“I remember the day I quit engineering. I had just sold my first house and was looking at a large check. My manager came by and stood in the entrance of the cubicle for eight or nine seconds. He said ‘if you spent as much time working as you did daydreaming, you might get something done.’ I got up, got my stuff, and went home – I put in my notice the next day. His comment pushed me over the top.”
To some, walking away from a career in engineering to peruse the real estate world may seem outlandish. But to Adonis Lockett, director of operations of Lockett-N-Homes, that change is a normality. After spending half a decade as an engineer, Lockett took his passion for damage control to the housing market during one of its most tumultuous times; after the 2008 financial crisis. Currently, Lockett-N-Homes, which is Adonis’ brainchild, offers a multitude of lending programs for buyers of every caliber.
Originate Report (OR:) How did you get involved in hard money lending and real estate? Is this a field you’ve always had an interest in?
Adonis Lockett (AL:) My background is in electrical mechanical engineering. When I graduated college, I worked for Boeing as a satellite antenna design engineer and I also worked as a rocket propulsion test engineer; my background was heavy in testing, failure analysis, and process improvement. My job at all of these big companies was to identify failures, source it down to the smallest details that caused the issue, recreate the failure, and figure out a way – in its infancy – to prevent it from happening in the future. My goal was to take any broken process, recreate it, and make processes as efficient as possible without sacrificing quality. We had a very robust training, and I got very good at it; what prompted me to get into real estate was the financial crisis of 2008. In my first four years after school, I was involved in five rounds of layoffs – that taught me that my sense of job security was a fallacy; I was with people who had been at the company for six months, and people who had been there for 40 years who were laid off.
I decided to start flipping houses in 2010. I was smart enough to research the market and not ride the wave of 2008 – I waited until the market bottomed out to buy my first house. I spent two years learning about the real estate market, and when I sold my first house, I did the work myself and list the house ‘for sale by owner.’ What I learned from buyers at the time was everyone had bad credit – many of them had good jobs and consistent income, but were impacted in some way by the crash. I said to myself, instead of just having a real estate business, I wanted to have a real estate and credit business; I wanted to create a program that helped people in those situations. Lockett-N-Homes initially started as a house-flipping credit service business. What I learned as part of my credit service was dispute letters are not the way to go; I evolved the company into a credit score improvement home buying program.
That’s where our Easy Qualifier (EQ) program came in. Fixing people’s credit was only a facet of getting a loan – I partnered with an independent loan officer; she told me the criteria these customers needed to qualify for a home loan. I would help get their credit scores up to the point of qualification, but I would also get collections removed by dealing with creditors directly – that’s something I wanted to do, and because of my background in engineering, and I knew how to manage the numbers. By the time I sent that person’s profile to a loan officer, they were quickly approved and would buy my house. Once we got traction with that, we grew it in the Dallas area and then in Los Angele.
While this was happening, Lockheed Martin (who I was working for at the time) decided they wanted to do another wave of layoffs. I decided to leave Lockheed voluntarily as a part of that wave, so I left engineering in 2011. Lockett-N-Homes was still in its infancy at that point, but with that first house I flipped I made more in 62 days than I did in a year as an engineer. When that wave of layoffs came, I realized that I had proven my concept twice over, so I said to myself “I think it’s time to take this concept and grow it on my own.”
(OR:) You mentioned your experience in failure management. Do you feel as though this helped you better navigate the housing market, especially post-crash of 2008?
(AL:) I did find it useful but in certain situations. After my first few times flipping houses, I took feedback from clients and colleagues and continuously restructured and revised the input I found credible. Constantly refining my process is something I took very seriously.
(OR:) I can imagine that there isn’t a lot of consistency in the real estate business – what does a typical day look like?
(AL:) I would say every day is a new challenge – the structure of every day is consistent, but each day has its own set of challenges. The reason for that is, if I’m doing ten straightforward single-family hard money loans, that will be ten completely different experiences. The structure of the day will be pretty much the same; even though we have a pretty consistent meeting schedule, though, the properties’ files will be different because of the personalities associated with all involved parties. The differences come into play depending on the position of the person who is the most stressed or has the most to gain, etc. To put some context to that, I’ve been in situations where we hear from the seller more than anyone. Often to their detriment, they have spent a lot of the money, or have spent the money within a certain timeframe. This, of course, can cause a myriad of issues in and of itself.
(OR:) So what are some of the biggest concerns of those sellers? Where do those concerns come from?
(AL:) I wouldn’t say this is a concern, but one of the biggest misconceptions I hear is a lot of sellers – especially if they’re not in the investment business – assume that an appraisal’s completion means we’re going to close the next day. They have a real disconnect from what the process entails, and it gives them a skewed perspective of what the process looks like, and the timeline associated with that process.
I think a lot of those misconceptions come from TV. You watch shows like “Million Dollar Listing,” and you latch onto the idea that you can talk to the people who are involved in a transaction in any way – you think you can get away with making demands and not showing respect, saying “we’re gonna do it, we’re gonna do it my way, or I’m going to walk.” A lot of times, they don’t realize that the process has a lot of moving parts, a lot of interfaces, and they get attached to the Hollywood lifestyle and is not realistic. I’ve seen this go up in recent years as these shows have become more popular – it’s a Catch 22 as well because someone could call me and say “stop talking, you need to listen to me, you have X amount of days to perform, or the deal is off.” Two things happen in that situation – they forget that they’re dealing with another person at the end of the line; we’re all professionals, but at the end of the day we’re all human. What typically happens is we get put in a compromising position – do I as a person maintain my self-respect and listen to them as they tell me to shut up, or do I understand their frustrations? I often find myself in that crossroads; do I stand for my self-respect and dignity, or stand our ground at the cost of our buyer’s deal?
(OR:) In the wake of the 2008 financial crisis, what were your initial clients’ reactions to the services you offered? I can imagine there weren’t many people offering credit help and real estate deals at once.
(AL:) They felt uncertainty, disbelief, and they seemed unconvinced – many people at the time had credit repair programs and many had bad reputations for non-performance. The irony about my story is every time I tell it people say it’s awesome, but they don’t realize that in my haste I didn’t factor in many things. The stigma of a new business is always present – I was confident in my ability to run the business, but when potential clients would research Lockett-N-Homes, other companies were established eight months or a year ago. I was just a guy out pitching a service that no one else was pitching and some just didn’t believe it. The first eight or nine months I struggled extensively – I sold houses, but part of creating the legitimacy of my business was purchasing commercial office space. One thing I didn’t realize was selling houses differs from having an every-other-week paycheck in engineering, and I was overextending myself a lot. This got easier with time, though.
When clients would have apprehension, I never took it personally – a lot of people had a story that they would cite as the root of their suspicion. What I started to do was bring people into the office and give them real-time examples. I pulled up their reports and walked them through the process of what was affecting their credit, showing them the requirements needed to get their situation qualified. Even though I was doing ‘freebies,’ it was essential in building my credibility.
(OR:) Since Lockett-N-Homes’ inception, how has the company grown? Do you feel satisfied with your firm’s success thus far?
(AL:) In 2011, it was one other person and me. Now, we have 11 offices in nine states and are no longer just a credit and hose flipping company, we are a real estate investment firm. We are a real estate brokerage, mortgage brokerage, hard money lending company, and a holding company.
Three years ago, I would have said: “yes, at the end of the day I feel happy about how far my company has come.” Today, I say that I’m a little disappointed because I feel like I’ve gotten complacent.
(OR:) Technology is continually changing, and this change impacts every industry. What are some of the trends in hard money lending or real estate that concern you, and are there any that excite you?
(AL:) I became a hard money lender for two reasons – first of all, being part of a real estate brokerage that wholesales properties to investors, I found myself referring business to hard money lenders and making them tens of thousands of dollars with nothing to show for it. One of our main goals at the time was to realize that the revenue associated with lending is a necessary piece of the operation. Secondly, I wanted to start a hard money division because of the void that existed in the hard money lending space. That void is a true understanding of how investors and investments work. I know that’s a borderline controversial statement to make because as lenders we’re always supposed to err on the side of caution. The irony about that is the way lending is now- everything is by-the-book, and a lot of the common sense underwriting seems to get lost.
That is one of my biggest issues with lending today. When I first got involved in the space, I saw a more discretionary position. Lenders would say “I’m going to go off of my gut,” but I feel like we’re no longer in the age of discretionary lending – everything now is so by-the-book that when you take some of the realistic components of the investor or deal out of it, I find that loans are declined that shouldn’t be tossed aside. If you haven’t flipped a deal in two years, some professionals view you as having no experience – that is my number one gripe with the hard money lending industry today. I feel like there’s such a lack of common-sense underwriting.
With all of that being said, it’s not fair for me to say the industry is all bad – a lot of these lenders took a burn during the 2008 crisis in the same way homeowners did. I understand their position, but I feel as though they’ve overcorrected the industry. As part of their risk mitigation, they went so hardcore that they’ve taken the practical aspect out of what investors go through. I feel like many people become skeptical because they feel as though lenders don’t understand the human aspect of being an investor.
(OR:) Given your experience and the growth of Lockett-N-Homes, where do you see the company going in the next few years? Where are there opportunities for growth?
(AL:) One of our biggest accomplishments as a firm – and even for me as a real estate professional – was being able to originate and fund loans on our own and move away from primarily brokering. Where I see Lockett-N-Homes in the next year or two years is growing to a real heavy hitter in the industry to the same capacity as some of our competitors, you know, those companies. I respect them and everything they’ve done for the industry; I would like to contribute to the same capacity that those companies have been able to. With that, I also want to implement the more cutting-edge technology into our process that allows us to stick to our traditions, but also allows us to be forward-thinking into the industry and automating some of the antiquated processes that exist. I see us being on the leading edge of technology in regards to growth, automation, and implementation of our services. Of course, we also have to keep in mind the traditions and processes that the industry is used to seeing and has kept a lot of the larger firms successful.
As Lockett-N-Homes’ website states, “homeownership is only a phone call away.” Over the course of the past decade, Adonis has grown his company from infancy to success, offering services previously not offered in the loan industry. With a propensity for helping those in precarious financial situations receive the assistance they need to gain monetary independence, it is easy to hear Adonis’ passion for the real estate market – both over the phone or in person. For more information on Lockett-N-Homes, visit https://lockettnhomes.com/
