Hard Money with a Heart: Culture, Code of Honor, and Consistent Execution for Borrowers & Investors

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Show Summary

In this episode, Erika sits down with Chris Baumann, Executive Vice President of Socotra Capital, to talk about what makes their company stand out as a “hard money lender with a heart.” Chris shares how he got started in the industry, the importance of company culture, and how Socotra Capital has built long-term trust with both investors and borrowers through fast, reliable lending.

Resources and Links from this show:

• • • Investor Fuel Real Estate Mastermind
    • Investor Machine Real Estate Lead Generation
    • Mike on Facebook
    • Mike on Instagram
    • Mike on LinkedIn
    • Chris Baumann’s Website
    • Chris Baumann on LinkedIn
    • Chris Baumann’s Email Address: [email protected]
    • Chris Baumann’s Phone Number: 916-617-2220
    • Chris Baumann’s Direct Line: 510-984-3685

  Listen to the Audio Version of this Episode

  Investor Fuel Show Transcript:

  Hard $ Chris (00:00)
  My favorite deal ever, though, is 686 Falcon Summit in Las Vegas, Nevada. It was a residential building. It was a new, ⁓ new home. And ex-NBA player had a million bucks, non-refundable, was going to close with a bank. Two days, two days prior to closing, the bank walked. We had, ⁓

  We had an existing loan file, which was a luxury. You the loan had been prepared for the bank and thank God there was a current preliminary title report. We make the joke, I can fund as close as, I can fund as fast as the preliminary title report is there. And so we got docs to title. The guy drove across the United States or half ways across the United States just to get to the title and escrow company signed. We closed. Yes.

  We ⁓ trademarked the term turbo close after that. So we are the Socotra Capital home of the turbo close.

  Erika (02:27)
  Hey everyone, welcome to the Real Estate Pros podcast. I’m your host, Erika. And today I’m excited to be chatting with Chris Baumann, the Executive Vice President of Socotra Capital. Chris, I’m glad to have you here.

  Hard $ Chris (02:42)
  Hi Erika and hello everyone. Thanks for having me. Thank you for taking the time to listen.

  Erika (02:47)
  Yeah, yeah, I’m excited the chat. let’s dive on in. First off, Chris, for people who may not be familiar with your world, can you give us the rundown? How did you get involved in hard money in Socotra Capital?

  Hard $ Chris (03:03)
  Great question. You know, I was working in a different industry, a sales industry, and some of my mentors at that time, I was in automotive sales and finance, they were investing in real estate. And so I was really initially inspired there to get more involved. And it was, it was first from an investor standpoint, ⁓ group of guys were investing in land down in Lathrop.

  in the Stockton area and they were buying up lots. And I was doing some of the initial underwriting on some of those and was looking to buy a lot also. And I’m glad I didn’t because this is circa 06, 07 when the great financial meltdown occurred. And a few years later, I was also unemployed. Socotra Capital was started by John and Adam during this time. And I got involved during the startup phase.

  Erika (04:04)
  Yeah, that’s really cool. then, you know, to fast forward today, Chris, tell me more about what you’re doing. Like, what are you excited about at Socotra Capital?

  Hard $ Chris (04:18)
  You know, I’m excited. I’ve always been excited since the time I started working here. You know, working with entrepreneurs is awesome. So, you know, as a hard money lender, we get to sit like on the 50-yard line to a, you know, a sporting event. We’re right there on the front row watching what people are doing, the types of deals that they’re trying to take down, and their situations. As, on the hard money side, you know, we see it all.

  So it’s super cool to be available and understand and help and learn from my clients.

  Erika (04:53)
  As far as what goes on at Socotra, what would you say sets you apart from other lenders?

  Hard $ Chris (05:50)
  You know, that’s a great question. We’ve, this might sound cliche, but you know, we’re trying to be the best hard money lender, hard money lending company there is. We’re, you know, a hard money lender with a heart. So, you know, we’re not just an office where we’re trying to do hard money loans and kind of stay in one spot. We’re really trying to scale and grow, embrace best practices. You know, John and Adam, when they started the company, they really wanted to build a company

  with a firm footing and build it ⁓ on a place where investors could bring their capital and get consistent, reliable returns and where borrowers could seek refuge and find a reliable funding source. So much in the hard money space, you have private lenders that look at a deal and then come funding time, they’re nowhere to be seen or they need additional items or this and that, you’ve all heard the news.

  Uh, so we want to be reliable. And then lastly, we wanted to have a place where employees could come to work and have just an awesome time working, you know, build a retirement for themselves and have a company that they could grow with. And, know, over the years, I, I can say that we’re, we’ve really tried to stay true to that. You know, the people that have worked here have worked here for a long time. Um, my partner’s hard money karate, hard money, Matt, they, came to us pretty much out of college. I’d been here 10 years.

  And so this is how we’ve really built the company, one deal at a time.

  Erika (07:23)
  Yeah, yeah, I thought I find that so interesting that you were talking about hard money with a with a heart and then you know, you’re you’re talking about the team that you’ve built and you know how how long they’ve stayed there. So it’s not just about how you interact with your customers. It’s also your your teammates, your employees. What do you think is the secret to happiness there? How do you keep employees happy?

  Hard $ Chris (07:50)
  It’s ⁓ kind of the culture that we’ve built. There’s accountability, but there’s, we have a code of honor. I guess it’s hard to see from here, but ⁓ that black on the wall there is a code of honor. And we have a code with 24 ⁓ mantras. Support your teammates, listen generously, act with integrity.

  You know, those are some of the, those are some of the code of honor attributes. And every week we start the meeting with one of these code of honors and we go around and five people talk about what, you know, what this particular code of honor means to them. And so this circulates every week. The owner, Adam Spey, puts out a video talking about each one of these code of honors every week. And it might seem kind of boring and annoying, but you know, every week we do this and it’s just repetition and we’re

  We’re trying to build a culture. So that’s pretty cool, I think.

  Erika (08:55)
  Yeah, yeah, I would say so. That’s a really great structure that Socotra Capital has implemented. when it comes to structuring deals with hard money, how do you make that attractive to investors?

  Hard $ Chris (09:12)
  Well, what’s attractive to our investors is not our pricing. mean, we’re, know, hard money just is not inexpensive. know, we’re, our pricing is reasonable, but really what they’re coming to a hard money lender for is that, you know, they need that, that immediate funding when the bank can’t perform, but the deal still makes sense. And so, you know, that is where we play. We try to get the deal scenario over the telephone.

  without collecting a lot of items. Because, you know, most people know sort of the nuts and bolts of the deal. And so we try to run the scenario with them briefly over the telephone so they can understand where we come in at. And then ⁓ we have loan approval every single day. So our loan committee meets on the daily. And so we can make the bold statement to our client that, you know, we can quote your deal within 24 hours and so long as you are truthful and everything turns out.

  to be as it was, you we’ll be able to perform. And they, you know, they can take that check to the bank and cash it. We will be there on closing day. I think our record was at like a two-day close in Las Vegas.

  Erika (10:58)
  Wow, yeah, you know, that kind of transitions pretty well to the next thing that I was going to say, Chris, and maybe it is that story. you know, every every pro in the real estate world has a moment where they have to pivot quickly or change their plans, you know, for a deal to come through. Can you share one of those moments on your journey and what you learned from it?

  Hard $ Chris (11:25)
  You know, there’s been ⁓ several, several of them, know, especially year end. I remember one year there was a rim of the world was the one of the addresses and we got the call on, on Christmas Eve. It was a partner buyout end of the year. They were going to buy out a partner. And if they could, if we get the deal funded by year end, they would get their tax rebate. ⁓

  We sent the appraiser down there Christmas Eve. They had a snowshoe up the driveway. I don’t think they really snowshoe’d, but you understand the property’s a big bear. There’s snow.

  My favorite deal ever, though, is 686 Falcon Summit in Las Vegas, Nevada. It was a residential building. It was a new, ⁓ new home. And ex-NBA player had a million bucks, non-refundable, was going to close with a bank. Two days, two days prior to closing, the bank walked. We had, ⁓

  We had an existing loan file, which was a luxury. You the loan had been prepared for the bank and thank God there was a current preliminary title report. We make the joke, I can fund as close as, I can fund as fast as the preliminary title report is there. And so we got docs to title. The guy drove across the United States or half ways across the United States just to get to the title and escrow company signed. We closed. Yes.

  We ⁓ trademarked the term turbo close after that. So we are the Socotra Capital home of the turbo close.

  Thank you for asking.

  Erika (12:56)
  Yeah, know that, you know, that kind of stuff just separates, you know, people who, you know, are just casually in real estate and people who want to make an impact, want to be here long term working like that.

  Hard $ Chris (13:11)
  Well, takes, you know, real estate’s choreographed, right? It’s not like you’re walking into the grocery store. It’s not just like you’re buying something you wait in line to pay for it. There’s a closing date. There’s monies that are earmarked. There’s, that go, that go hard, you know, now the money’s non-refundable and ⁓ sellers aren’t always willing to extend a closing deadline. So, you know, you have to count on a team, your team to perform.

  And thank God I have a good team here. We have transaction coordinators and real professionals that can navigate these situations when things get weird, because ⁓ they inevitably will.

  Erika (13:49)
  Yeah, how do you train or prepare for that?

  Hard $ Chris (13:54)
  Well, you work out and try to eat good food. Just teasing. And rest well. You know, you definitely want to have your rest. How do you, how do you prepare? Just knowing, knowing your, knowing your space, I think. You know, we, we know our space very well. And what I don’t know, I have other people in the office that know. And so ⁓ I would say, you know, just having people that you can rely on.

  You know, there’s the culture that you mentioned, or that I mentioned, you know, ⁓ when I write an email, it’s confirm over, you know, did you get the email? You know, it’s a precision game, you know, it’s not like going to do it today, it’s going to do it today at 1.30. So ⁓ an important system of checks and balances where, you know, if it’s going to be done, it’s done by a certain time throughout the day, not like, ⁓ you know, today, generally speaking.

  ⁓ if that answers your question.

  Erika (14:56)
  Yeah, absolutely. You you were talking a lot about the team and who’s around you. you know, that also leads me to ask Chris, when it comes to building relationships and growing your network in the real estate world, what’s made the biggest difference for you?

  Hard $ Chris (15:58)
  Well, there’s no secret, the same thing that you grow your, same skillset it takes to grow your network sort of in the smaller regional level is the same that it takes to grow your network beyond. We wouldn’t be where we’re at today lending in 24 states if we weren’t able to grow the network because we’re a small office, say, you know, 25, 30 employees. And what we’ve done is really try to build relationships and build out the broker dealer network.

  where, you know, we’re really trying to get in front of those that are in those situations of impact, you know, whether it’s a broker or trusted broker or a trusted attorney or a CPA, building relationships with professionals in other markets that have the contacts and always trying to make new friends and make new contacts, going to trade shows, you know, trying to meet folks like yourself.

  I think I was just browsing, I time blocked. So it was like a week ago that I had time in the afternoon and time blocked to go on social media. And that’s where I came across you all. And I filled out an application and who knows where some of these serendipitous moments will take you.

  Erika (17:16)
  Yes, yes I love it. Chris, let me ask you this. What would you say is next on the horizon for Socotra Capital? What’s the next real goal?

  Hard $ Chris (17:28)
  We, we have the Anvil project that we talk about in-house. And so when I started with Socotra, we were a $10 million fund back in the early 2000, 2010s. I cut my teeth on a lot of the fix and flip loans on residential real estate as we grew. You know, we’ve sort of, you know, as banks keep consolidating and buying, you know, one bank buys another bank and then that bank, you know, buys another bank. We’ve sort of

  come to fit the niche of the community banks. So we want to be the hard-money lender with a heart that’s reliable, loves doing deals. And, you know, we’ve, we’ve kind of like gotten into that, that niche where we, we make the loans that make sense that maybe the banks don’t make. Gosh, I don’t remember originally what your question was, but I hope I answered it.

  Erika (18:18)
  was asking about what’s next on the horizon for the podro.

  Hard $ Chris (18:21)
  Yes, so it’s,

  we’re, we’re, we’re, we are chasing a billion dollars under management or best the Anvil project. We, we want to, we want to close $500 million annual in loan production. And currently we’re at 250 million. So I’ll need all of your collective help to get us to the billion dollars under management and a half a billion dollars in annual loan production. So we’re raising capital.

  We’re building the network. We’re building our array of loan services. We’re trying to build better systems where ⁓ using AI to where someone could fill out a loan intake form, you know, whatever hours of the night it may be, we get them an answer quickly, everyone wants the answer right away, right, in this, in this world. Which is a challenge, because every one of these loans we look at and we try to create a bespoke product, a premium product.

  and deliver the premium experience. So to try to balance, you know, growth, the premium product delivery, and still be a very customizable, you know, ⁓ one deal at a time, that’s the, that’s the challenge. That is the daily grind.

  Erika (19:32)
  Yeah, yeah, wow. Well, that’s pretty impressive with what you’ve all built at Socotra, having all those pieces come together.

  Hard $ Chris (19:43)
  We’re trying. It takes a team. It’s not one individual. We have good people.

  Erika (19:49)
  Yeah, yeah, when it to the different deals that you’re doing, are you noticing any trends with investors that the public should be aware of?

  Hard $ Chris (20:05)
  You know, ⁓ Josh, give me an example.

  Erika (20:11)
  Well, you know, like, you know, what, what do you see going on? Like what’s, you know, what’s, what’s popular, you know, certain market, you know, a certain deal structure.

  Hard $ Chris (20:18)
  Well,

  What, what I’m, gosh, this, this isn’t like, you know, like really joyous, great news. I would say what I’m seeing is just, you know, a need to really be careful. This is the, the, the mark, you know, when the tide is rising, you know, everyone is swimming. When the, when the tide goes back out to sea, you can see who’s swimming, you know, who’s got their underwear and who’s swimming naked, kind of, so to speak. Right. And so I don’t really know.

  where the market is going right now. It’s just sort of, you know, felt a little bit, you know, a couple of the last couple of years have been a little bit strange. You know, right now rates are going down a little bit, but ⁓ there’s a lot of not very good deals out there. So I guess, you know, you really want to make sure that you’re being prudent and you’re covering all your bases, doing all of your due diligence.

  And, ⁓ you know, you’re not getting into something, you know, biting off more than you can chew. You know, in real estate, it’s easy to get attracted to something. It’s easy to get into a deal in real estate, right? It’s very easy, especially, you know, using hard money. We lose sight of that because we move so quickly. But then, you know, to get out of a deal isn’t always so easy. So ⁓ that doesn’t sound like real fun news, but I would just, I would just

  say to be careful. People that are good at doing it, ⁓ they’re good at it, but even those, know, they get into markets that they don’t, you know, have their vendors as well picked out, you know, they don’t know the area as well. So it might just seem like a great idea, but it always, it isn’t always. ⁓ So yeah, beware.

  Erika (22:05)
  Absolutely.

  And when you you know, when you find a good deal, it’s important to go with a lender that’s reliable.

  Hard $ Chris (22:13)
  Yeah, you you want to, you want to do a little bit of homework on your lent. You lot of lenders poses hard money lenders that lend their own money, but they’re actually not. might, ⁓ you know, so tip is you can go on their website and, and, see if they have an investor portal. can kind of see if. Investors are depositing funds with them. You just kind of want to do your, ⁓ you do diligence, your research, whether it’s a deal, the vendors that you’re working with, ⁓ the market probably just check once or twice more, you know,

  Erika (22:44)
  Yeah. Chris, before we go, is there anything you do want our audience, the investors that are listening to know about hard money?

  Hard $ Chris (22:44)
  what I would say.

  Hard Money Never Sleeps. No, I’m just teasing. Yes. ⁓ Look, I want to be a resource. I was telling you earlier, Erika, the group, ⁓ what’s it called? top fuel. How do we say it correctly? What’s the name of the one? Investor Fuel has look and feel of like a community, you know, and what I’ve found that in, in real estate, no matter how big the country, it is a small community, right?

  Erika (23:14)
  Investor fuel.

  Hard $ Chris (23:27)
  people know each other. So ⁓ I just want to be a part of this community. And I want to be a resource for those if they want to have questions about hard money, want to want to earn money using hard money, whether it’s sell our services or network or leverage the network that we have here to offer in our contacts. Yeah.

  Erika (23:52)
  Yeah, yeah, that’s

  that’s great Chris. Well, if someone today listening wants to connect, reach out, they need help with, you know, some hard money lending, what’s the best way for them to reach you?

  Hard $ Chris (24:08)
  My team here is always ready to serve. My email is chris, C-H-R-I-S, at S-O-C-O-T-R-A-C-A-P-I-T-A-L dot com, [email protected], and I’ll give you the easiest phone number, our main line, 916-617-2220. That is our main line. My direct line here in the office is 510-984-3685.

  If somebody doesn’t call you back within 24 hours, call us back because we didn’t get the message and we do not want to drop the ball.

  Erika (24:47)
  Perfect. Well, Chris, I appreciate you being on the show today and sharing all your expertise.

  Hard $ Chris (24:54)
  Thank you, Erika, and thank you everyone that was listening.

  Erika (24:58)
  And for our listeners, if you enjoyed this episode, make sure that you’re subscribed to the Real Estate Pros podcast. We’ve got more conversations lined up with pros like Chris who are out there building fantastic real estate businesses. We’ll see you on the next episode.