What’s in a Name? I Zack Lofton, Loan Ranger Capital

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On the road in Texas, Kevin visited with Zack Lofton with Loan Ranger Capital. He got to learn about their “garage band debt fund” and how Loan Ranger has grown rapidly in a short period of time in the central Texas market. Kevin and Zack also talked about building the brand, staying lean and mean, and growing a great company culture. He also got to learn about Zack’s background as a Chartered Financial Analyst and learn how he grew the business from a solo operation.

Zack Lofton is Founder & Chief Executive Officer at Loan Ranger Capital.

Episode Transcript

You’re listening to Lender Lounge with Kevin Kim, a podcast dedicated to the private lending industry. I’m Kevin Kim. And my goal is sit down with key figures in the private lending industry to talk about their business and their personal lives. We’ll get their takes on market conditions, the industry at large, and their personal stories. Overall, I really want to learn more about how they started and grew their businesses. So whether you’re a lender, a borrower, be a vendor, an investor, or anyone just interested in learning more about private lending, this podcast is definitely for you. Thanks for tuning in and enjoy this week’s episode of Lender Lounge with Kevin Kim.

Kevin Kim:
All right, everyone, welcome to an audio-only version of the podcast Lender Lounge with Kevin Kim, yours truly here. We are live here at NLE, the National Lender’ Expo, and I’m here with a good friend, Zack Lofton with Loan Ranger.

Zack Lofton:
Thanks for having me, Kevin. Yeah, first time for everything.

Kevin Kim:
I wanted to do this in your office, but I was so busy in Austin. I came to Austin, and my assistant just jammed my schedule so tight, and we didn’t have enough time.

Zack Lofton:
Yeah, we spent about an hour of it too at the bar.

Kevin Kim:
Yeah, exactly, drinks come first, right? And it was a little bit wet, so we couldn’t record outdoors. But for our audience out there, this is going to be an audio only, but we’re going to make sure we get some nice photos of Zack and his team and all that stuff on here, so look out for that. Now, Zack, thanks for joining the interview, and the podcast is growing, and we love to include people to have awesome stories of growth. So, first of all introduce the company, introduce yourself to our listeners, and let’s go from there.

Zack Lofton:
Yeah, thanks so much Kevin. Yeah, Zack Lofton, Loan Ranger Capital. We started a little bit more than about four or five years ago. But yeah, I guess before that lived in the Bay Area, got into banking pretty early, and pretty early with that realized I did not like traditional banking.

Kevin Kim:
So, you were a retail banker?

Zack Lofton:
Yeah, we were doing commercial real estate banking out in San Francisco.

Kevin Kim:
Loan officer?

Zack Lofton:
No, I was an analyst. I was the lowly Excel wizard. Oh yeah.

Kevin Kim:
Oh man.

Zack Lofton:
So, quickly found out I hated that, and I didn’t want to climb that ladder. So, while I was out there, decided to study for my CFA, ended up getting that, and that opened up a lot more opportunity for me. So from there, really through a friend of a family friend weird connection got introduced to a fund that works out of Phoenix, Arizona.

Kevin Kim:
Who has been on the podcast before, so shout-out to Noah.

Zack Lofton:
Yeah, exactly. Yeah, worked with Noah for a little while over there, and great time, but after awhile decided that it was time to branch out, time to do something else on my own. And shoot, pretty much packed up a truck, moved to Austin, didn’t have a-

Kevin Kim:
Wait, wait, so you moved from the Bay, and then you moved to Phoenix?

Zack Lofton:
Exactly, Bay, to Phoenix, and then to Austin. And yeah, my wife, bless her soul, she-

Kevin Kim:
And you were married the whole time?

Zack Lofton:
No, my at the time girlfriend in San Francisco, and then we finally ended up getting married when we were in Austin. So, that’s been about three years now.

Kevin Kim:
She’s a keeper. Yeah?

Zack Lofton:
Yeah, thank God. Yep. We got that, we got a little nine-month-old at home too now.

Kevin Kim:
Oh, congratulations, babies are awesome. You and I will have a lot of conversations about children.

Zack Lofton:
Yeah. I can’t help myself.

Kevin Kim:
So let me ask you this, so you started working with another private lending fund, and you chose to now do your own thing in Austin.

Zack Lofton:
Exactly.

Kevin Kim:
Now, why did you do that? What clicked in your head said, “I got to do this on my own?”

Zack Lofton:
Growing up father was an entrepreneur, he had a framing company. So, you think about a house when you’re building a new build, it’s the skeleton of the house.

Kevin Kim:
So real estate’s in your blood then.

Zack Lofton:
Yeah, super familiar with real estate, had the banking side, had the CFA with the numbers side. So, it’s kind of the perfect marriage right there. And I just knew I wanted to go off and do something on my own, and if I had success it was on me, and at this point my team. But in the beginning it was just me. And if I failed, it was going to be on me too.

Kevin Kim:
And you were young enough. How old were you when this happened?

Zack Lofton:
God, when I moved out to Austin I think I was 26 or 27 maybe.

Kevin Kim:
So new fund manager at 26. Did you start with a fund right away out the bat?

Zack Lofton:
You could call it a fund right off the bat. It was a very humble beginnings. In the beginning, we had a Regis office that we called our office headquarters, because having an office was a little too expensive.

Kevin Kim:
You, a desk, and a phone I’m guessing?

Zack Lofton:
Oh yeah, it was me in my … So, the office was just a mailing address. I was working out of the apartment.

Kevin Kim:
Right.

Zack Lofton:
And humble beginnings there, we got some friends, family money, enough for a couple of loans there. But I mean shoot it exploded pretty quick, and we delivered on both ends. With our borrowers, we did exactly what we said we were going to do. We never committed to anything that we didn’t do, so we’ve got an awesome track record there, and word spread like wildfire, especially out in the Austin area. And I think it doesn’t hurt the way we branded ourselves either.

Kevin Kim:
Right, right, right.

Zack Lofton:
But on the investor’s side too, especially early on, it was 2016 I don’t think hard money was as accepted by investors as it is today.

Kevin Kim:
That was when it started to become much more mainstream.

Zack Lofton:
Exactly. That’s when you get some of those big players starting to do it, so people are starting to hear about it.

Kevin Kim:
Oh yeah, I remember.

Zack Lofton:
But yeah, shoot the first year, two years, I would have driven to someone’s house and washed their freaking car for a $50,000 investment.

Kevin Kim:
Right, right, right.

Zack Lofton:
And fast-forward to today, we’re about $140 million fund, and-

Kevin Kim:
Fantastic.

Zack Lofton:
… really fortunate to have a great awesome group of investors.

Kevin Kim:
And that’s one of the craziest stories, because I was talking to you about this earlier is that I work with a ton of fund managers, and growing a fund from 2016 into 2021 today, and you’re at 120 million, that’s five years. That takes a lot of work, and your team isn’t that big. You’re what, seven people?

Zack Lofton:
Yeah, seven, eight including me.

Kevin Kim:
And are you the principal capital raiser?

Zack Lofton:
Oh yeah, 100%.

Kevin Kim:
Okay. So, I met them, great back office, the Loan Ranger team they’re lean and mean, but they do a lot of damage. I met the team in the office, and you got a great work culture, great work environment. I like it a lot.

Zack Lofton:
Oh God, yeah. Our team, I mean I swear to God it’s no bullshit.

Kevin Kim:
So, when did you add those people? When did your team members join you over the years?

Zack Lofton:
Yeah, so I mean Nick is the right-hand in the office. He was actually the first employee.

Kevin Kim:
So, he was your first addition?

Zack Lofton:
Yeah, and I mean shoot kind of the same story with all of our employees, most of the people that we’ve hired, they’re not super seasoned in hard money, they’re not private equity folks, or anything like that. They start filing papers, doing-

Kevin Kim:
You’ve got a mail room, right?

Zack Lofton:
Oh yeah. Doing data entry, things like that, and just working their way up, and really learning the business. Hard money is so unique that you get someone from mortgage lending, you get someone from wherever, it doesn’t 100% fit. So, it’s been-

Kevin Kim:
Translatable skills.

Zack Lofton:
Yeah, we’ve had folks who they just fit the culture, they fit the work ethic, and we’ll fill in the blanks from there.

Kevin Kim:
But as a small group, your fund grew relatively fast though, right?

Zack Lofton:
Very.

Kevin Kim:
So, let’s talk about the milestones. So, you opened up shop in Austin in ’16, when did you hit your first 50 million?

Zack Lofton:
Oh God, so first 50 million, I want to say was let’s see by year one we were there. I want to say it was probably year three that we hit 50 million.

Kevin Kim:
That’s so fast. That’s amazing. And so, that’s all within your local network in Austin, and Phoenix, and California?

Zack Lofton:
Oh God, I mean at this point we have, Nick and I made a list the other day, and it was actually when we were working with you guys at Geraci making sure to shore up some filings that we needed to get in, or making a list of all the investors we have states in, and I mean I kid you not we’ve got investors in Hawaii, Alaska.

Kevin Kim:
I remember the list, yeah.

Zack Lofton:
New York, everywhere.

Kevin Kim:
I figured that was more toward the tail-end as you were expanding, and when you guys were getting off the ground.

Zack Lofton:
Oh, the beginning. Oh yeah, good point. So, yeah because I’ve got the network from Arizona, was really right in the CFA circuit pretty hard, going to those events in Texas, so we got quite a few out there. And then had some connections from California as well from being in banking. But other than that, because we’ve never marketed the fund.

Kevin Kim:
Yeah, you guys don’t have a massive marketing campaign out there.

Zack Lofton:
No, nothing.

Kevin Kim:
Your website’s very lean and mean, it’s very slim. And you guys don’t have the typical, like a lot of these firms out there call it crowd funders.

Zack Lofton:
Yeah, oh God no.

Kevin Kim:
I love that, yeah.

Zack Lofton:
We figure the same attitude we have with the borrowers is we’re actively going to look for stuff, and we’re going to push for it, but we’re going to let our work speak for itself. So, especially with the investors, we got a track record, and I mean they were doing all the marketing for us, we were getting-

Kevin Kim:
Word of mouth.

Zack Lofton:
Yeah, it’s like Joe knows somebody that he golfs with and he lives in Idaho, and-

Kevin Kim:
That’s the core essence of building a fund, it’s that friends and family to start with and let the reputation speak for itself.

Zack Lofton:
Exactly.

Kevin Kim:
You mentioned you’re a CFA, that’s something that’s also very unique, and there’s not a lot of private lenders out there where the CEO has a CFA. And for the audience who don’t know what a CFA is, please inform us.

Zack Lofton:
Yeah, so CFA I guess long story short, you think about-

Kevin Kim:
Charter financial analyst right?

Zack Lofton:
Exactly, charter financial analyst, they do a series of tests, it’s usually three tests. They try to artificially put the pass rate for each rate at about 30-ish percent.

Kevin Kim:
Right, it’s one of the hardest exams to pass out there. In my world it’s actuary, then CFA, and then maybe way down the list is attorney. So, I respect CFAs a lot.

Zack Lofton:
Oh God, no. No, I mean it was very difficult, but definitely worth it. And long story short, it’s a fancy way to say that you’re capable of understanding some high financial concepts, and really at the end of the day capable of managing people’s money to just be educated with it.

Kevin Kim:
So, I’m guessing that has to have helped you out a lot over the years.

Zack Lofton:
Yeah, I would say so. Because especially, I was pretty young when I started it, so talking to a lot of these investors they see some 20-something-year-old come in, it’s like okay well why should I give you a significant portion of my wealth when it looks like you haven’t run a company before, you haven’t really done much yet. This is like 2016 that I’m talking. Now it’s much simpler, but at the time I had to lean on that really heavily to say look this is a vetted process to where I can at least lean on some credibility.

Kevin Kim:
Right. Well, let’s put your analyst hat on real quick because what are the key what I would consider features of private lending, but also investing in a fund that does private lending that is so attractive?

Zack Lofton:
Yeah, I mean the biggest thing is super high-level, it’s common sense banking.

Kevin Kim:
Exactly, that’s what I always say. Money in, money out.

Zack Lofton:
Yeah, exactly.

Kevin Kim:
There’s no weird depository thing, there’s no weird regulatory things, it’s money in, money out.

Zack Lofton:
No, and we don’t get cute with the loans, we don’t do weird business loans. We do collateralized real estate loans, and if it’s not real estate we’re not touching it. Our fund specifically, we do residential. So, we’ll do single family flips, new construction, we’ll do duplex, triplex, things like that. But we don’t do big multi-family, we don’t do office loans. We stick in our lane, and we’ve gotten pretty damn good at it over the years. But it’s commons sense, it’s collateralized, it’s usually 70-

Kevin Kim:
So your investors really responded to that, the fact that it’s-

Zack Lofton:
Oh, totally.

Kevin Kim:
… real estate secured, risk adjusted.

Zack Lofton:
Yeah, 70 cents on the dollar loans, and it’s high-yield. And the misconception is okay you’re doing hard money, you’re a payday lender, you’re lending to broke people.

Kevin Kim:
Yeah, exactly.

Zack Lofton:
Not the case at all.

Kevin Kim:
How do you overcome that misconception?

Zack Lofton:
I mean really just education. We had … God, especially early on, vetted so thoroughly by our investors.

Kevin Kim:
I’m sure.

Zack Lofton:
And our investor presentation, our deck, over-

Kevin Kim:
Which is very slick by the way.

Zack Lofton:
I appreciate that. Yeah, over time it got significantly better, kept improving on that, but education was the big thing. The reason why these people will pay approximately 1% a month, is because they’re not going to have it for a full year. If they have it for a full year, yeah something went wrong. You should be in and out to this, and at the end of the day when you compare it to equity, when you compare it to some other sources out there, we’re actually not that expensive. It just sounds really expensive.

Kevin Kim:
Comparatively speaking it’s pretty good. And on the equity side, if you were to fund a property at 100% equity, the cost of capital is insane.

Zack Lofton:
Yeah, you’re cash on cash return is going to be so skewed. And that’s also on the borrower side, we have to educate them on that too because if you’re going to have an equity partner, I can’t guarantee, but I’m pretty certain that I can make you more money …

Kevin Kim:
It gets a lot more dicey when you have an equity partner, and you go 100% LP style on a flip. Oh no, absolutely not. Yeah, yeah, yeah. Well, let’s talk about the company, because first of all you guys have one of the best names in hard money. Because everyone has a very formal sounding name, and you chose a little tongue-and-cheek, you went Loan Ranger, L-O-A-N Ranger Investments?

Zack Lofton:
Yep, Loan Ranger Capital.

Kevin Kim:
Loan Ranger Capital, right, in of course Austin, Texas. And I’m sure your investors ate that up, right?

Zack Lofton:
Yeah.

Kevin Kim:
Talk about that real quick, because I love those kind of you don’t take yourself too seriously kind of approaches to life.

Zack Lofton:
Yeah, and that was when we were starting the fund, or I say we, and it’s an old habit from early on, I would say we to make it sound more like it wasn’t just me in my apartment for that first year. But yeah, when I was starting the company, thinking about what we wanted to do, and how I wanted to brand it, there was a couple of things I thought about, and one of the first ones was okay, SEO, we’re going to have to think about that, because we have to attract borrowers.

Kevin Kim:
You’re thinking way ahead, by the way, because that’s not something most operators think about in the beginning.

Zack Lofton:
Yeah, because a lot of these generic sounding names-

Kevin Kim:
They double up.

Zack Lofton:
Yeah.

Kevin Kim:
It’s hard to get that Google ad.

Zack Lofton:
Exactly. And if you have, I’m making up a fake name because I don’t want to pick on anybody, but Eagle Funding, those are two really generic words that SEO’s going to be a nightmare for it. So, we wanted something-

Kevin Kim:
The word Pacific is in a lot of funds in California, right?

Zack Lofton:
Yeah.

Kevin Kim:
And you have to be very careful how you choose the name because they overlap a lot.

Zack Lofton:
Yes. So, we had to think about that. And then also I was a lot more fortunate with the investors than I ever anticipated. But I knew one day the investors wouldn’t be a huge concern in terms of capital raising. It was really going to be how do we get the money placed with great borrowers. Because if we don’t have great borrowers, it doesn’t matter how much investment we have.

Kevin Kim:
So, how did the borrowers react to the name choice?

Zack Lofton:
Yeah, they love it. But we don’t want to sound unapproachable, we don’t want to sound banky. I hate to quote another… We want to be delightfully tacky.

Kevin Kim:
Exactly, yeah.

Zack Lofton:
It’s approachable, they know we’re a hard money lender, and it’s obvious, we’re not trying to be something we’re not.

Kevin Kim:
No need to be too serious. No need to be [crosstalk 00:15:11].

Zack Lofton:
Oh God, and that’s one of our we always there’s a lot of folks in this business, they want to look like a billion dollar bank, they want to look like a hot shot. We would much rather look like we are so much smaller than we are, because we want to have an intimate relationship with our borrowers, we want every borrower to think that they are our best and only borrower.

Kevin Kim:
Right, but what’s interesting though is that you guys haven’t done that, but you also now achieved a size of the company from assets under management standpoint that competes with a lot of the larger funds out there in California, on the East Coast, and you’re growing.

Zack Lofton:
Oh yeah, we’re growing every day.

Kevin Kim:
Exactly. So, I want to hear more about that whole smaller than we are concept, because a lot of folks don’t know this, but I visited your guys’ office, and I love this about your office, it’s tight, you guys are all in a room together, you’re working together, you’re sharing information and yelling at each other across the room. Everyone knows what everyone else is doing, right?

Zack Lofton:
Yeah.

Kevin Kim:
You have the little telephone booth. It’s real lean and mean. I love that because it creates a lot of collaborative effort, right?

Zack Lofton:
Yeah.

Kevin Kim:
And did you guys intentionally choose that kind of space?

Zack Lofton:
100%.

Kevin Kim:
Because you could have gone for a high rise.

Zack Lofton:
Get a big, fancy … I mean yeah, so we wanted to fit, kind of with the name, we want to fit small kind of family feel. And that’s with the borrowers, but also with our team too because our culture is paramount. And that’s what’s really had us have some kick ass talent on our team. And we’ve taught them through the years, but they’re unmatched. They are so, so awesome at what they do. And I think part of that is having-

Kevin Kim:
The culture is that tight-knit atmosphere?

Zack Lofton:
Oh definitely, it’s tight-knit, it’s close, it’s collaborative, and you saw it people on here can’t see it but-

Kevin Kim:
I want to make sure, we’re going to get a photo yeah.

Zack Lofton:
Okay, perfect. It’s like bull pen style, where you can turn around and you can talk to anybody in the office very easy. I’m not sitting away in a corner office overlooking the city.

Kevin Kim:
Exactly, right.

Zack Lofton:
If they want to talk to me, they just speak slightly louder and I’m going to hear them from their desk.

Kevin Kim:
Yeah, when I walked in you were just basically standing and talking with Nick, and he was on his computer. But the cool part was that I was able to interface with all of your staff, and appreciate all of them for what they do. But also, I notice if one person was talking about something, and all of a sudden oh I know about that, you can chime in and collaborate.

Zack Lofton:
Exactly. And it’s really helped us, and I think that’s been huge in our growth because there’s no silos. You think about, and I remember when I was in San Francisco doing commercial banking, so siloed, no communication, and-

Kevin Kim:
One guy did only one thing.

Zack Lofton:
It kills progress.

Kevin Kim:
There’s no redundancy there. Once that guy leaves, someone’s got to figure out what he did the past whatever years.

Zack Lofton:
Exactly, yeah. And so, in our office, everybody knows the whole loan process. People can step in. Do they do the whole loan process, no, but you ask anyone on our team-

Kevin Kim:
They’ve all done it before? So, every single one of them?

Zack Lofton:
Oh yeah, they’ve all done it before. And almost everyone, they’ve started from the very bottom, worked it up, and we’ve had awesome success with that. Folks that just might be overlooked by other employers, but they’ve been so … I mean I can’t overstate it, just so amazing.

Kevin Kim:
So, let’s talk about that real quick because I always ask on the podcast about hiring. Hiring is such a big pain point, but so important, finding quality staff. So, how do you approach hiring, what do you look for when you’re looking? Because you have a different approach, a lot of people will look for a seasoned lateral to work in whatever it is, loan origination, or marketing, or back office, someone who’s been doing it for 20 years.

Zack Lofton:
Exactly.

Kevin Kim:
But you’re starting them at the bottom, you’re mail rooming them.

Zack Lofton:
Yeah, and because for us those skills are very important, and all of our employees need to have those skills eventually. But if we’re going to look at technical fit versus cultural fit, you can have someone who’s technically so sound, and can do the job, and can just do it amazingly. And we’ve had this before, it’s not like it’s always been perfect.

Kevin Kim:
Of course.

Zack Lofton:
But a bad culture fit, not only will they bring themselves down, but over time they’re going to bring everyone else’s ceilings down a little bit because it’s-

Kevin Kim:
Hard to work with them.

Zack Lofton:
… it’s hard to work with, and then everyone’s enthusiasm, and I hate to use this metaphor, but everyone’s drinking the Kool-Aid on it. And when everyone is on the same page, and everyone is just excited to come to work every day, the productivity goes through the roof, and that’s how we can run lean and mean.

Kevin Kim:
So let me ask you this, how do you interview to find that fit, because it’s very hard. You can’t just go off of an interview, you kind of have to force social interaction, see what they like to do for fun. I mean what do you guys do?

Zack Lofton:
Oh yeah, so I mean the interview will be a little bit technical. Don’t get me wrong, it’s not like we’re totally looking at the personality. But we’re going to do a culture test, culture index, we like that a lot.

Kevin Kim:
Yeah, yeah, yeah.

Zack Lofton:
That’s been super helpful. But we’re also going to just sit there, get to know them. And when we do an interview, it’s not just me, or me and Nick sitting down with one person making sure they’re a fit. They’re going to meet the entire team, and the whole team is going to be part of that interview.

Kevin Kim:
And they’re going to have to get along with them.

Zack Lofton:
Exactly, because at the end of the day they’re all going to be working with each other, not they all, we all are going to be working with each other. So, it has to work that way. So, we’re really going to look at that. And as long as they have the ability to learn these skills, we’ll teach you that stuff later on, that’s fine. We’ll teach you everything else. You need the attitude, the need the ethic, and as long as that’s there, we’ll be good. And we have had some great success. We’ve got one employee, Lucille, who started off and she’s kind of branched off into a few other employees just through referrals. It’s like, “Hey, I know this person from back home,” or, “I know this person-”

Kevin Kim:
And they’re bringing their friends over.

Zack Lofton:
Yeah, exactly.

Kevin Kim:
And they have a similar ethic, yeah.

Zack Lofton:
And it tends to be a similar mold.

Kevin Kim:
Love that.

Zack Lofton:
Yeah, similar ethics, similar personality, or just similar sense of humor I guess that’s that’s a big part in our office.

Kevin Kim:
That’s important too, right?

Zack Lofton:
Oh yeah.

Kevin Kim:
Because if one person’s super sensitive about certain things, and you guys are a jovial group and talk shit, you can’t. You can’t, it doesn’t work.

Zack Lofton:
Oh yeah, everyone’s talking shit all day.

Kevin Kim:
Yeah.

Zack Lofton:
And it doesn’t go too far, but it’s fun and it keeps it-

Kevin Kim:
It has to be, especially how small you guys are, and how lean and mean you guys have been, you cannot … This is a high-stress job.

Zack Lofton:
Oh yeah, I mean these loans it’s not like you’re doing a 45-day closed mortgage where in our time that’s light years. A lot of these we’ll get the request on Monday, and they say, “Hey, Lucille, or Nick, or whoever in our office, we got to fund by Thursday or Friday because we’re working with a wholesaler, we put on the contract that it was all cash, so we need to make sure that we can actually close it.”

Kevin Kim:
Yeah. Let’s talk about the business real quick. So right now Loan Rangers focus exclusively on resi, and a little bit of multi-family, a little bit of it, not a lot?

Zack Lofton:
So we’ll go up to four units, or townhouse projects, we like townhouse.

Kevin Kim:
So one to four then.

Zack Lofton:
But in terms of an apartment building, typically not.

Kevin Kim:
Right, right. And there’s a lot of that in Austin.

Zack Lofton:
There’s a ton of that.

Kevin Kim:
And so, I’ve been talking about this with other groups, but Austin is a very unique town in the sense that it’s one of the most prized places to move right now.

Zack Lofton:
Yeah.

Kevin Kim:
And so, how are you guys dealing with that as a company? I mean there must be massive cash offers coming in all of the time.

Zack Lofton:
It’s wild, and it’s good and bad because obviously as a lender your collateral’s worth more and more every day, and the amount Austin’s appreciated is-

Kevin Kim:
Right, does that raise questions when you’re getting a valuation? I mean, that can’t be right.

Zack Lofton:
Yeah, we’ll see something and we’re like no way. And then it ends up being accurate, or they end up selling for that. And awesome for them, but we’ll tend to be … We try not to be too conservative, but we’re a lender, we have to be a bit conservative.

Kevin Kim:
No, I get it. Yeah.

Zack Lofton:
But throughout the course of the loan, our asset value’s getting higher, and higher, and higher.

Kevin Kim:
Values have increased what 30% I heard over the past year or so.

Zack Lofton:
It’s crazy. And what I love about it, I mean we’ve seen stuff in the past where it’s value’s increasing for no reason, but it’s the amount of sheer jobs that have moved to Austin specifically, and Texas a whole, it’s been staggering. I mean between Oracle, Google, Amazon, it’s nuts, Tesla.

Kevin Kim:
The Oracle move, the Tesla move, I’m hearing about the Goldman Sachs from Dallas, there’s a lot of wealth coming here. But let me talk about that real quick, so when it comes to the growth of Austin, because Austin’s your primary market right?

Zack Lofton:
Yeah, we’re probably right around 50% Austin.

Kevin Kim:
And the remaining 50% all throughout central Texas, or all over Texas?

Zack Lofton:
So, we’ll typically stick to the metro. So we like the greater Austin metro, we like the Dallas-Fort Worth metro. We’re actually doing quite a bit in San Antonio these days as well. And then we’ll get Houston, Houston’s been a tough market for us to penetrate, but we like the Houston market. It’s just not a huge portion of our portfolio.

Kevin Kim:
Sure. And you’ve been branching out to Colorado, and Tennessee, and to other states nowadays, starting your expansion plan now, right?

Zack Lofton:
Yeah, we just got into Tennessee, and really pushing Nashville pretty hard right now.

Kevin Kim:
Another great place to move apparently, yeah.

Zack Lofton:
Oh God, and yeah again jobs. It’s so many jobs coming there, and you’re seeing the coasts, everything’s kind of moving inward a little bit.

Kevin Kim:
Yep. Well, let’s talk about your perspective on the Texas market, because Texas is … Especially Austin and Dallas such a unique market, because fix and flip’s not really a thing here.

Zack Lofton:
Yeah, and it’s so funny people think Texas market, and you can’t even …

Kevin Kim:
Yeah, it’s true Austin is so different.

Zack Lofton:
It’s like four or five different markets.

Kevin Kim:
Even within Austin, you’ve got pockets that are so different.

Zack Lofton:
Oh yeah, so different. You’ve got areas where there might be some fix and flip here, or this area yeah you can’t make the math work there, it’s got to be a tear down.

Kevin Kim:
Right. And it seems to me that in Austin and parts of Dallas that it’s more construction that seems to be driving the trend.

Zack Lofton:
We’re seeing a lot more construction, and I think speculating a bit here, but you’re seeing the margins on the flippers get a little tighter. And part of it’s there’s so many wholesalers that are tying these up, and obviously they’ve got to make their premium on it too.

Kevin Kim:
Right.

Zack Lofton:
And then just everyone is getting into the flip game right now. So, you’re seeing the margins compress a bunch on the flips, and on the new build side it’s-

Kevin Kim:
Still healthy?

Zack Lofton:
Yeah, it’s still pretty healthy. And part of it is being a flipper versus being a builder, those are two different animals.

Kevin Kim:
Absolutely.

Zack Lofton:
Not diminishing flippers at all, because flippers that’s incredibly hard too.

Kevin Kim:
Right.

Zack Lofton:
But the builders it takes a different set of skills.

Kevin Kim:
Right.

Zack Lofton:
So, we’re seeing the margins really healthy on that side too, and in a way people think of the construction as a little bit riskier. We almost like it a little bit better, because you’re starting from literally the ground up.

Kevin Kim:
Right.

Zack Lofton:
And you know you’re going to have to pay for everything. So those budgets from a percentage aspect actually tend to be a little closer to spot-on, whereas the flips-

Kevin Kim:
You can project, because you have funds control, you know what’s coming.

Zack Lofton:
Exactly.

Kevin Kim:
Yeah.

Zack Lofton:
So yeah, we love those.

Kevin Kim:
But when it comes to construction though, it’s interesting I was driving through Austin when I came to visit you guys, and it’s an interesting town from that perspective because you don’t see master plans. You see a lot of custom homes, and you see a lot of these houses, you’ve got a beautiful newly built home, and then right next door you’ve got a chicken coop, literally barbed wire, aluminum siding. And that’s a fascinating real estate market here.

Zack Lofton:
Yeah, you talk about keep Austin weird, that is the definition.

Kevin Kim:
It’s definitely, but the values are still there, and that’s the fascinating part.

Zack Lofton:
Exactly. And that’s where I think we really, and why we’ve been so successful in Austin is because a traditional lender, that is really hard to underwrite. When you see a chicken coop next to a new build, across the street from a 1980s build.

Kevin Kim:
Yeah, and then down the street you’ve got some kind of outdoor restaurant bar coffee shop thing going on, and food trucks out on the street there. It’s an interesting set up, you don’t see that anywhere else in the United States.

Zack Lofton:
And that’s why us having literal boots on the ground in Austin, I think it’s so important. I think places like newer cities where there’s a lot of master planning communities, you can get away with doing that remote and underwriting that remote because it’s all 500 houses were built by the same builder, there’s three floor plans.

Kevin Kim:
I didn’t see a single toll road sign when I was driving through Austin. I drove north past Cedar Park, I saw one.

Zack Lofton:
Yeah, I was going to say further north you’ll see it, and those big mass production builders can survive way far up north. But the geography in Austin doesn’t really allow for it, it’s hilly.

Kevin Kim:
It’s very hilly.

Zack Lofton:
People think of Texas, they think dry, there is water everywhere in Austin.

Kevin Kim:
Yes, lakes everywhere.

Zack Lofton:
There’s creeks, springs, lakes.

Kevin Kim:
As we were flying in saw lakes everywhere, it’s ponds, and lakes, and rivers, and creeks, and it was amazing.

Zack Lofton:
So, it creates an awesome opportunity initially for the flippers, because there were these old houses that as people came into town, they needed to be updated because Austin’s an old city, it didn’t really boom until now, but a lot of the houses that we look at 1920s build, even earlier, it’s not uncommon.

Kevin Kim:
But that aging inventory problem is slowly dwindling.

Zack Lofton:
Yes.

Kevin Kim:
And so, now you’ve got an inventory problem, right?

Zack Lofton:
Exactly, now there’s an inventory problem, and that’s where the new builds are coming into play too because a lot of the low hanging fruit with the flips they’ve been picked.

Kevin Kim:
But there’s a lot of folks that say, even in Austin, Texas in general, has so much land, right?

Zack Lofton:
Yes.

Kevin Kim:
And so, is that still the truth in the Austin metro, Dallas metro, is there still enough land to build on?

Zack Lofton:
So, Austin and Dallas, two totally different stories in my opinion. Austin it’s so hilly, and you go west and it’s just so expensive to build because it’s hilly. It makes it beautiful-

Kevin Kim:
The engineering is a nightmare.

Zack Lofton:
But yeah, and then you go east and you’re on clay, the soil’s got a bunch of clay underneath. It makes the foundations a nightmare to deal with.

Kevin Kim:
I’m sure, yeah.

Zack Lofton:
And then west it’s all rock, it’s all bedrock down there, so it’s really difficult.

Kevin Kim:
More labor.

Zack Lofton:
Yeah, especially if you’re dealing with an incline. So, from a mass production standpoint, they can’t make those numbers pencil out. So, it’s difficult in terms of really building out in a big way. Up north, you can do it a little bit, Dallas I think-

Kevin Kim:
[crosstalk 00:29:43] home builder, and it’s great for you.

Zack Lofton:
Yeah, and that’s why we exist, because those are our clients, and that’s who we love.

Kevin Kim:
That’s awesome.

Zack Lofton:
But Dallas, a little bit more opportunity for that. It’s a little bit flatter, a little bit closer to the plains.

Kevin Kim:
Yeah, Dallas very much feels like LA.

Zack Lofton:
Yeah, feels like LA, kind of almost like Phoenix-esque too, where it’s-

Kevin Kim:
Yeah, yeah, very corporate. I can see Toll Brothers loving it out here.

Zack Lofton:
Oh yeah, a lot of fortune 500 types up here, which if you’re comparing Austin to Dallas like oh my God, this couldn’t be worlds further apart. And we lend in both areas, but in terms of needing boots on the ground, we need them in Austin. Dallas we can kind of get away with sending inspectors, sending the appraisers to go view them for us.

Kevin Kim:
So, let’s talk about the future for you guys. What’s the challenge right now for further growth, what’s keeping you guys from growing? Is it the market conditions, is it new markets you don’t want to break into just yet? What’s keeping you guys from going even further?

Zack Lofton:
I would say right now it’s new markets, because we really-

Kevin Kim:
Austin’s getting a little crowded, right? Texas is getting a little crowded.

Zack Lofton:
It’s getting crowded, money’s coming in here, and it’s crazy too, money has never been easier to raise right now.

Kevin Kim:
It’s so commoditized. So commoditized.

Zack Lofton:
It’s never been easier to bring on investors.

Kevin Kim:
Let me ask you that, why do you think that is? Because you’re an analyst, you can have that brain, I personally believe it’s because investors, even retail investors, they don’t trust Wall Street, it’s all over the place. They love our market, fixed income is dead, right?

Zack Lofton:
Yeah, because like you said earlier, it’s common sense lending. It is here’s an asset, here’s the value, we’re going to lend this percentage of the value, and it gets a pretty damn good return on it too. So, yeah you look at Wall Street, you look at a stock it goes up this amount today, it goes down an equal amount tomorrow.

Kevin Kim:
Like last night, it was just like what?

Zack Lofton:
Yeah, exactly. You get inflation fears, and it tanks 2%, and then today I think up about a percent-and-a-half. And then there’s for most people you can’t rationalize that.

Kevin Kim:
It’s mind-boggling.

Zack Lofton:
Yeah, even with a CFA who studied that for way too many hours, I can’t rationalize it most of the time.

Kevin Kim:
No, but this makes sense.

Zack Lofton:
Yeah.

Kevin Kim:
But there is the concern nowadays with real estate values being so inflated, especially in these new metro, Texas, Arizona, Idaho, Florida, the Carolinas, Tennessee are now the dominating state, everyone wants to live there now.

Zack Lofton:
Yeah.

Kevin Kim:
Even I want to move there. But that is inflating values don’t you think? I mean that’s what I worry about.

Zack Lofton:
Oh, totally. I mean it’s deathly inflating values, and it’s something that we watch a lot, because-

Kevin Kim:
So, what are you doing to mitigate that risk in the long-run?

Zack Lofton:
In the long run, that’s where we’re getting into other markets too. You look at Tennessee, and we love Austin, we think Austin’s got a lot more room to go. I think it’s been a little too affordable, and it’s starting to get to where it probably should be. But to mitigate that, we’re going to places like Nashville, Tennessee where the median home price is almost smack dab right at the national average.

Kevin Kim:
Right, but they’re not seeing as much over inflation in values yet.

Zack Lofton:
Not yet, I mean they’re definitely seeing it, but it’s not-

Kevin Kim:
Because where I’m at in California, it’s already been like that for the past five years, it’s insane. A house can sell in three days all cash offer for $150,000 over asking price. It’s insane right now.

Zack Lofton:
Yeah. And that’s where we obviously want a great market, we don’t want too great of a market.

Kevin Kim:
Exactly.

Zack Lofton:
And that’s where it’s just really we love funding deals, we love doing stuff for our great borrowers, but at the end of the day we’re a money manager, so our investors always come first. So, that’s where we stick to our underwriting criteria to where we’re not going to lend to questionable people with questionable experience, we’re going to lend to only our great borrowers, and we’re going to lend at usually 70% loan to value, so then-

Kevin Kim:
I know you guys have been sticking to those guns for a long time.

Zack Lofton:
Oh yeah, and that’s-

Kevin Kim:
You’re not chasing that, right?

Zack Lofton:
Since the beginning, and that’s why we’ve expanded as opposed to really doubling down in Texas and saying oh my God we’re going to take all the market share. Some of the market share we don’t want, because it’s too risky, or it’s too high on the leverage, or they’re just dropping the rates to where we don’t think it’s in the best interest of our investors.

Kevin Kim:
And as a fiduciary money manager, you have to keep that in mind.

Zack Lofton:
Oh, yeah.

Kevin Kim:
It’s so scary, but it’s so easy to fall into that trap, on 70, 75, 85.

Zack Lofton:
Yeah, where do you draw the line?

Kevin Kim:
Exactly.

Zack Lofton:
Because if you don’t draw one, then it creeps up forever.

Kevin Kim:
Oh, yeah. So, let’s talk about beyond that now, so we’re talking about new markets, beyond expanding to new markets, what else is in the cards for Loan Ranger? What else do you guys want to be working on in the next few years? What are you excited about?

Zack Lofton:
Yeah, I mean the biggest one, and we’ve been working with you guys since the new markets, so obviously that. We talked about that. We’re getting a little-

Kevin Kim:
What else, Colorado, Tennessee, anywhere else?

Zack Lofton:
So we like those markets, Carolinas are great. I love Florida, but just kind of like Texas, all the money is going to Florida. So, it’s interesting. I think the southeast over the next decade is going to be really well poised to have a strong market.

Kevin Kim:
Oh yeah, I agree.

Zack Lofton:
And you saw it with all the COVID stuff, they just did a little bit better economically.

Kevin Kim:
Oh yeah, no lock downs.

Zack Lofton:
Yeah, exactly. And however you feel about that is how you feel about it, but from a business standpoint, it really in other places-

Kevin Kim:
Their economies didn’t suffer as hard as California or other states.

Zack Lofton:
It crippled businesses, and they let a lot more of them stay open, which was great. The construction crews, the northeast I hear horror stories from lenders I know they weren’t able to pull permits.

Kevin Kim:
They were stopped, they stopped building. We were lucky in California, they allowed builders to get back to work. But that was after, it took about a week-and-a-half.

Zack Lofton:
That’s got to be a scary week-and-a-half.

Kevin Kim:
Yeah, it was…construction lenders, yeah.

Zack Lofton:
Yeah, the lenders, and the borrowers, it’s like I don’t blame them. I wouldn’t want to pay interest if I wasn’t able to work on my project.

Kevin Kim:
Right.

Zack Lofton:
So, that’s tough.

Kevin Kim:
I love that man, you have a very clear expansion plan. How about when it comes to I guess the fund, what’s the vision for the fund, keep going, just keep on raising money, grow as big as we can?

Zack Lofton:
Yeah, and the fund is difficult because there’s so many opportunities nowadays with how you-

Kevin Kim:
Get deals done, yeah Wall Street’s all over the place now.

Zack Lofton:
Oh my God, yeah, Wall Street’s all over. I mean note buyers are everywhere, it’s never been easier to sell notes, which-

Kevin Kim:
Let me ask you about that, I mean you’ve been approached I’m sure to sell loans, but haven’t recently.

Zack Lofton:
Multiple times a week.

Kevin Kim:
Yeah. And so, how do you stay disciplined and say no to that?

Zack Lofton:
Yeah, and it’s really easy to do it, and the reason we didn’t do it, because it’s very tempting because the rates that they’re going to buy them at are really great rates. It’s pretty low, we can make a nice spread on it. So, from a pure economic standpoint, and our bottom line we should be doing that, we should be doing a lot of that. But then the reason we don’t is tying it all back to culture, and taking care of our investors, taking care of our borrowers, for our culture we’re not going to be able to be as quick, and we’re going to be beholden to Wall Street, especially you think about draw requests. You’re building a house, you’re doing a flip, you put the floors down, we can do common sense, we get our inspector out there, we get a team member out there ASAP.

Kevin Kim:
Not as efficient.

Zack Lofton:
We can get a draw done in 24 hours.

Kevin Kim:
If you’re working, if you’ve got another overlord, of our beholden to somebody else it’s different.

Zack Lofton:
Oh yeah, it’ll take two weeks.

Kevin Kim:
Much different.

Zack Lofton:
Yeah, I mean that’s pretty average…

Kevin Kim:
And that’s fantastic for a lot of operators, but I feel like fund managers especially, you need that unique twist that you have built over the years.

Zack Lofton:
Yes, and one of our values in the office is on the wall, it’s value beyond the rate. So, we’re not going to be the cheapest, but at the end of the day we will make our borrower’s lives the easiest.

Kevin Kim:
Right, through service.

Zack Lofton:
Yeah, through awesome service, through speed, reliability. You saw a lot of lenders through COVID, they pulled the rug out from under their borrowers, and they called notes, or they stopped doing draws for whatever reason, that’s not us. And you think about our investors too, shoot, starting from literally nothing, where we’re in an amazing situation today, to me it feels selfish to take that deal flow away from our investors, and then give it to an insurance company, or a big note buyer, or someone like that.

Kevin Kim:
Fantastic, well I can appreciate that as well because my advice from fund managers has always been it’s okay to do it, but you’ve always got to have your own balance sheet, because you never know. COVID was a good example, you never know, and you need that backup plan.

Zack Lofton:
Yeah, and Wall Street can be very fickle. It’s hot today, may not be hot tomorrow.

Kevin Kim:
And I have a very long memory, and I started in this industry right after ’08, and I was in law school during the recession. I remember exactly what happened, and all you have to do is think back to COVID to see, and I love those guys, and I wish them the best, and I recommend them to a lot of my clients. But it’s a tool in a tool kit, and that’s what it should be.

Zack Lofton:
Exactly.

Kevin Kim:
Let’s talk about Zack now, I want to get to know Zack a little more, I want to get to know you. Because honestly, there are a lot of clients that I work with, and I really like to hang out with, I’ve really enjoyed hanging out with you, we’ve had a lot of great talks. You’re living in Austin right now. You live in downtown?

Zack Lofton:
Yeah, more or less downtown, east Austin.

Kevin Kim:
Nice. And you’ve got a little one, nine-months-old?

Zack Lofton:
Nine-months-old, yeah. She is oh my God so much fun right now. Not going to say it was easy, but she is so much fun.

Kevin Kim:
Nine months I mean they’re starting to sleep better, they’re starting to eat better.

Zack Lofton:
Yeah, a full night of sleep will do a lot for you.

Kevin Kim:
Oh yeah, I’m currently fighting a six-month-old, she is not sleeping at all, so it’s fun.

Zack Lofton:
It gets better.

Kevin Kim:
I’m sure it does, I’m sure it does. It was funny because my first, she was out like a light at six months, but it’s okay they’re all different.

Zack Lofton:
Yep. Yeah, we’ll get less lucky on the second one.

Kevin Kim:
Yeah, let me ask you this, having kids through this past year with COVID, you had the baby during COVID basically, right?

Zack Lofton:
Yeah, in August.

Kevin Kim:
I had her during COVID, and so they’re not that far apart. And we’re all closer to family, right? So, I want to hear about your thoughts, your experience having a new father during COVID. How was that?

Zack Lofton:
Oh my gosh, I mean to say it wasn’t stressful you’d be lying, because it was … You think back to March, everything happens it’s like okay two weeks we’re going to be good. Perfect, we’ll bunker down for two weeks, we’re good, and it keeps going and going. And then our investors get a little worried, because you don’t know if people are never going to leave their houses again, go out to a showing, nobody’s ever going to sell their house and buy their house again, it was doom’s day stuff. So, luckily we’ve got some amazing investors to where, and it took me a long time, but eventually talked to every single one on the phone and just explained what our stance was.

Kevin Kim:
That’s a big deal right there.

Zack Lofton:
Oh yeah, the first few at least were really hard conversations to have.

Kevin Kim:
Oh, I’m sure, freaking out.

Zack Lofton:
People are stressed out, and very emotional time. But we’re able to get them all.

Kevin Kim:
So, you calmed your investors down.

Zack Lofton:
Calmed down, get them relaxed, on our side. So, dealing with that, and then at the time my wife was, I think in March, I wish I was better at math here, but about five months pregnant. So, that’s just stressful at that time. You really want to enjoy that time, and love it, cherish it.

Kevin Kim:
But you’re also freaking out because of work.

Zack Lofton:
Yeah, because we don’t know if people are going to buy and sell houses.

Kevin Kim:
I was in that exact same position. I was calling all my clients, I think I called you, and my wife was six months pregnant. I’m like, “Oh crap, what’s going on here?” And I also got a three-year-old, who’s climbing all over the place. It was nuts, it was a lot of nuts. Were you working from home at the time?

Zack Lofton:
So, for a little while yes. And then we were talking about it earlier, we worked from home for a little bit just because we didn’t know what to do. But the first people to reach out to me to say, “We need to get back in the office,” were the moms on our team. And me too, love my wife to death, but between everything at home and two massive dogs, it is hard to get work done.

Kevin Kim:
It’s a lot. Yeah.

Zack Lofton:
But they said, “Zack, we got to get back in the office.”

Kevin Kim:
They were probably noticing it, I can’t execute to the level I’m used to doing it, and I’m letting my team members down.

Zack Lofton:
It’s tough to have culture via Zoom.

Kevin Kim:
Oh, absolutely.

Zack Lofton:
You can do it for a little bit, but-

Kevin Kim:
I don’t think you really can at all.

Zack Lofton:
I don’t think you can have a Zoom culture.

Kevin Kim:
It’s not possible, especially when you’re a tight-knit group like that, you can’t.

Zack Lofton:
Exactly. And just people in general not even working, people need to see people to get motivated, inspired to let go a little bit.

Kevin Kim:
People love to collaborate, it’s their nature.

Zack Lofton:
Exactly. That’s what makes us great in the office is that we don’t have offices for everybody, and myself included because I want to be approachable, I want as things are happening, were all collaborating. The process gets better all the time. And if everyone’s on Zoom, you get siloed, whether you want to or not, you get siloed.

Kevin Kim:
Oh, I remember the feeling. I still kind of feel that way. Now that we’re back out there at conferences, I feel a lot better about it, but for a long time literally wake up, walk upstairs, go to work, walk downstairs for lunch, back upstairs to work. The only person I see is my wife and my baby. It’s not the same. It’s not, yeah.

Zack Lofton:
And the fact that we’re at a conference right now, I mean it feels great.

Kevin Kim:
It’s awesome.

Zack Lofton:
We’re out here, we’re seeing everyone in the industry again.

Kevin Kim:
The world is back, we’re all back. It’s awesome.

Zack Lofton:
Yeah.

Kevin Kim:
So let’s close with, I usually like to close with some crystal ball statements and thoughts, so where we’re headed in the industry. I like the fact that you have a CFA, and you’re I joke about this but we call you a garage band fund, nice little short…

Zack Lofton:
No we 100% are.

Kevin Kim:
I love that. But you have a really strong insight into the market that you’re going into, so next year, new year after that, what are your thoughts, where are we headed?

Zack Lofton:
And you’re saying private lending in general?

Kevin Kim:
I mean private lending, residential, real estate. And fix and flip, construction, DSCR. I mean I know you guys don’t to DSCR, but-

Zack Lofton:
No we don’t, but I think that’s a huge, I think DSCR is going to be a big part of our future, as soon as we find a great way to do it. That’s just the only thing holding us back. DSCR, and everyone listening, it’s rent a loans essentially is what that is. But I think Austin specifically, I think we still have a lot of growth to go. I worry a little bit for the coasts, because I just don’t see … You see the job numbers moving out, like in hoards. And you got the census data that came out, but-

Kevin Kim:
California lost a seat, a congressional seat.

Zack Lofton:
Which is wild. I mean that hasn’t happened since I don’t think ever, right?

Kevin Kim:
I call it the great migration, it’s real. Yeah, and it’s still going on to this day.

Zack Lofton:
Yeah, because that data was pulled in March, and how accurate that is with people how have just recently moved, didn’t go to the DMV.

Kevin Kim:
Lines of U-Haul trucks leaving California. It’s real, yeah.

Zack Lofton:
I think people are going to realize that the coast got hit worse than they actually appeared to. And I think that’s really going to help areas like the south, southeast especially, or even middle, like Arizona, Colorado, I think those states are going to benefit quite a bit.

Kevin Kim:
Something else booming.

Zack Lofton:
God, Idaho. I think those areas have a lot of growth to go. Flips I think are just getting harder to come by, especially as … I mean it’s a bonafide market now. You told people you’re a flipper 15 years ago, that’s cute, you’re a handy man.

Kevin Kim:
Yeah, exactly. Yeah.

Zack Lofton:
Cool. Now it’s a career path, and that’s all of our borrowers that’s their full time gig. They don’t have a day job, they flip homes, or they build houses. So, I think we got some good growth to go there. The only thing that really worries me is the inflation right now. If we can’t find a way to curb that, and it’s a little scary because-

Kevin Kim:
That affects everything – construction costs, labor costs.

Zack Lofton:
Oh God, yeah.

Kevin Kim:
Fuel costs. I mean-

Zack Lofton:
And selfishly it props up the real estate market, but do you really want that?

Kevin Kim:
It’s artificial.

Zack Lofton:
Yeah, it’s artificial. You print a few trillion dollars, and oh my God prices went up?

Kevin Kim:
Exactly, yeah. And then when fuel costs go up, and labor costs goes up, and lumber cost goes up, then the price-

Zack Lofton:
It gets passed on, yeah.

Kevin Kim:
Gets passed through. But when you try to sell it in a couple years, is that going to be sustainable?

Zack Lofton:
Exactly.

Kevin Kim:
I don’t know either. I really hope it’s not as bad as it seems right now.

Zack Lofton:
Yeah, especially this month. It doesn’t-

Kevin Kim:
It’s a little freak outy. Yeah, the whole oil thing, and the whole consumer price index came out yesterday, everyone this week they’re like what’s going on?

Zack Lofton:
Yeah. So, really I think especially geographically I love where we’re at, I love the direction it’s going. But yeah, macro-economic, if we can’t get this inflation under control it’s going to pass onto consumers.

Kevin Kim:
But that usually leads to an increase in fed rate, right?

Zack Lofton:
Mm-hmm (affirmative).

Kevin Kim:
Which translates to a conversation at Wall Street, are they going to stay in?

Zack Lofton:
I can’t see them staying in, and it’s not if it’s when, because the rate has to go up.

Kevin Kim:
Right, the margins are going to shrink.

Zack Lofton:
Yeah, exactly. You can’t have a Japan style economy where you have negative interest rates. We saw how that panned out.

Kevin Kim:
Europe, Japan, I mean-

Zack Lofton:
It never historically worked, so the rates will increase. And when they do, we talked about Wall Street being a little fickle. I think those insurance companies, the big family offices, I think they pull a lot of the lending space, because it’s-

Kevin Kim:
Or it’s just not there anymore.

Zack Lofton:
Yeah, it’s not there anymore, it’s just not as attractive anymore, there’s better places the park your capital.

Kevin Kim:
And then most likely long equity’s probably going to be the alternative. I mean that’s usually the play.

Zack Lofton:
Exactly.

Kevin Kim:
But we’ll see. I’m looking forward to I joke about this, but private lending becoming private again.

Zack Lofton:
And that’s what’ll happen.

Kevin Kim:
A little bit of a correction. I think the frothiness right now is definitely very foamy. But it’s companies like yours, and your colleagues out here in Texas, got competitors across the country that are the backbone of this industry. And I think for you guys though, there’s not that much concern right? I mean more opportunity for you.

Zack Lofton:
Yeah, and we talked about selling those, being involved with Wall Street. We can make more money today dealing with Wall Street as opposed to our investors, but when they pull out, they’re not going to give us a six month warning, they’re going to pull out and they’re going to say, “Hey check’s due.”

Kevin Kim:
Yeah, exactly.

Zack Lofton:
So, by having our investors who stayed loyal to us, we’re really well poised when the market changes, the private money market that is.

Kevin Kim:
Yeah, and that rings true past I guess we’d say 15, I’ve interviewed a lot of fund managers that have had their funds since pre-2012, [inaudible 00:48:49] came out of the recession, built their fund, and have rid this wave, but they hit COVID and they did better than ever.

Zack Lofton:
Oh yeah, yeah. And we’re definitely in that boat. COVID the first month, two months, is a little scary, and then month three we said, “Oh my God, this is the best thing that’s ever happened to us.”

Kevin Kim:
Yeah, exactly.

Zack Lofton:
And then with you guys when that happens, you’re going to be busy turning all these note selling funds into private funds with all their [inaudible 00:49:15].

Kevin Kim:
I was telling everyone about this, last year we had a record year because it was a shift in attitude went back to being more private retail investor focused. And I hope that the lesson rings true, keeping Wall Street as a tool is important, it’s very important, make your money.

Zack Lofton:
Yeah, so important.

Kevin Kim:
So important, make your money, but remember in the back of your mind, keep your memory long and have your own toolkit available to you.

Zack Lofton:
Exactly.

Kevin Kim:
Yeah. Well listen, you know what this has been a really fun interview, and we’re here at NLE once again, National Lending Experts, leverage. Tongue-twister, but I came to visit you guys here in Texas, and I’ve loved every moment of it.

Zack Lofton:
Yeah, it was a pleasure having you out. You got to come out again.

Kevin Kim:
Oh, I will be here.

Zack Lofton:
I mean we love working with you, Tay, the whole team.

Kevin Kim:
Oh, thank you so much. And Tay is the actual mastermind behind all, that guy, shout out to Tay Kim, that guy works his ass off. He’s working his ass off right now actually.

Zack Lofton:
Yeah, poor guy. Yeah, I wish we started using you guys earlier. I mean it would have been a huge help the first few years, but luckily the last about three years we’ve been working with y’all, and oh my God you guys are the experts of that.

Kevin Kim:
And you know what, it’s also been refreshing working with you guys, because you guys appreciate culture, and value council, and it’s great to have clients like you. And we really appreciate working with you guys as well. So, hopefully come back out here and throw a nice big party for y’all, and maybe we’ll go out and do a little bit of fishing, a little bit of hunting, a little bit of grilling.

Zack Lofton:
Yeah, show you that Texas side of the culture.

Kevin Kim:
Exactly, I miss that. I basically spent my entire time in the city this time. So, it’s okay, next time.

Zack Lofton:
We’ll get you out in the country, out on the ranch.

Kevin Kim:
Yes, yes, yes, for sure. Well, you know this has been a great episode here at National Lending Experts. This is Kevin Kim with Lender’s Lounge signing off. Thank you once again Zack for joining us today, and we’ll see you on the next one.