BY DAN HILDEBRAN
A hard money lender explained to a Keystone Heights civics group how he finances house flippers and rental property rehabilitations.
Rob Shackleford, owner of 3 Shacks Capital Partners LLC., told the Keystone Heights Rotary Club that he answered a newspaper classified ad about a job posting as a senior at St. Augustine’s Flagler College.
“I was looking in the management and professional section and saw an ad that said ‘investment consultant wanted, no experience needed. We’ll train,’” recalled the now 48-year-old. “So, I called the number. It was a company expanding from Orlando into Jacksonville, and I thought it was about stocks. Well, it was actually real estate investment.”
Shackleford said his first day in his new job was November 26, 2001, so, he has spent nearly half his life in the real estate business.
“It changed my life,” he said of the 2001 phone call. “I’ve made money, and I’ve also lost money on some deals.”
Lake Region realtor Branden Waters, who introduced the speaker, added that he knows several young people in their 20s who are making money turning over properties.
From rentals to lending
Shackleford said he spent much of his career building, selling, and renting multi-family housing. His last portfolio was a collection of 200 rentals in Northwest Jacksonville.
The Keystone Heights High School graduate said that the stress of managing toilets, tenants, and property taxes in the low-income, high-crime area led to his departure from property management and his entry into lending.
“The nail in the coffin for me was 4th of July,” he recalled. “It’s storming. I lived in High Springs at the time. I was on a roof in Jacksonville trying to put a tarp on a roof in a torrential downpour with fireworks and gunshots going off, and I’m like: Dude, I’m the boss. This isn’t going to work anymore.”
Shackleford said that after selling the portfolio, he recruited additional investors to fund the types of real estate deals he used to initiate.
Banks will not touch them
The businessman who recently purchased the two-story office building at 240 South Lawrence Boulevard, also known as the Paul Newell Building, said he fills a need not met by banks.
“Banks will not touch them because of the condition of the properties,” he said. “A lot of these properties need roofs. They need full electrical upgrades. The way they smell, the way they look, holes in the walls, plumbing that has to be gutted and re-piped, they need HVAC. They won’t pass a four-point inspection to get insurance.”
Shackleford said that, to date, he has not had a single missed payment in his $26 million portfolio with over 300 loans. He cautioned, however, that his fund is relatively new and that credit risk is now rising because the real estate market is softening.
Shackleford credited his, thus far, perfect underwriting track record to the fact that he not only analyzes each deal that comes before him but also the borrower behind the deal.
The lender said that instead of paying for online background checks of his potential borrowers, he performs his own customized background checks, a skill he honed while renting homes for 15 years.
“They may decline them because of something like a DUI,” he said of the online services. “Whereas I can probably overlook that as long as there’s not five of them. So, I got really good at finding people and finding information about people. And so I do the due diligence on the borrowers as well. We try not to lend to anyone that looks like they’ve had a checkered past with arrests, drugs, assaults, or any financial defaults, especially recent.”
The lender said his deals must comply with a strict financial model he has developed.
Watchdog
Shackleford said that besides providing funding for real estate entrepreneurs, he uses his industry experience to act as a watchdog for his borrowers, warning them of the business’s pitfalls.
He added that unscrupulous contractors and title problems knock many people out of the house rehab and rental businesses.
“I keep the wolves off the sheep,” he told the civic club. “The sheep can’t live in peace if there’s a bunch of wolves. So, I try and guide them, especially the newer investors. I don’t want to see anybody be what I call a one-and-done. You can lose a lot of money really quick and you can’t get it back. And if you’re brand new, you can’t recover from that.”
“You may have saved for like 5, 10, 15 years to do a deal,” he continued. “You always wanted to buy a fix-and-flip or buy a rental, but if you don’t buy it right, or if you buy something that’s got tax liens and you don’t know what you’re doing, it’s over right from the beginning and your nest egg’s gone.”
Relationships are key
Shackleford said he finances deals on properties from Southern Georgia to Orlando, coast to coast.
He added that one of his most valuable features is a long-term relationship with his investors and borrowers, something his competitors, like New York-based funds, do not offer.
“My biggest competitors are institutional lending funds like Kiavi, and there are a couple of others. As soon as anything happens in the market, the guys sitting in New York on the 87th floor, they’re going to get scared. They’re going to shut it down, and then all those relationships are going to disappear,” he said, “That’s why, pay a little bit more, come see me; I’m not going anywhere. We’re going to have a personal relationship.”
