about that because hiring, especially right now, hiring and staffing is, honestly, if someone had an answer for this, I feel like they would make billions of dollars because there’s no answer. But in this market today, especially, it’s so hard to find good talent, team members. And one of the common threads that I’ve noticed with lenders who kind of founded during the recession, have been around for a while is they have people like that, they’ve been with them for 11, 12, full life of the company. What do you think allows a company to keep people on stuff like that and retain that kind of talent? Because it’s a frothy market right now, not just for capital, but also for talented staff. And I was telling another client earlier today is we’ve seen people lose staff members and we’ve lost staff members to other organizations and clients, and the salaries they’re getting paid are ridiculous. So what is Vince’s secret to keeping those staff members on board?

Vincent Balagia:
Yeah, well, I think you have to be competitive with what you pay. But a lot more than that, we’re very intentional about this, one of our purposes is that as a person, you have time, as a team member, and you’re deciding where to invest your time. And so, when people work with us, I want them to look back and say, “Man, I invested my time well.” I don’t want them to say, “I wish I would have gone somewhere else. I wish that I wouldn’t have gotten involved in this industry.” But I don’t want them to look back and say, “Those are some of the best years of my life.”

Vincent Balagia:
So a few things. Being intentional about having people invest your time well, looking at culture of the company, making sure that people have the ability to be heard and that their ideas and their creativity can come out. So it’s not just what I think or maybe what the leadership thinks, but it’s everyone in the company, how do we think that we should be conducting ourselves? Are we taking care of each other? Are we taking care of our investors? Are we taking care of our borrowers? Is everyone benefiting? And I think that when we have that goal of wanting to be good to everyone involved, I think people are looking for that.

Kevin Kim:
Making a great place to work.

Vincent Balagia:
It is. I mean, money is important and sometimes I can’t compete. We lost a valuable team member who a development company came, and scooped in, and doubled the salary, It’s just one of those things.

Kevin Kim:
Yeah, you can’t compete with that, sometimes you can’t.

Vincent Balagia:
But at the same time, it was hard for him to leave because we do have a good culture, and we really try to take care of people. And so, that’s really, I think, the best that we can do. And I think most of our team members here would say that it feels like family, and that’s what I do to. Certainly, we need someone who’s great at their role, who wants to execute and do really well, but I want them to feel cared for and I want them to feel like we’re investing in them as a person.

Kevin Kim:
So investing in them as in, you’re creating more of a flat environment where everyone can speak up and be heard, but also, it sounds like you’re also investing a lot in the culture. So tell me more about that, how do you describe Stallion Capital’s culture and your approach to that?

Vincent Balagia:
Well, we like to be very upfront about it. So when we’re in the hiring process, we have six core values, relationships, stewardship, care, improvement, humility and ownership. And so, when we’re interviewing, we’re looking at all of those aspects, and we’re asking people, “Why don’t you write about these things? What do these things mean in your life?” And let’s see if those match up to what they mean-

Kevin Kim:
The perspective of what those values are.

Vincent Balagia:
Exactly, and those were selected, over years, we had the first five, and then we added ownership because we realized that that was such an important thing for us, that someone would come in and even if they aren’t the owner, they act like it and they want to drive something forward. So they’re willing to pick up the ball and go score even if they can’t see all the way to the end zone.

Kevin Kim:
And go above and beyond because they think like an owner.

Vincent Balagia:
Exactly, exactly, and so we’ve really tried to make that a part of the culture. And then we also really look at does our vision and our values align with the vision of the person that wants to come on. And if there isn’t a fit, if someone’s looking for something that’s temporary, or they just want to learn a little bit about the industry, they want to try something out, it’s probably not something that we wanted to go and do [crosstalk 00:24:37]-

Kevin Kim:
So you’re hiring pretty slow then.

Vincent Balagia:
We are hiring slow, we have probably three to four interviews before an offer is made, try to be social with people and then see, can we be friendly and friends? Because if you look at, I feel bad for my assistant, she has to spend a terrible amount of time with me. We had better be able to get along fairly well.

Kevin Kim:
I mean, that’s so important. How about at the office, at Geraci, we spend more time with each other than we do with our families, so you better fit. If you don’t fit, we got a problem.

Vincent Balagia:
That’s right. And then I think you also have to listen to people though. So if someone’s going through a hard time in their life or just something is unfulfilling about their job, I think not ignoring that, but facing that head on to say, “What can we do?” Because typically, they’re going to be someone who we really care about, I’d hate to lose [crosstalk 00:25:31].

Kevin Kim:
But let me ask you this though, in that same vein, we’ve had this challenge before where the employee, culturally they’re fine, they get along well, but they’re not willing to really speak up and they let that fester, and fester and fester. I mean, sometimes you can’t control that.

Vincent Balagia:
Some people are like that and then you have to go and dig. So one of the things that’s been helpful for us, and really, I recommend for a lot of managers or business owners, is we take personality profiles. And probably my favorite-

Kevin Kim:
Which way do you guys use?

Vincent Balagia:
So we use DISC, which is okay. And then we use the Enneagram, which I really like.

Kevin Kim:
What’s it called?

Vincent Balagia:
Enneagram.

Kevin Kim:
Enneagram, okay.

Vincent Balagia:
Yeah, SO E-N-N-E-A-G-R-A-M.

Kevin Kim:
Okay.

Vincent Balagia:
It really gets down to motivations, why people do what they do. Why do people communicate? Why are some people peacemakers and they don’t want to speak up? And why are some people challengers like me and they can’t shut up?

Kevin Kim:
So what’s your DISC profile here? You’re a D?

Vincent Balagia:
I’m D with some C on, okay.

Kevin Kim:
Okay.

Vincent Balagia:
And then for those that know the Enneagram, I’m an eight wing seven, which means that I get myself in trouble all the time, but I always think that I can and get myself out.

Kevin Kim:
I feel like that’s the same as Anthony Geraci. So Anthony, if you’re listening-

Vincent Balagia:
He might be.

Kevin Kim:
But all of us actually, Nema, and Anthony and I have all kind of over the years become more of D personalities, becoming more managers and ownership people, we have no choice because-

Vincent Balagia:
It’s what happens, you have to do it.

Kevin Kim:
… We have to face issues head on.

Vincent Balagia:
You do. I got into this as an asset manager and then somewhat as a lender, and then I’ve had to really kind of turn it into a leader, and a manager, and someone who does go and really take someone’s temperature. And sometimes you’re right. Sometimes you just say, “How are things, Kevin?” You say they’re great. “Are they really? Because it-”

Kevin Kim:
It doesn’t like it.

Vincent Balagia:
Yeah, it seems like… so what’s up? What’s going on?

Kevin Kim:
Yeah, we get that a lot. I mean, not just within the organization, the employees, we want people to be open, but encouraging them to be open and then digging are two different stories, right?

Vincent Balagia:
It’s true.

Kevin Kim:
And-

Vincent Balagia:
That’s how you invest in your people though is, “Am I willing to actually dig?”

Kevin Kim:
And those folks feel loved.

Vincent Balagia:
They do.

Kevin Kim:
Yeah, they do. And they feel taken care of. Have you ever had to force someone to take a vacation?

Vincent Balagia:
Yes, I have. Where I’ve said, “I am watching you, I can see what’s going on, you need to back up a little bit. You have to take some self-care.” Because this can be a very stressful business in the industry and it’s fast-paced, and that’s not healthy if you’re trying to sustain it. We need margin in our lives. I tell people here, and they don’t always listen, but I say, “You need to run at about 80%. Anyone can sustain 80%, and sometimes you’re going to have to go to 90, or 95 or 100, but then you need to come back down to 80 because-”

Kevin Kim:
There are those guys and gals, who just want to run it 110 at all times, and just taking everything on and-

Vincent Balagia:
You can’t do it forever.

Kevin Kim:
… Couple months in there’s, “Oh.” It happens, yeah.

Vincent Balagia:
It’s true.

Kevin Kim:
Yeah, but then there’s some people who are really, really good at doing it. And I just wonder though, are they just a glutton for punishment?

Vincent Balagia:
Well, sometimes, but I think we all need boundaries in our lives. And that’s one thing is if I see someone spending too much time at work, or they’re just too involved, I say, “You, you need to take a step back. You have a family; you have a life outside of work. If I’m investing in you, it’s not just your work, it’s not just your career, it’s you as a person.” And we all need a lot more than what we get just in the office.

Kevin Kim:
Right. Let me ask you about the kind of company-wide policy when it comes to, I guess, nowadays is considered a standard, is remote work. The theme in Texas, I was noticing is that everyone’s back in the office. In California, not the case as much, our office is probably 70% still work from home. We’re going to reopen next week, I think. And even then, it’s going to probably be half. You guys, during the pandemic-

Vincent Balagia:
It was, first, we sent everyone home and said, “Let’s really see what’s going on.” I really couldn’t take the break and I’ve got little ones at home. And so, I kept showing up and then we did. We’d have more team members come back in. And then I think really what it came down to is everyone wanted to be here.

Kevin Kim:
In that culture.

Vincent Balagia:
In that culture, right? We want to be here, we want to be interacting with each other, we’re interdependent. It’s hard to do that on Zoom or just on the phone. But we never really had a policy. And so, we still have people that are at home and that’s fine because I think we want them to be safe and to feel safe. But at the same time, I don’t feel right, stopping someone if they want to come in and engage. The nice thing is our building and everything else, it’s really just us. We don’t have a lot of clients coming in. Not a lot of borrowers. We do a lot of things outside the office. And so, I feel like we’ve been pretty safe here. But I don’t want to dampen what we’re trying to accomplish together.

Kevin Kim:
Right, no, that makes sense. I mean, so that was want, to go that way, but we got some issues in the office with fear of the virus and stuff. But before the pandemic, was it always just everyone was in the office?

Vincent Balagia:
Everyone was in the office?

Kevin Kim:
Yeah, normal employees.

Vincent Balagia:
So a lot of us might be out, we might be traveling or in different cities, but it was always that this room, conference room gets packed every Tuesday. And people, I feel like want to be here. And they liked that comradery, they like knowing that what they have to say really matters. And so, yeah, it’s hard to keep people from being here.

Kevin Kim:
And then, what they say matters part, interesting thing, as a company grows, people feel less inclined to speak up.

Vincent Balagia:
It’s true.

Kevin Kim:
And how do you, at the company now, you guys have grown significantly. How many people now on the staff?

Vincent Balagia:
Gosh, 15, right now.

Kevin Kim:
15, so that’s pretty lean, that’s still pretty lean.

Vincent Balagia:
It’s still pretty lean. No, still pretty lean.

Kevin Kim:
But with 14 people, you kind of get that group thing going and that awkward silence going when the boss is talking, how do you overcome that?

Vincent Balagia:
You have to ask questions. So you have to say, “What do you think about?” Yeah, I mean, I’m a spot putter. I don’t know if that’s a thing.

Kevin Kim:
No, I love that. I love that.

Vincent Balagia:
So if I see someone that maybe isn’t paying really attention, or hasn’t really said something, I’ll say, “Hey, Rachel, what do you think, Megan, what do you think about this situation?”

Kevin Kim:
They know they’re going to be put on the spot, they’ve got to be engaged.

Vincent Balagia:
They do, right. And that’s just one thing. I try not to have too many meetings, but on the meetings that we do have, I want people to be engaged, because I want to hear what they have to say about it. And that’s just that it, we’ve had people that have been here for a long time. And if that’s the case, they should have a lot of experience and a lot of knowledge, I don’t want it to be just what I think or what a few people think. I really want to leverage all of our knowledge and all of our experience. And so, I do, I put people on the spot.

Kevin Kim:
And that’s healthy, I think, and that creates engagement. And it forces people who normally do not want to speak up, out of their shell a little bit, so then, they get the benefit and the reward of being engaged and being a part of the process.

Vincent Balagia:
Well, and I think a couple of things there, they have to know that what they say is valued. And they also have to know that it’s a safe place to come up with some crazy ideas or make suggestions that maybe we don’t take. But we want to hear what they have to say.

Kevin Kim:
For sure, for sure.

Vincent Balagia:
And if you’ve got good people, they’re going to bring a lot of value.

Kevin Kim:
So a lot of this stuff doesn’t come naturally. At Geraci, we had to hire consultants and do a couple different training programs and Anthony joined DO and all that other stuff. Did you do anything like that or?

Vincent Balagia:
Yeah, so I’ve been in this organization called C12 for many years. It’s a Christian business organization where we get around a table like this once a month for most of the day. And we talk about all these business issues, and it’s not just a bunch of finance guys, you have a roofing company, a lumber office furniture, attorneys, just from all the different aspects-

Kevin Kim:
Same problems, though.

Vincent Balagia:
Same problems.

Kevin Kim:
Exactly.

Vincent Balagia:
Because we’re all working with people, we’re all trying to grow our businesses. And so, that’s been a big deal. And then, we also have an executive business coach that we bring in once a month. The guy’s name is Rob Lynch, and he’ll meet with our leadership team and we get to fight about everything for about four hours a month.

Kevin Kim:
Nice.

Vincent Balagia:
And we bring it up and then he helps guide us on the path of, okay, where are we wanting to go, are we doing everything we can to get there-

Kevin Kim:
He is mediating discussion.

Vincent Balagia:
Yes, he’s mediating but also putting structure behind it. So, we’re cheating a little bit in that, it’s not all about our internal process. We can borrow some processes from the outside, but it’s been very helpful for us.

Kevin Kim:
No, I really think that’s awesome. I mean, a lot of people think they have all the answers and it takes a certain person to understand this stuff does not come naturally.

Vincent Balagia:
The older I get, the more I realize, I don’t know everything.

Kevin Kim:
And that’s the right way to look at it. I’m the same way. And my wife’s always asking me, like, “You used to know everything, and now you know nothing.”

Vincent Balagia:
That’s true, it’s true.

Kevin Kim:
I don’t have an answer. I don’t know, I’ll find out.

Vincent Balagia:
The more we experience the more we just understand, there’s just so many things that we don’t understand.

Kevin Kim:
And it’s okay not to know things.

Vincent Balagia:
Yeah, it is, I think it’s good to be curious. One of our core values is humility. And so, if you can humbly say, “I don’t know the answer, and I’m not even sure where to look. But maybe we can go find someone that does,” and be willing to go listen for that person, that’s a bit different.

Kevin Kim:
For sure, and did you guys install this kind of consultancy and you joined C12 very early on in life and life of Stallion.

Vincent Balagia:
We did. So C12, I’ve been doing for about 11 years, and then Rob, I think that’s been at least about two and a half years now. And there’s just a cadence of it.

Kevin Kim:
Do those values come from C12 or do they come from Rob?

Vincent Balagia:
So, the values that we have really came from us because I think you can create core values that might be aspirational or something that sounds good or looks good on a piece of paper. But I really think it’s about the people and the culture that you actually have. So when we were coming up with those values, we said, “What about our organization, do we really want to embrace and cultivate? What are the best things about us, not someone else?” And that’s really where it came from. That’s why we added that six-core value of ownership later, because that was one of the things, “Gosh, we care so much about this. How is this not a core value?”-

Kevin Kim:
It’s a fluid concept. You’re evaluating your values every year?

Vincent Balagia:
We are, yeah, we are and-

Kevin Kim:
That’s healthy, I think a lot of people will set up their values, and they kind of just don’t think about them, they aren’t critical about them.

Vincent Balagia:
Well, I think they have to be real, otherwise, what do they matter? So when we’re hiring that way, when we’re reviewing them, and one thing we do at our team meetings that I think has been a really kind of a game-changer is, we’ll give each other little awards based upon core values-

Kevin Kim:
We do the same thing, batches, we do batches.

Vincent Balagia:
Yeah, so we do these little cards, then we have drawings in the cards, we put the cards up on the wall. But even this morning, I gave out a care value. So we had a roast course, a team builder on Friday. And the person who put that together, I said, “You’re doing a great job taking care of everyone else here. That is one of our values, go and put it up there.”

Kevin Kim:
We would not be the organization we are today without doing the same things. And the people that we’ve attracted, I call our lifers, they live and breathe the company. And I don’t think we would have those people without that kind of intentionality to those types of things. Let’s go back to the lending business. We can talk about great organizational leadership and values. And I could go off this stuff all day, but the industry is also something that’s really important. You guys were, and still are a very dominant force in Austin. You’ve got two funds now-

Vincent Balagia:
Three, we’ve got three.

Kevin Kim:
Three funds now out of the REIT. Now, where are we headed going into 2021? You’re still doing a lot of Rezi. You’re still doing a lot of construction right?

Vincent Balagia:
Yeah, we are.

Kevin Kim:
You always had an open mind when it came to the assets you were doing. You’re open-minded to doing small balance commercial, a little bit of this, a little bit of that, no crazy stuff on the high-end commercial stuff. But now, more kind of out of the pandemic, right?

Vincent Balagia:
It’s true.

Kevin Kim:
Austin is hotter than it ever has been before, Texas in general.

Vincent Balagia:
Texas is good.

Kevin Kim:
Super hot right now and during our episode at Innovate, you were talking about, “We’re not laughing.” Because new Yorkers and Californians are all coming here.”

Vincent Balagia:
It’s true a lot of them.

Kevin Kim:
Yeah. And so, what is your perspective looking forward in the next six months, the rest of the year, and then going into 2022?

Vincent Balagia:
So I’ll start with residential. I think it’s going to be very strong. One of the things that I was looking at, is supply. Because what I don’t want to see happen is what we had in ’05 and ’06, where you had a overheated market and you had a bunch of supply come online. And then, all of a sudden, the demand dried up and you had all these properties everywhere going for pennies. So that’s what I look at first. It has become difficult to build in Austin, Dallas, Houston, and San Antonio.

Kevin Kim:
Why is it difficult?

Vincent Balagia:
Well, one from a regulatory standpoint-

Kevin Kim:
Really?

Vincent Balagia:
Yeah, from just permitting. It’s not like California, but it takes time to put a project together and then execute it. And then, there are not a lot of infill lots like there used to be.

Kevin Kim:
You’re running out of space.

Vincent Balagia:
We are running out of space. We’re not landlocked, Texas is huge but in these-

Kevin Kim:
But no one wants to live that far away from the central part of the city.

Vincent Balagia:
That’s right, because traffic is a problem. And so, you don’t want to spend an hour and maybe an hour isn’t bad in some places, but an hour is pretty bad here.

Kevin Kim:
Also, as I was driving, I’m used to California and a lot of us, those who are in California, you’re okay living like… I live in Brea the office is in Irvine. It’s about an hour drive, and it’s not that bad. My parents live half an hour from me, that’s not that bad. Here, we’re basically in the suburbs and 15 minutes from downtown, no traffic.

Vincent Balagia:
With no traffic, yeah.

Kevin Kim:
Yeah, straight shot with no traffic. Even with a little bit of traffic, half an hour?

Vincent Balagia:
Probably so, yeah.

Kevin Kim:
And I think people like that about Austin.

Vincent Balagia:
They do. I mean, so it’s still a small city. Our population has really ballooned, but it still feels-

Kevin Kim:
Sub 10 million.

Vincent Balagia:
Exactly, right. I mean, we’re at somewhere around two million right now.

Kevin Kim:
Two million people, that’s it. Well, there you go.

Vincent Balagia:
A little bit more with you [crosstalk 00:39:36].

Kevin Kim:
Well, that doesn’t make any sense. How can you guys have such a crazy real estate market, and only have two million people, that’s crazy?

Vincent Balagia:
Because people just want to be here. It’s funny with Austin, kind of Texas in general, if you hear someone that’s moving out of town, they’re either going to Denver or somewhere in Colorado, they might be going to Florida, if they’re retiring, they’re probably not going to California, no offense to California, guys.

Kevin Kim:
No, absolutely not. The great people of California has not hospitable right now.

Vincent Balagia:
So you just don’t have that. It’s like you almost have to go someplace really nice and beautiful to be able to leave Austin [crosstalk 00:40:17]-

Kevin Kim:
The only downside is like the super humid summers, but everything else-

Vincent Balagia:
It is, the summers are killer. So yeah, like I said-

Kevin Kim:
And the food scene here is amazing.

Vincent Balagia:
It’s good.

Kevin Kim:
I mean, you guys have very little traffic, it’s very beautiful.

Vincent Balagia:
Yeah, and what’s funny is we have relatively little traffic, but for us, with all these people here, we feel like, “Oh, my gosh, we’re dying.” But I think for all those reasons, and I think that you have good job growth, you have a lot of headquarters that have been coming to Texas and a lot to Austin and you read about that-

Kevin Kim:
And you hear about that in the news, but is it really a lot of tech companies are relocating here and they’re bringing their wealth with them and-

Vincent Balagia:
Well, so we have a lot of tech companies already, and they’re growing. And then you do have a lot coming from California that are tech company who are relocating-

Kevin Kim:
A lot of people don’t know that, that Austin, as a very much a tech hub access-

Vincent Balagia:
Very much is.

Kevin Kim:
It’s a kind of a second Silicon Valley.

Vincent Balagia:
It’s number two, right behind Silicon Valley.

Kevin Kim:
And so, that is driving massive wealth growth here?

Vincent Balagia:
It is.

Kevin Kim:
Where do you see that on the real estate side? Are you seeing a lot of placement of capital into that kind of wealth building? Is it going into rental homes? Is it going into apartments?

Vincent Balagia:
You see more apartments, because certainly, we have rental homes here, but you don’t see people just going and buying large swaths of them. What you really see is taking down the existing homes and then putting a denser product up. That’s where you really see a lot of capital and that makes a lot of sense. And I think that’s the transition that we’ve had is just more density. It’s not like the big cities where you have high-rises and everything else. You have that downtown, but by and large, it’s your smaller multifamily developments, your apartments, and that’s really kind of where it’s going to going. So I think that’s where the money is going to go. And to kind of get back to your question earlier, we’re going to be careful with office. I think your single-tenant office, I think you’re going to see more of that. Your industrial-

Kevin Kim:
Office parks and small condos.

Vincent Balagia:
Small condos, I think you’re good there. Your light industrial or your industrial, that’s a big deal here right now.

Kevin Kim:
A question about that, so Texas is the last bastion to hold out legalizing cannabis. And you guys have a ton of industrial real estate here.

Vincent Balagia:
Sure.

Kevin Kim:
I mean, how’s that looking? Is the governor being pushed to this? I mean, everyone’s waiting for it.

Vincent Balagia:
I think people are waiting for it, but I don’t even know when it might happen. I mean, you could see it in the next three to four years, but I think that we might hold out longer than that. There’s certainly a movement towards it and it’s more popular than it’s ever been, but it’s not like it’s been around the rest of the country. I think there’s a number of people asking for it, but it’s not a wave that’s coming right now.

Kevin Kim:
I mean it’s because there’s not as much tax revenue that the state relies on.

Vincent Balagia:
It’s true, It’s [crosstalk 00:42:55]-

Kevin Kim:
… So they don’t really need it. Because I was shocked to see how much industrial real estate is out here. And so-

Vincent Balagia:
There’s still a good amount of manufacturing out here. I mean, Tesla’s got their big place that’s coming in. It’s being built out here. San Antonio has a lot of manufacturing, Dallas, a lot of industrial space, but a lot of manufacturing [inaudible 00:43:15]. So it’s being used, I mean, that’s one thing that it’s hard to get ahold of right now. If you need a 50,000 square foot warehouse, good luck, right now.

Kevin Kim:
Oh yeah, yeah and brick and mortar retail is all shifting over to e-commerce, which requires light industrial. So it’s a hot commodity for sure.

Vincent Balagia:
It’s true.

Kevin Kim:
So we’re talking about other asset classes, I mean, aside from residential and new construction, which has been your core base, I mean, are you guys jumping on the bandwagon of DSCR, rental homes, that kind of stuff?

Vincent Balagia:
We’re not yet, and I would say because I’m not seeing a big demand for that yet. I do expect to see a significant increase in rental properties and we own some properties in our fund in Houston. And so, we’re really looking at that. In fact, we’re about to go through, we have new leases that are coming up because we started about a year ago. and so, we’re going to recycling through that. I think you’re going to see some significant rent increases towards the end of this year, beginning of next year, which you’ve seen that happen a little bit, which you’ve really seen as the prices for sale properties go up really a little too high.

Kevin Kim:
Yeah. It’s pretty frothy.

Vincent Balagia:
It’s too frothy right now. So I think you’ll see that stabilize, maybe even come down a little bit, but then the income on the rentals, or the rental price is just going to be coming up. So that’s what we’re looking for. And then we might look at something like a DSCR, but it’s not time yet to do that.

Kevin Kim:
And so, for a lot of folks who are listening in also, the model of the business… I mean, you guys are portfolio lenders, you’re not selling on [inaudible 00:44:47] paper, you don’t do Wall Street.

Vincent Balagia:
We’re not, no.

Kevin Kim:
So you’re picking the deal that you want to do.

Vincent Balagia:
True.

Kevin Kim:
You’re structuring them the way you want them, right?

Vincent Balagia:
It is, because I’m still stuck on that asset management side. I’m not looking at, “Okay, can we print some paper and then sell it out and get a little bit of a spread?” That’s just never been our model, it’s instead, “Can we create our own investments that we really believe are good-”

Kevin Kim:
But you must have been tempted over the years? I mean, Wall Street has been hitting this market hard. Austin, they love Austin. They love Texas.

Vincent Balagia:
It has, but we saw at the beginning of the pandemic, I think that everyone knows, that that dried up quickly. And so, it was a little bit of kudos to us saying, “Okay, being a portfolio lender it’s a good time to be that-”

Kevin Kim:
Amen to that.

Vincent Balagia:
But that money has come back and I think we’ll have to compete for that. So we have to change our strategy to really try to find the best people to work with on the borrowing side.

Kevin Kim:
And they’ve got to become repeat customers.

Vincent Balagia:
They do. And I think that’s really the valuable thing right now is, can you develop relationships that are long-standing where you trust your borrowers, they trust you, you do what you say that you’re going to do. And they’re happy to work with you, even if there is a slightly cheaper competitor because they know what with you.

Kevin Kim:
Right. And I think that’s been the nature, I feel like that’s the cornerstone of private lending and we’re losing that with all of this commoditization.

Vincent Balagia:
It’s true.

Kevin Kim:
And it’s all about that, “Can you get it done on time, on budget, at what you say you’re going to do.” To me, it was the cornerstone of our space, repeat business, borrowers will pay extra because they want to get this closed in a week or two days, whatever it is. And we’re losing that a little bit.

Vincent Balagia:
We are.

Kevin Kim:
And it’s on portfolio lenders like yourself to keep that truth alive, I feel-

Vincent Balagia:
I’m doing my best.

Kevin Kim:
Yeah, I know.

Vincent Balagia:
It’s hard because money is green and so if you’re paying less for it and it’s become a commodity that is hard to compete with. But that’s why I really want to bring the relationship. Our top core value, relationships. So whether that’s with investors, whether that’s with borrowers, that’s what I’m really banking on is to say, “Can we do everything we can to help you out? Will you stay loyal to us if we’re treating you right.”

Kevin Kim:
How much of your borrowing base is repeat?

Vincent Balagia:
Probably 60% or so.

Kevin Kim:
Wow, wow.

Vincent Balagia:
Kind of-

Kevin Kim:
So right now, Stallion is focusing… I mean, I remember talking to you about this before, you were planning to expand to a few states and then coronavirus happened.

Vincent Balagia:
It’s true.

Kevin Kim:
You became conservative about where are you going to lend for a little while, your geography, now that things have kind of settled and we’re seeing a lot of activity in a lot of these, what used to be secondary market states, what’s the plan? Are you guys looking to expand?

Vincent Balagia:
I think we’ll expand into cities across the country that we like, that we feel like they have.

Kevin Kim:
What cities, specifically?

Vincent Balagia:
Cities, not even states. And I think we’ll go very slow with that. Because there is one thing about being local, you know your local markets. Being able to drive to a property, even though Texas is a big state. All of our lending areas are within three hours drive.

Kevin Kim:
Right. Last thing you said, “Up and down 35 basically.”

Vincent Balagia:
Up and down 35 and then over to Houston. And so, it’s kind of this triangle or diamond, depending upon how you want it to look at, that really makes sense for us. And because we have all this population growth and we have a lot of people in that diamond and even have some secondary cities in there, like Waco that everyone’s seen with Chip in-

Kevin Kim:
Yeah, that’s interesting, is I was talking to a lot of people today about Waco and like how it used to be a joke, and now it’s-

Vincent Balagia:
It’s a place.

Kevin Kim:
… Fantastically growing city.

Vincent Balagia:
It is.

Kevin Kim:
I have a lot of friends that have moved to Plano. Is that how you pronounce it, Plano?

Vincent Balagia:
Plano, yeah.

Kevin Kim:
Mainly because they’ve got a great market there.

Vincent Balagia:
Yeah, just north of Dallas. So you have all this growth in Texas. So I don’t think that we have to have a big expansion campaign into various other states. And I think that it’s always important as a lender, that you really know what the laws are, where you’re lending. And in Texas, we have very favorable lender laws.

Kevin Kim:
Oh, you have the best laws in the country. For those of you who know, 30-day foreclosure process, non-judicial.

Vincent Balagia:
It’s true.

Kevin Kim:
No license necessary to lend here for business purpose. The only thing you guys have a weird thing, the only weird one is the homestead rule.

Vincent Balagia:
The homestead, it makes it difficult, yeah.

Kevin Kim:
Yeah, one little wrinkle but everything else… I mean the best state to lend in by far, but that’s also an interesting segue is everybody wants to lend here, and that customer base, and with all that new people coming in and new borrowers flooding the state, new realtors all of a sudden flooding the state, how do you guys stay competitive?

Vincent Balagia:
We try to be out there. So one thing we’re talking about today is the fact that we are a local lender makes a difference. We’re a Texas-based lender, we’ve always been here, we know the people that are here, but everyone that’s coming in, we need to introduce ourselves too as well. So now when we see those California license plates, some people will throw an apple at the car, but we’ll say, “Come and meet us. Where are you from? And welcome to Texas.” We’re a very welcoming state. When people come and visit, they say, “Gosh, you guys are pretty nice. You say howdy. You may have some strange hats and boots.” But in general, we’re-

Kevin Kim:
Actually, I have not seen a cowboy hat my entire time here in Austin. Although I haven’t seen a lot of cowboy boots and a lot of cowboy stores, but I’ve not seen a single cowboy hat.

Vincent Balagia:
So sometimes we just have to pull it out just to keep it real. But you’ll still see [crosstalk 00:50:21]-

Kevin Kim:
I’ve seen rhinestones earlier today though.

Vincent Balagia:
You might have to go to Fort Worth to really see a lot of cowboy hats. But yeah, we have rhinestones too. Not a lot.

Kevin Kim:
Yeah, I mean, I got to say though, with all the population growth in Texas, in general, it is the move to stay and focus on the local economy and the industry. But you got to be tempted. I mean, it’s got to be tempting, the yield right now, in Texas is shrinking.

Vincent Balagia:
It is, it is.

Kevin Kim:
And it’s been shrinking over the years, what was 14 and five is now 10-

Vincent Balagia:
10 and two, maybe three and 11 on a nice deal, something like that. But sure, a lot of competition, a lot of yield compression.

Kevin Kim:
I mean, everyone’s talking about Tennessee right now, Nashville. A lot of folks talk about North Florida, the Carolinas right now, not on the radar.

Vincent Balagia:
I think there’s good opportunity there, but I don’t think that we have maximized where we’re at. And that’s really my strategy-

Kevin Kim:
Own your backyard.

Vincent Balagia:
Like really own your backyard. And then if you own your backyard and you have more capital and you’re looking for more opportunity, then let’s go and pick some places around the country that are doing really well, but until that happens, let’s be really good. That’s one thing about being an entrepreneur is, you’re always looking at, “How can you do it better than you have before?”

Kevin Kim:
How to make the widget better.

Vincent Balagia:
How to make the widget better, how to make your processes better, how to even change the way you think about the challenges that you have. And I think all of those things push us to say, “I really want to be the best lender in Texas.” Not just a lender that lends in Texas and around the rest of the country.

Kevin Kim:
Right, and we talk about organizational management as core competency, and stick to your core competence. But not just focus on one asset class or what you do as a business, but also your geography. A lot of folks right now are forced to chase yield or whatever reason. And they’re taking a little bit extra risk and going into markets that they don’t know and it has burned them. I saw it happen during COVID, but I think I saw it happen before that. So geographic risk is important to think about and you guys are visiting all your properties or at least somewhat somehow.

Vincent Balagia:
That’s right, we are. So when we were at the conference about two weeks ago now, I met a great gentleman at lunch and he was telling me how he had spent half the past year, I think, in North Carolina because they did it great… it seemed like a great deal there, it went into foreclosure, now, they’re having to build themselves out of the loan. And I’ve been there and I’ve done that, but I haven’t had to go across the country to do that. We’ve done that in Houston, or Dallas, or here in town. And I’d much rather when you do run into problems, just keep them local so you can keep your sanity.

Kevin Kim:
I mean, there’s the benefit of now because of the concentration in your market, you know these builders, you know these vendors, you know even the guys who are swinging the hammers.

Vincent Balagia:
It’s true.

Kevin Kim:
But we want to make those relationships even stronger. So yes, we’ve done business, maybe they’re a former borrower, that’s really the shift is, I’m trying to get to know them as friends and colleagues and say, “What can we do to make your business better? Here’s what you can do to help us and work together.”

Vincent Balagia:
On that, marketing-wise, are you guys doing… I mean, digital is all the rage right now?

Kevin Kim:
It’s the rage, a little bit of a secret. A little bit of secret sauce, but it’s the idea of if we really know who we want to do business with, people that aren’t our clients yet, and we can be in relationship with them and be in contact with them on a regular basis.

Vincent Balagia:
So that’s what I was going to ask, are you doing in-person, hangouts, meetups?

Kevin Kim:
So with COVID, not yet, but the plan is to… But not only that is, is really just kind of in-person visits. Let’s go hang out. Let’s see what you’re doing at your job site. I think a lot of developers, a lot of builders would love to give a property tour, if you’ll take the time to get out there. So it takes a little bit more boots on the ground, but I think that you’re-

Vincent Balagia:
You can’t do that if you’re national, you can’t do that.

Kevin Kim:
Yeah, you can’t do that.

Vincent Balagia:
No, that’s important. So site visitation, you’re spending time, quality time, basically it’s quality time campaign.

Kevin Kim:
That’s kind of the idea.

Vincent Balagia:
Yeah, that’s a good idea. That’s a really good idea. I mean, that’s kind of the reason why I came out to Austin before the conference in Dallas, because I wanted to spend face time with you guys, and I don’t get enough opportunities to come see your office.

Kevin Kim:
It’s true.

Vincent Balagia:
And that goes very far because now I connected it with how you guys, what your day actually physically looks like. And now I can think about, “Oh, okay, that’s what their office looks like. This is what’s going on over there.” And it gives me a different sense of who you are as a person.

Kevin Kim:
Well, I think that’s one thing that the pandemic has taught us a little bit. It’s pulled us away from each other in some ways. And so, now, we have that desire to come close again. And whether it’s business lunches and dinners, or site visits, or meetups, or gatherings, those things are important. And I think that’s what we’re kind of banking on to continue to grow the business and do a great job.

Vincent Balagia:
That’s awesome.

Kevin Kim:
Let me ask you, so the closing question is more back to Vince. So we talked about the church leadership, men’s Christian leadership group that you’re part of, we talked about racing a little bit. Tell me more about the racing, is it a hobby of yours?

Vincent Balagia:
It’s a hobby. One of the things that I enjoy about being on the track is it’s a little risky. You have to pay attention to where you are on the race track. You have to pay attention to where the people are around you on a racetrack. When you’re doing that, you can’t think about anything else.

Kevin Kim:
Singular focus, right?

Vincent Balagia:
Singular focus, it requires 100% of your attention. And so, while it is somewhat stressful, it’s also a great stress reliever because you can really be in the moment. And for whatever reason, I’ve just always loved cars. I’ve always loved motorsport. And back in 2012, the Circuit of the Americas was built and delivered, and we had our first F1 race here, and it’s a fantastic track. As tracks go, it’s a very modern, very new, it’s getting a little older. It gets a little bumpy sometimes. But to have that literally in my backyard, that I can go jump on the track and chase other like-minded people.

Kevin Kim:
That’s cool.

Vincent Balagia:
It’s a lot of fun-

Kevin Kim:
How often do you get out there?

Vincent Balagia:
I’m probably out there six to seven times a year, sometimes more if I can-

Kevin Kim:
Okay. It’s pretty frequent.

Vincent Balagia:
And then there are some other tracks, some smaller things that are around town to just kind of get out there and enjoy it. But Austin really kind of has developed a bigger car culture, which is really neat for me, because that’s just something I’ve always been into. And the track has helped a lot because there’s just not a lot of places that you can go and go as hard as you can and wear yourself out and have a great time with it. So there’s no trophies, there’s no accolades, but man, it is exciting.

Kevin Kim:
There’s also your personal best, and you’re tracking your own time-

Vincent Balagia:
Right, you’re tracking your times and you’re pushing, you’re trying to improve. And then sometimes you’ll get some employees or team members that you’ll actually be able to trick to get into the car with you and you get to make up for all the problems they caused you, so.

Kevin Kim:
That’s awesome.

Vincent Balagia:
That’s a lot of fun.

Kevin Kim:
That’s a really good hobby. I mean, I know a couple of people in the industry who do a little bit of motorsport stuff. I mean Jason, over at Armand, he does the stock car stuff.

Vincent Balagia:
Oh, cool.

Kevin Kim:
A couple of the guys do the motorcycle stuff, and it’s an interesting enigma, he loves cars as well, and he wishes he can get on the track and do that stuff too. That’s really cool to see. I mean, I should introduce you to Robert when we’re in California [inaudible 00:57:51]. He’s also a track guy.

Vincent Balagia:
Is he?

Kevin Kim:
He’s more of the import, like the BMW track racing.

Vincent Balagia:
Sure.

Kevin Kim:
It’s still a very cool scene to be part of.

Vincent Balagia:
It’s all fun because everyone’s out there, they’re wanting to be safe, they’re wanting to be competitive.

Kevin Kim:
You’re wearing the gear and colors-

Vincent Balagia:
We’re wearing the gear. And I’ll tell you, if you go to a new track, it’s pretty world-class. I mean, certainly, it’s a dangerous thing, but it’s not like tracks of old, or anything that you see on the street. It’s a pretty controlled environment. You’ve got race control and cameras everywhere. And people, if you start to get out of line, they’ll wave a flag at you and get you off the track pretty quickly.

Kevin Kim:
So we’re going to keep you around for a while then.

Vincent Balagia:
That’s my hope, that’s my hope.

Kevin Kim:
Make sure we got to keep him around.

Vincent Balagia:
That’s right, got to [crosstalk 00:58:33].

Kevin Kim:
Well, you know what, I think that’s all we have for today. I want to thank you very much, Vince, and welcoming me to your great office, [crosstalk 00:58:39] Austin. I said, “We’re coming down to Austin and-”

Vincent Balagia:
You came through, man. I appreciate it.

Kevin Kim:
Yeah, and for all our listeners out there stay tuned for more live content. We want to bring you more of this live and in-person content, no more Zoom calls if we can avoid it. And hopefully, we will see at the next one. And this will be available on all platforms, but our next episodes probably going to be at the Dallas NLE Show, at the show. And so, looking forward for that. It may be a little bit late, but yeah. Vincent, thank you very much for having us.

Vincent Balagia:
Thanks for coming down, always great to have you [inaudible 00:59:10].

Kevin Kim:
Thank you very much. And that is all for us today here on Lender Lounge. We’ll see you on the next one, thank you.