Mastering Private Lending: David Little on Building Client Trust

Kristen Knapp (00:00.758)
Welcome back to the Real Estate Pros podcast. I’m Kristin Knapp and I’m here with David Little, the co-founder of Crown Capital Resources. Thank you for being here today, David.

David Little (00:09.006)
appreciate the opportunity to come on, Kristen.

Kristen Knapp (00:11.348)
Awesome, well I really want to get into Crown Capital and kind of what you guys do. It sounds like you’ve had a great journey with it already. How about you just give me some background on when you founded it till today?

David Little (00:23.118)
Yeah, sure thing. So the inception of Crown Capital Resources was actually what a lot of people call a side hustle. My background and the other co-founders well our background are in engineering. We had a very long 15 year career in engineering, but as both of us stepped into those roles, we were always interested in real estate. So we always had different real estate projects that we were doing, whether it was broad land development or owning rental properties, Airbnbs, etc. And me and

Jeremy came together in 2017 and decided to start Crown Capital Resources and started doing private lending. And what we found was that all the things we did in real estate, we loved it the most. We were super passionate about it. So we maintained it as a side hustle from 2017 up until 2024 last year when the business had grown to the point where it just became a no-brainer, both from a personal standpoint and financially to leave our

full-time corporate roles and dive in full-time. So we are both full-time in the business for the first time in a long time and it’s been a really great year.

Kristen Knapp (01:27.456)
Yeah, that must feel really good to start doing it full time.

David Little (01:31.213)
Absolutely.

Kristen Knapp (01:32.628)
And as you’ve been building it, what’s something that you’ve learned to get to where you are today when building this business and making it become so successful?

David Little (01:43.852)
Yeah, I think for myself and Jeremy, especially having engineering backgrounds, there’s not a silver bullet in business. It’s just a continual optimization of your business model over time. And so that’s one of the things that we focus on. We want to be 1 % better every day, right? And those sort of dedication compounds over time. So we’re always thinking about what in our operations could we optimize or what in our systems could we make better? And we even

challenge ourselves to do so, but we challenge our teammates as well. we say some of our, their annual personal goals are, Hey, what are some efficiencies that you added to the business? Cause we want to empower them to say, Hey guys, this isn’t working well. This could work better. Here’s what I’d recommend.

Kristen Knapp (02:26.486)
Yeah, awesome. And how does Crown Capital kind of differentiate itself from other commercial lenders?

David Little (02:34.445)
We are all about the service. We’re a very small piece of the frame and put a hard money under space. The way we differentiate ourselves, we say we are completely service oriented. When you call us, we can speak to one of the founders. So that’s a big deal. You’re not dealing with a massive, massive corporation. I pause it, Kristen. Sorry, give me one second. I don’t know if you can tell. I’m not running a tell.

Kristen Knapp (02:57.594)
yeah.

Kristen Knapp (03:01.826)
and pause. Okay, yeah.

David Little (03:04.373)
Okay, do you want to start the, I’m sorry, do you want to start the question over again? Okay.

Kristen Knapp (03:07.266)
Yeah, I’ll just start the question over. So how does Crown Capital differentiate itself from other commercial lenders?

David Little (03:16.589)
Yeah, so one unique thing about us within our marketplace, we right now encompass only 0.13 % of the Texas market share. So it’s not a hyper competitive space and it’s a really big playground that we’re playing in, comparatively speaking. The way we do differentiate ourselves, however, is we are all about service. We focus on our client relations. And one of the things that we tell our clients is, hey, we are not going to be the cheapest lender out there. You are all about

reducing your points of fees, there are people who are cheaper than us, but we’re going to out complete everybody on the service. So when you call us, you can always talk to one of the business owners. We don’t change term sheets on people in the last minute. When you’re servicing things, we like to get drop payments out in 24 hours versus two weeks, like some of our competitors. And so all these things really stack up. And so sometimes we’ll have a competitor will come to us and then they’ll go shop rates and then they’ll go to another lender, know, big box lender.

get a little bit cheaper rates. But what we see a lot of times is that they end up coming back because it’s such a hassle on the other side. And they just say, you know what, it’s a little bit more expensive with you guys, not a lot more, but it’s totally worth it from a service standpoint. And those efficiencies that they’re gaining in the draws and in the underwriting and all that just stack up and make their life easier.

Kristen Knapp (04:34.178)
totally, and you get what you pay for. So cheap is not always better. It’s very rarely better. And then talk about, so you guys have an income fund as well on top of the other part of the business.

David Little (04:39.691)
Yeah, exactly right. Yeah.

David Little (04:47.189)
Yeah, that’s right. interestingly enough, so for the first five years of the business, we self-funded the entire business. So me and Jeremy seed funded the company and we grew that capital over time. about 24 months ago, our parents started asking if they could invest with us and then it was group to family and friends and then that broad group of investors has grown over time. And so essentially the way to think about it is Crown Capital Resources is a private lender and we deploy capital originate loans, service loans.

But the way we primarily fund those loans now is through a 506C income fund, named Crown Capital Income Fund. So third party investors can come in, they can invest their capital, we pay nine to 10 % return for them. So it’s a very competitive space. It’s relatively liquid investment. We don’t have large hold back periods like the real estate firms, they would say, hey, we want you to invest with us, but it can be a three year hold. For us, it’s a six month lock up. We’re very, very looking at the period of…

And yeah, it’s a completely passive investment. We were super transparent with what’s going on in the business. do quarterly newsletters where we give out all our key metrics for the business, where we focus on what we call radical transparency, because we say, we don’t want this to be a black box investment for you. But we actually provide the entire loan tape and say, hey, you want to see where all the capital is deployed? Here’s our loan tape. then, here, by the way, here’s the county link so you can self-verify and make sure that we hold the first-line position on all those notes.

Because keep in mind, this fund is primarily today comprised of our closest family and friends. So we take our duty as a fiduciary very responsibly, as you can imagine.

Kristen Knapp (06:29.184)
Yeah, I mean that’s wonderful and so you guys as far as that part of the business you function nationally, correct?

David Little (06:36.169)
Yes, absolutely. Yeah, we’ve got there’s no geographic limit to our third party capital investors. We’ve got people from Washington, Florida, from L.A., from all over the place. So the big consolidation are people from Texas, as you can imagine. That’s where we’re from. But it has started to broaden out because people kind of look at this and they’ll say, you know, it’s an opportunity for me to earn a passive 10 percent.

and it’s a relatively liquid fund, it’s relatively low risk since everything’s massively over collateralized in a first lien position. So people like that as kind of a diversification away from a typical equities portfolio.

Kristen Knapp (07:14.198)
Right, and kind of if you could talk more about that, like someone trying to get into this for the first time and not really knowing, or maybe being nervous of doing this for the first time, what would you say to them?

David Little (07:25.783)
from an investment side or from a borrower client side.

Kristen Knapp (07:28.46)
from an investment side, yeah.

David Little (07:30.39)
Yeah, yeah. So, you know, the main thing when looking for a GP, know, somebody who’s running these funds that I would focus on is track record, is transparency, and then is operational key metrics for how the business is doing. Right? Because, and realize that when you get into these funds and some are going to offer higher rates of return, it’s going to be a long, there’s going to be a compensatory level of higher risk associated with that as well.

So for example, I have seen, I just came across a mezzanine fund that was offering 18 % interest to their third party capital investors. And that sounds good on its face until you realize that mezzanine means second or third lean position notes. So if something goes wrong within the real estate portfolio, first lean position is likely going to get paid back. The second and third, there’s a much higher chance for a capital loss.

So that’s kind of one thing. The second thing is transparency. A lot of these funds are kind of black boxes. You’re putting your money in and there’s kind of a rough guideline of what they’re gonna deploy their capital to, but it’s really hard to verify that. And then the third is track record as well. I mean, that’s huge, right? So asking key questions like how long have you been doing this? Is this a full-time job for you guys? How many foreclosures have you guys had? And so we’re super conservative in the way that we do things.

operating a little over eight years now. We’ve only actually had one foreclosure, one global foreclosure. So we’re proud of that. An investor has never lost capital with us. In fact, an investor has never even not paid a monthly interest payment with us. So all those things are just credibility building. When you’re out there and you’re talking to people about potentially raising money, what you’re essentially trying to establish first is credibility. And then once you’ve

Kristen Knapp (09:10.38)
Wow.

David Little (09:24.799)
we’ve got to handle and you’ve established that, then you can really move into, what is this investment opportunity?

Kristen Knapp (09:30.272)
Right, I mean that sounds awesome. It sounds like you guys are doing such a great job.

David Little (09:34.783)
It’s the capital fundraising side is, it’s, it’s, I love doing it, but it’s, it’s a really interesting side of the business, right? Because, know, there have been times where I’ll sit down with an individual and after 20 minutes into breakfast, they’re like, Hey, this sounds great. I’m in like, where do I, I’m ready to deploy some capital. And then there’s some people who you’ve been having conversations with and sharing how the business is going for six plus months before they’re finally like, okay, I’m ready to dip my toe in. So.

And that’s what we generally find. People will kind of step in with a lower capital amount. They might start in with like $50,000. And then over time grow that capital base with us because again, they see that transparency, they see the track record, they see the payments coming in, and they become more comfortable with the investment over time, which I would say that’s what happens 80 % of the time. It’s very rare for somebody to just come in with a huge amount of capital. It’s more so if somebody says, I love this opportunity.

Kristen Knapp (10:02.306)
it.

David Little (10:29.132)
Love you guys. Let’s test this out with a smaller amount of capital and see where it goes.

Kristen Knapp (10:33.686)
Right, yeah, no, that makes a lot of sense. That makes a lot of sense. And then kind of going over back to the lending side, can you just walk us through maybe a recent deal where you were able to secure capital faster and more efficiently for your client?

David Little (10:47.498)
Yeah, so the from a lending side, we actually get a decent amount of our clients from, especially on the front end from other lenders falling through. And so other lenders saying, hey, they have had a term sheet. And then the they get to the closing table and say, hey, it’s going to be, you know, we’re going to need another 10 % down. So I need another $40,000 at closing. So we get a lot of emergency calls, especially on the residential side that say, hey,

I’m going to lose my earnest money. I need to close this deal. And we’ve closed some deals as quick as 24 hours. Yeah, yeah. So I would say in our portfolio for residential, nothing is farther out than about 10 days. Our average, when somebody calls and say, hey, I’ve got a residential deal, our average closed time is about seven days. But since we’re a smaller shop and we can evaluate it quickly, we don’t have a ton of bureaucracy or red tape.

If we do have those emergencies, we can, we can fund something in a 24 hour period. And what that does for us is that client now knows like, these guys are like all over it. These guys can take care of this. Their term sheet didn’t change. They got me through the door. So we’ve actually a good chunk of our repeat client base. Um, we captured them on the front end through other lenders, just not behaving or not performing really well, I should say. So it kind of works out for us to be honest.

Kristen Knapp (12:03.168)
Yeah, that’s so interesting. Absolutely. what, I mean, you mentioned kind of, you know, changing deal terms and stuff like that, but what are some other things that you’re seeing from other lenders where they’re kind of dropping the ball for people?

David Little (12:15.98)
Yeah, a big one that becomes a real pain point for clients is renovation funds and escrow. And so typically most lenders function this way is they will front the capital needed for the purchase of the property, less down payment, less the client’s down payment. And then they hold back all the renovation funds back in an escrow account. And then they dole those out as the renovations are done in a retroactive. in other words, like they have said, have $60,000 in escrow for renovation.

and the client comes in and says, hey, I finished the roof and some of the flooring and making things up. I’m requesting a reimbursement for $20,000. Other lenders will say, OK, that sounds great. Let’s send an inspector out there. But the inspector will take two, three, four days to get out there, maybe. And then Hillbriters Report, which is another week. And so then they’ll get that capital back one to two weeks later. Versus the way we do it is we say, hey,

Please send us some pictures and video walkthrough. Okay, the floors are clearly installed. The roof’s clearly installed. So we do same day reimburses. And so you can imagine the pain point of that when you have to do that six to seven draw requests over the course of a loan. You know, getting same day cash back and being able to pay yourselves, pay your contractors is way different than having to load that for one to two weeks, times six times over, right? So that’s another really big pain point.

that we do see with other lenders that are different than us.

Kristen Knapp (13:48.61)
Absolutely, and how do you match the right funding solution to the right client?

David Little (13:53.898)
Yeah, so typically a client will come to us. And so we really have we really have three loan products, right? So we have a flip loan product, a flip for residential, a cash out for residential and then a bridge loan for commercial. So about 20 percent of our portfolio is commercial notes. But we’ll focus on the residential one. A majority of.

our residential portfolio is all repeat investors. So they’re guys we’ve worked with for several years and we know them. I mean, we know them, we probably know their wife’s name, but we have a good relationship with them at this point. And they’ll call us up and they’ll say, hey, I’ve got a loan I’m looking for. Here’s the rough address. Here’s the rough purchase price. I think I can get it at, here’s my rough renovation. Would you guys take and evaluate this? So we pull all that information in and we underwrite it internally. And then we actually come out and say, hey, I think after this is renovated, we’re seeing

a 400K ARV, here’s your term sheet. So a lot of these deals are being brought up. We don’t seek out the deals. And the nice thing about this business is that a lot of your residential base is all repeat business. Like if you treat people really well, you service the loans, you originate them well, they’re going to come back to you. And the beauty of that is you can almost guarantee that if somebody’s flipping and this is how they’re feeding their family. And let’s say last year they flipped four houses.

You better, you know, it’s a good guess to say that their goal this year is they’re going to flip six or eight. So that’s one of the beautiful things about this business is that your, your high quality borrower base tends to grow over time. and, and that’s one thing that we do different versus some of our competitors is a lot of our competitors treat, in my opinion, their borrowers as just kind of one-offs and they have a huge revolving door of new people coming in, but we, we don’t operate that way. We’d rather have.

Kristen Knapp (15:34.402)
Great.

David Little (15:49.963)
a large percentage of our base being high quality repeat barters who pay their bills on time. And that’s how we keep our foreclosures low. That’s how we sleep better at night, all of the above. So that’s how fundamentally we run our business a bit different.

Kristen Knapp (16:04.482)
That’s incredible information and that makes a lot of sense as well. I can see how that’s how you guys grow with your client base. And how is the current lending environment changing and what should borrow borrowers be aware of in 2025?

David Little (16:19.241)
Yeah, so the big thing that we’re seeing across our portfolio is that the loans are taking longer to pay back than we’ve seen over the last seven years. And it’s twofold. So it’s number one, properties are staying on the market longer, as you can imagine. Properties used to sell anywhere from 25 to 35 days, from what we were seeing. You can pretty well add another 45 to 60 days on top of that. And so

And then the second thing that’s taking longer as you can imagine is is finding sometimes finding decent contractors as well. And so that can be, you know, people walking away from jobs or finding high quality individuals, all of the above. But so the renovation timeline is actually extending as well. And so if you’re out there flipping houses, your your calculations need to change a little bit now from when

you know, maybe two years ago, right? You need to have a little bit more cash available to continue to pay the insurance, continue to pay the interest payments, to make sure to have a fund if you, let’s say you open up a wall and something didn’t turn out like you thought it would. So having a little bit of a contingency fund is always a really good idea. But that’s something that we especially work hard with on our newer, less seasoned investors.

and to say, let’s take a hard look at your current liquidity and see if this project is right for you.

Kristen Knapp (17:44.202)
Right, right, no, that’s great information. And then just in terms of how you started this business, what advice would you give to someone who’s kind of doing real estate on the side or trying to get into stuff and wanting to make it a full-time gig? What would be your advice?

David Little (18:01.257)
Yeah, I would say that a few things. First and foremost is real estate is incredibly broad. And I ultimately pursued this because I was so passionate about it. And I loved the lending side a lot more than I loved everything else. went in initially started buying up rental portfolios and my goal was I said I wanted to have 50 rental houses. And I realized within a few years, I hated being a landlord. I just say it was just the worst. would keep me up at night. It was stressful for me.

And so very clearly it wasn’t a fit for me as far as that goes. so my first piece of advice is get in and start trying a bunch of different things. And I’ll even be a little bit more specific on my actionable advice, because I know a lot of people are thinking like, I don’t have $50,000 to go drop on a rental property or things like that, you know, to start the down payment for the financing. And if you really are interested in a segment of the real estate market, what I would do is I would find a player that’s doing that in your real estate market.

reach out to them and offer to work for them for free. That is my advice because when you’re young, you have no capital and no expertise, but you have a lot of time. And that’s what you have to leverage. And so you reach out to the big players and you just tell them, hey, my name is So-and-so, I’m passionate about this. I see you’re a, let’s say, wholesaler. I see you’re a wholesaler. I’d love to help you out in the business in any way, or form. I’m willing to work for free. I just want some experience. That’s something I guarantee.

Within six months of doing that, for free, mind you, that’s okay. You’re gonna know like, is this something I’m very passionate about or do I need to move into another segment in the real estate market? Yeah, so that’s the thing. You have to follow your passion. Ultimately, with being a business owner and striking out from the W2 world, there are so many incredible benefits to that, but there are associated costs that come with that. And a lot of it terms of stress and making sure that

Kristen Knapp (19:39.446)
Great, great advice.

David Little (19:57.418)
you can financially provide for your family. So, but you got to follow your passion. And when you’re 23 years old, try to figure out that you have no idea. So my biggest advice is just try everything. Just get out there and start trying.

Kristen Knapp (20:07.362)
Yeah.

And what was it about lending in particular that drew you to it?

David Little (20:15.754)
I think it’s highly analytical. I think you’re going in on the front end. Within the engineering space, I was more on the finance engineering side of it. And so I was doing underwriting for larger scale capital oil and gas projects. And so I’m still doing underwriting for capital projects, but more on the real estate side. So there’s a complementary skill set there too. And I would say that it’s a systems-based business.

a lot more so than a lot some other real estate things like with a I give an example of like flipping. Let’s say we owned a flipping company. There’s so much of a kind of a human component that you just cannot quantify and systematize. There’s just that variable. And the fact that lending doesn’t have that as much as something that really draws me to it, something that I enjoy.

Kristen Knapp (21:02.976)
Yeah, I can see that from your engineering background, right? Yeah. Well, tell everybody where they can find out more about Crown Capital.

David Little (21:05.534)
Yeah, yeah.

Yeah, absolutely. So our website is crowncapitalresources.com and that’s the same Instagram handle at Crown Capital Resources. My personal email address within the company is david at crowncapitalresources.com. So if any listeners have any general questions or specific questions, please feel free to reach out. I promise you I’ll respond. get a lot of great conversations and communications and have been met up with some people in person from some of these podcasts. So always, always happy to help out and help mentor people or answer questions long delay.

Kristen Knapp (21:42.166)
Awesome, if anyone wants to work for you for free, right? Awesome, well, thank you so much for doing this. This has been great and I hope you have a great day. And for anyone listening, please check Crown Capital out, check David out and yeah, subscribe if you love this podcast. Thank you so much.

David Little (21:45.194)
Yeah, absolutely. I’ll always take free labor.

David Little (22:01.707)
Thanks, Chris, I appreciate you. Bye.