EPISODES
Episode 34.
Kim Deter, Director of Short Term Finance, Lima One Capital
Everything’s bigger in text is. That definitely includes a real estate Kim deeter and I donned our quarter zips and unpacked the Austin Texas market. Is Austin real estate over priced? We dug into that. Kim also walked me through the wildest deal in which she has been involved, and she has never been accused of being a rule fall or. Kim flipped the script and surprised me with a few questions. Thanks for listening. You’re listening to the real estate of things podcast. Welcome to the real estate of things podcast. I’m your host, Dalton Elliott, joined today by Kim Deeter, director of short term finance at Lewe capital. Kim, thank you so much for joining. Thank you for having so walk me through. Kim deeter. Who is Kim Deeter? I know you’re at Lee one capital. You Run our short term underwriting. That is a massive beheamoth of a ship. But walking through how you got here and some of your background. Well, outside of this headset, which is from the s that I brought with me in a backpack my Dan Sport, I’ve been in sales and operations my entire career. been doing new business development from the very beginning operations to at every level. Given my background, I have been doing real estate since I was just a week hid so my mom. My parents were divorced I was young, and so my mom got into real estate investing fairly early and to my childhood. And so the weekends when my mom had us, we spent, my sister and I spent helping her fix and flip homes. So so I got into the industry and don’t know it, but at an early age. That was when and progress along the way. My family owns a luxury construction company and Austin ran that with them for six years. And I’ve been in finance for what seems like a while now, and I’m on the real estate side for Gosh, about five years, and totality in the private lending space. But that’s that’s going to be the gest of it. But capital markets and running startups, everything in between is my background. taught myself how to underwrite by raising capital. Yeah, you, you’ve worn a lot of hats over the years. You know a lot about a lot and you mentioned Austin taxes and that’s what I’m going to pick your brain about today. So knowing your attax in and there’s some sensitivity here and knowing I’m we’re going to be at a conference in Texas next week. It will be a couple weeks before this episode airs. So you’re going to have to watch my back after I ask you this question and maybe you have to watch yours after your answer. Is Austin text has real estate over price? Right, Austin’s been the headline grabbing real estate market since covid broke out with insane HPA just prices up and to the right, and so let’s start with that. Is Austin Texas REAL ESTATE OVER PRICE? Quick answer is yes, but you have to look at the reasons why it can just be like a yes and we walk away and say it’s over price. We know that there’s people move in there and that’s why those are there are a lot of other contributing factors that are often spoken about. It’s a lot of like you know, Tesla’s moving to Austin and Charles Schwab moved to Austin back in two thousand and eighteen. PIMCO opened up one of their huge satellite offices out of New York. It’s bring a lot of infrastructure and new businesses to awesome. But also, additionally, we’re not talking about as a just in totality across the real state industry, is how much the institutional markets are buying up community developments essentially to put renters into these their home, the homes that they’re purchasing. So what once was a two hundred and Fiftyzero dollar homes, you know, scooped up but an institution when they scipped up three hundred of them, you know, could be going back on the market and you know that that’s going to definitely change the price. There’s going to be dictation with that too, because supply is going to be much smaller, and so so the demand for any single family residence is going to extremely exacerbate this problem of…
…pricing a lot of people out of a home and Austin what would be affordable fifteen years ago. How do you so underwriting that? That’s your bread and butter in the daily role. How do you and your team account for that? You know that a market is kind of overheated a little bit. How does that factor in to to underwriting? So that’s a great question. I love exis. I love certain markets of Texas. Out of all of Texas, real estate markets. So Austin’s a really unique place to underwrite. A lot of the projected aarvs and an appraisal are going to come back much lower than what the actual aarv is going to end up hitting just because of that. Like I said, the things that we’re not talking about contributing factors to supply and demand with institutions and entering our space at a mass scale in terms of buying up rental portfolios. So that’s that’s dragging down a huge part of the conversation that we’re not having. But I think ultimately, you know, when we underwrite a deal we have to look at what we perceive that value to be and think critically outside of what we know and not just like at the facts. So it’s backspace and it’s also going to be searching on the growth and economic development trends that we’re seeing within those areas. So I make my underwriters do certain aspects of, you know, kind of global searching outside of what would be a typical review of a file. You know, what are there businesses moving to certain areas? Does that increase the value to something move away from from a particular neighborhood? That’s also going to affect values. So both good and bed something moving away can definitely increase home prices. So taking a look at that our huge components on how I underwrite anywhere. What’s going on, what’s going on in that environment is huge. That makes sense. Is there any concern about the Austin real estate market? I think it would be too simple to say just because something’s overpriced that it’s on the edge of a lift. I don’t get the sense that Austin real estate is kind of towing up to the edge of a cliff that it’s going to fall down. But what what’s your taken? Why? Now? I don’t even think we’re remotely close. We can, you can use California as a basis and relative kind of size and scale to compare to. The difference, though, is that we’re California’s more condensed. Texas is more spread out and there’s so much undeveloped land and opportunity. I don’t see this being as big of a factor one because Texans are used to commuting. This is not a big component to to Texans at all when finding a home. Driving thirty minutes, forty five minutes, an hour and a half to your office is not something a lot of Texas take into consideration when purchasing their first home. So going more rural and outside of the main city limits isn’t going to be a prohibiting factor, which is what builders are having to do to build homes that you can’t purchase for, fix and flip anymore within the awesome city limits. Got It. And how? How’s Austin broken up like? Walk me through. Austin is a city. What what neighborhoods like? Can You? Can we get granular? Who are you talking food neighborhoods, or I mean just neighborhoods in general. We can talk say Edwards neighborhood, and which is going to be in the Travis Heights area, which is where my Alma water is. Did Not go to ut it’s a saying of university. So we’ll shout out to the hilltoppers. And what’s a hilltopper? Real quick, it is. Actually, it’s a goat. It is a is tiny, tiny billy goat. Yeah, there you go. I know what you’re getting for Christmas. Can’t wait. Is it a goat? It’s a hilltopper. I have a few of those. But yes, that’s what’s crazy about Austin is the markets that are that are high demand are naturally going to be the most expensive, are going to be closest to the city and downtown. And then you from there. You have smaller neighborhood pockets around area. So you t is going to be another pocket area where you’re going to have Hyde Park north of, you…
…know, West campus. Again, say downward, you you’ll have travis heights, you’ll have areas and Barton, Barton Creek area, anything around Zilker Park. So all these different areas and around Austin are the Austin neighborhoods and they all what’s crazy about aesome to is they all have a different feel and vibe to them. To have a very different cultural kind of neighborhood curation, if you will, then you would in most other cities. So it’s a unique place to come from and especially watch the real estate market change and adapt. Yeah, my sister lives Dallas and the time I’ve spent out there you see that in neighborhood vibe. Even in areas around there. There’s like Lower Greenville as a very ashvillion vibe to it, and it’s like it’s like you plucked Ashville and plot in the middle of Texas. It wasn’t like that go ten years ago. Wasn’t like Lower Greenville, like not, not the same place it is today. Oak Cliff in Dallas even like not the same place it was twenty years ago. Very Dangerous Neighborhood Twenty plus years ago and Dallas now one of the most Bishop Arts District in Dallas up and coming. Ten years ago was that neighborhood. Those home prices now upwards of seven hundred k ten years ago to hundred and fifty. You know, let’s just call what it is, gentrify neighborhood. And so we’re seeing that and you’re saying that a lot and these larger Texas metros is a lot of gentrification. Unfortunately, and I think that’s another topic we don’t actively talk talk about in Texas. Real estate is it’s what’s the actual state of things happening when we’re making these big moves real estate wise within a city? Yeah, so what out like outside of Austin? Just take Texas as a whole. What cities, what neighborhoods like peak your interest if you were deploying capital in taxes? If I said, Kim here’s a hundred million dollars go. Yeah, I wish. Here’s a hundred million dollars. Go do some real estate investing in Texas. How are you divving that up? What markets are you looking at? WHAT PRODUCTS SETS? What’s attractive? I’m going this is going to be an odd answer. I don’t even think the listeners at home or any for this one. I’m deploying a lot in San Marcus. Reason being Texas state, same Marcus is. It’s like college station. But the thing that makes it very different is it sits right in between awesome and San Antonio, big college town, has the great outlets, but it’s right in the middle, and so it’s a great middle round for college students to be able to come from and commute but even have family in either location and be able to live close by also. And how I would deploy that too, as you say, is like I would build a multi family. Truthfully, is a kind of a more luxury line, higher in college style multi family that definitely suits the needs of college students in that area. It’s the same thing of how West campus at ut came about. The higher end students or higher higher income students had the ability to pay for the nicer apartments, and so there’s definitely in need, as lower income housing has been a main focus of San Marcus in the city. There’s an alternative focus that investment investors haven’t been looking at to the take opportunity on, and that’s where I would hit up to Sam Marcus, to the poy a lot of capital. Alternatively, too, I would look at Fort Worth. It’s just booming in terms of what all the companies that are moving their infrastructure. The nightlife has always been there, it’s always had cultural attractions, but now that you know we have a lot more corporations moving to the area and makes Dallas, which is very outpriced, a much more favorable city for starter families to move into. Yeah, and you forgot to mention the two most important things about Fort Worth. You have the Dallas cowboys and you have billy Bob’s Honky Tonk, two things that just tug him our strings. I didn’t happen to miss either of those. I wasn’t by chance. We will, we will. I will save everybody from a Dallas cowboys discussion.
You and I’ve had that deeply. All the dolls, cow girls? Yeah, none of them. Yeah, I know. Hope Springs Eternal. And then when I saw my sister in February, she and I were the only people at Billy Bob’s hockey talk not wearing cowboy boots. I somehow, with Texas, didn’t bring my cowboy boots. Epig fail. Yeah, not good. One of the few times in my life that I looked around and I was like I’m out of place. So only a few times? Yeah, just a few times, just to pe time. All the time, most of the time. So it let me ask you the kind of inverse of the previous question. Any Texas markets that you are concerned about that you look at and you’re like I would, I would be incredibly selective about opportunities in this area. Certainly there’s going to be stuff in every pocket that pencils out, but just be a little more cautious. Anything that puts you in that mode. You had to tea this one up for me. I’m gonna Answer. Yeah, I’m not a big fan of the real estate market in Houston. Not. There are so many reasons why. A lot of great economic value in Houston, lot of businesses in Houston. Out of just a lot of great economics in Houston. Happening what a lot of people don’t know those at the real estate market is heavily correlated and tied to the oil industry, which is so heavy and prevalent in Houston. So when oil prices like right now are very high, the Houston market does really well. Oil prices, which have not traditionally been seeing to you know, stayed relatively consistent. Is Very hard to to price and sell home outside of anywhere north of five hundred K, which I know sounds like a lot of money in general for a starter home, depend upon where you’re from. The Texas market, though, that’s a pretty standard starter home prices five hundredzero dollars, and so reason why I’m not a big Fan of Houston is that we hold that loan for thirteen months. Something drastic can change, as we’ve seen with Ukraine and Russia. That has severely you know, we saw something coming, but that change the oil prices and the real estate market has changed in Houston because of that. Not to significant degree, but I’ve seen a RV’s significantly change within the last few weeks in that and that market, which is why I personally stay away from it. I don’t love deals that come across my desk from Houston. I don’t lend in Houston of my own money. I don’t invest in Houston. So there. They’ll probably some astro fans and my Houston friends after me after that comment, but I’ll break come here for it, htown go let’s talk. Yes, I the second rate football team, but that’s another yeah, another discussion. So, Sue, I’ve picked your bread about taxes. I don’t want to put you in a box. You know, by virtue of your experience and current role, a map of the whole country. So zoom out and kind of walk through some of the same like outside of text is what markets are our on your radar, very attra active. I had invested in ironically, in some California markets, Palm Springs being one. That is that’s an area especially for a short term rental investment. Huge market, a caveat short term rentals with just audience like know what you’re getting into with the short term rental financing kind of operates that. That’s for a whole other podcast discussion. So certain aspects and pockets of California makes sense. Again, I love Texas market. Colorado is a big market of mine. Sun Belt cities, our states Arizona. Another big market I watch Florida, is after COVID. Once covid hit, Florida just took off and we’ve seen that now and a lot of actions with a lot of finance companies. So traditionally how I look at the real estate market I watch were finance companies move and that tends to show how trends are going to project and move within a market. So that’s at least the from my experience and what I’ve learned, and…
…that’s how I follow trends with real estate. So those are the areas that I would look at specifically statewise, and we can get granular from city within those. Yeah, you just reminded me of your comment about Schwab Tra Shuad moving to Austin in two thousand and eighteen. So it seems like they know they’re definitely ahead of the curve there. Get a lot of groups during COVID, a lot of finance companies moving, like you said, to Florida. Interesting. It’s an interesting trend to watch. So yeah, was interesting about Covid and Florida was that a lot of New Yorker’s vacation in Florida and so in covid hit and New York City shutdown. They just bought. They did hear along leases in Miami. So brinckle specifically and in the finance just district of Miami just blew up to the real estate market. brickle was average rent went from somewhere of like eighteen hundreds to like forty five hundred been a matter of months. It was just it was crazy. Then you have winwood, just as you know, another suburbs, you know, neighborhood in the Miami downtown area, right outside of it. Again, rents just skyrocketed. So it’s just it was just crazy. And the thing was was that in that time though, alliance, Burnstein, black stone, JP Morgan, they all bought like Fiftyzero, Fiftyzero Square foot offices in the Miami Finance brinckle district, which again that’s going to drive an increased prices and the real estate market. But it’s watching were finance companies moving to because it indicates to they probably have a vested interest in a company there, and a large one at that, and and then there’s a lot of vested interest in their success and the company and the city success with them moving there. So that’s how I make finance and real estate decisions. That makes sense, and probably companies like that, Jav diamond and his crew, a lot of smart people there and doing their due diligence. So look, they’ve already kind of they’ve done some pre underwriding there. For us all, it’s teams. Do a quick Google search of where find it. We’re hedge funds moving offices. That’s where I’m investing immediately. I love it. That will be my guiding light. Oh, Google, no, not shocked. No, yeah, I know, simple boy, but all right, we’ll keep the last going to fun question. Also, by the way, we look like you. We should be on a gold stream on the way to buy up some companies. You See, this is it’s like a little flower leaves. For anybody listening and not looking, Kim and I are twinned up today. That glasses the the nice festive golf polo covered by a little quarters. It so very techy today. I like it. No, not tacky, very us as I have from Texas moved to South Carolina, is very finance, finance style out here in the southeast. There’s there’s a uniform that’s developed that has indeed indeed so let me let you pick your brain with a fun question. Stu. It’s dive into it. Worst deal you’ve been a part of? What’s the what’s the one where you look back the alarm bells go off. You like this was Ros nightmare, and which side offense? Where you own? Was this something that you’re lending on, something that you were involved in sponsor? Walk me through, unpacked, the nightmare. So this is easy, like no thinking again on this one. Thanks for the tea. Don’t need it’s fine. When these getting grained in your brain as you’re like, oh, never taking that one out. So I not that long ago either, five million dollar home financing, sourcing debt and equity for it. Playing not brokering. I’m not a broker, so I wasn’t brokering, but sourcing capital raising for this five million dollar beverly help project. Found out we were doing our due diligence on the property, there were like ten squatters in it and due to the laws in California, they had squatters rights. So we had to start developing and figuring…
…out how to pay them to get out of a home that wasn’t theirs. And so it’s just a complete disaster and one that I’ll never forget as many, many conversations, a texting, being in California asking my former colleagues how did this happen? What was wrong? How, like, why? Like, how did we get here? They will never be a race from from moment on. My Mind, that is a story. So I’m not going to let you off the hook there. Have some follow up questions. Please, please walk me through the squatters rights payoff process. How in the world does that work? I am not a lawyer, so I don’t want to get myself into a legal situation here, so I won’t speak to the nature of that, but I will say that there is some sort of money exchange. That does happen for a quick and easy we called cash for keys in the Biz when the West Coast. That is interesting. That’s a that’s a deal. there. It is it, is it? Yeah, should you should your just one? Anything used to squat in the right place, I suppose. Yeah, and I think you go into any deal with a healthy kind of punch list of potential audibles that might need to be called. But that’s probably not one that’s usually on the I may run into this list. No, it was one that we found though came about after covid quite consistently in California deal. So this what it wasn’t unique to California, but it was. It was a West Coast unique situation that was occurring there were this was a thing all on the Pacific northwest. That’s story. Well, I’ve got it. Okay, now I have a question for you. Who Ready for this? All right, all right, tales of turn we grew up. What has been the most awkward conversation you’ve had on a podcast? Ah, the most awkward conversation I had on a podcast. That’s a tough one. I have to I have to put my professional PC had on too. I thankfully so. This is episode thirty four, which is crazy to think that we started this thing at the end of September and putting out an episode every Tuesday. I knew, I don’t know. I thought this was going to be a small, little, tiny pet project which started this and it’s turned into so much more than that. I’ve grown so much from it, the networking and the people I’ve met, been able to talk with and pick their brains. That’s just been an incredible experience and I’m you know, as I’m dodging your question. I’ll circle back to it. Well, I’M gonna ask you this most interesting most interesting. That’s that’s an so two people come to mind right off the bat. Episode Number One, which was probably the fifth or sixth of recording I did, but the first one that aired, was Gary Beasley, CEO of roof stock, such an incredibly intelligent human being, and we probably spent somewhere between thirty forty five minutes after the episode of me Just Hey, gary, you might if I just pummel questions at you for the next half hour or we’re not recording. He was absolutely gracious and allowed me to do that and let me kind of poke under the hood a little bit with stuff that you know, wouldn’t wouldn’t have been best to be recorded and broadcasted. But that was a wonderful episode. And then another one, gentleman by the name of William Sweet in FL veteran is around my age, based in Atlanta. I’ve done two episodes with him, so fun to see, even over the few months between episodes, new things that he’s launching businesswise. He has a kind of a Tesla rental fleet in Atlanta now and you know he’s we stay in touch and I just follow him and kind of live partially by carryously through him and his NFL pedigree life, but he’s so…
…much you know that the NFL piece is so secondary to him and hearing his origin story about working it at Jimmy John’s and seeing the guy who owned a bunch of Jimmy Johns franchises in the area and he’s like, I want that. I want that independence. I want to be able to wake up every day and I structure by day how I want to. I do what I want to. I don’t show up to a nine hundred and twenty five. Like just that complete independence, and this is, you know, being able to kind of check him, with him periodically and follow his story. He also invests in Georgia and in Florida, but some transitional housing and just a real noble purpose. One other that comes to mind is dairy and done an investor also in Atlanta, and he and his crew are super mindful about whenever they go into an area. You mentioned gentrification right, they hold back a certain percentage of units and they put those units under market right so as to give the opportunity for folks who are in that area. They’re not just getting pushed out because somebody comes in and scrapes a building or upfits it, jacks up the price and then you can’t afford it anymore. They’re mindful about their impact and every community, the community that they go into, and it’s so, so easy to cast away any type of purpose and just say look, I have a fiduciary duty to investors and only focus on the dollars and sins and spreadsheets. But as I advance in age, I become an old man here I have a softer, softer spot. All sounds what we call the triple bottom line. As you get more more vested into its business, it’s not just about dollars and sense. It’s the triple bottom line. I know, it’s a beautiful things, good will exactly, and there’s it’s like why would you not? Why would you not? It’s it’s you could go in and you could scrape down a building, you could outfit it many times above the class where it is, go through this and just not pay any attention to the current state of that community and just say here’s where I’m pushing it, here’s where I want to go. But folks like day and done, William Sweet, they really truly. They don’t just talk a noble purpose, they execute that and there is as a major part of their business plan. So those folks, those conversations, those are the ones that I really drive with because we get so much deeper than just dollars and since it’s really understanding their emotional buy in to what they’re doing and it’s just a Bot and beyond the dollars, which I’ve again as I have mature as a human, I appreciate that so much more. He said something that I tell tell a team that I get the privilege of working with. It’s not about I was that some like is it? It’s something in Bible and doesn’t make sense and I don’t think we ask ourselves that enough as like individuals, as a company was employees. You know it does something make sense to do it? We tend to rely on you know, we have there’s so much data in the world today that we rely on data and we’ve stepped away for some reason from this like internal gut check that we’ve intrinsically all have. We know what feels good, what like when we know something’s right. We just have that natural innatability and I think we lose that so I challenge and push my underwriters on my team, like does this make sense? This is deal makes sense, even when I was starting businesses, like does the business make sense? Is there a need for this? What are the pain points that we’re addressing? Those are all things I think as companies as that’s where I start getting into fiduciare of responsibilities. You know, how are we solving for problems rather than and pain points, rather than just selling money as private lenders? That’s so we that’s what we do. We sell money for real estate. But there are pain points within this industry that aren’t being addressed for borrowers, heightier borrowers,…
…scaling borrowers, that we don’t talk about. We talk a lot about a whole bunch of things and we don’t solve the biggest issue, which is that gap between lot the you know called the Dr Horton’s of the world, and the borrowers who are scaling their business to get into that space. There’s this like area of time we’re to scale your sort of in the start up phase. Maybe you’re raising equity for Your Business, you’re scaling, you’re buying, you’re acquiring properties to build. There’s a huge need for finance. Think huge risk component, but that’s why we’re in private lending. Our money’s not cheap, but we take risks and we should be to a what’s what we should be doing constantly. But we have to be smart about taking risks and from we’re, you know, drawing lines and asking ourselves questions. I cannot think of a better note to end an episode on. And now, after that beautiful commentary, I now I have an answer to my favorite episode weekly. So, Kim, this one. Yeah, being a director, short term dance, at Le One capital, a wealth of knowledge, a Texan. Beautiful. Thank you so much for joining me. I had a blast. Stop you. Did you hear that, Chris Wilhoy? I was a favorite. All Right, here we got the competitive street continues. I love it. We got we got a lot of a type A’s around here. So Kim’s clearly an aspiring type. So now you’re a type. I’m kidding, Kiddo, kidding, getting get in trouble, I kid. Thank you so much. I really appreciate you taking the time. Thank you for having me. Thank you. Thanks everybody for listening. Take care. Are you a realistic investor looking for the right lender? That can find of all your deals and help you scale. Lima one capital has the best suite of loan products in the industry, Barnet, whether that’s fix and flips, fix and holds, building new construction or buying rental properties. They have incredible financing solutions for it all. A reliable common since Linder, is one of the most important parts of your investment team, and that’s exactly what you get with Lima one. Let Lima one capital show you how they’ve helped thousands of real estate investor scale and increase their wealth. Check out Lima onecom or call eight hundred two five nine, zero five ninety five to speak with the consultant and preparation for your next project. Thank you for joining us today on the real estate of things podcast. Subscribe and tune in weekly for new content from the industry’s best while we continue to unpack the nuances of this dynamic market. Follow US across social media for additional insights and analysis on the topics covered in each episode, and remember to rate, review and share the show.
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