(Transcribed by TurboScribe.ai. Go Unlimited to remove this message.) Welcome to the Purpose Driven Investor, where we build more than portfolios, we build communities. I'm your host, Robert Howell, a real estate investor and founder of Define Communities. Each week we'll explore how purpose and profit connect through affordable housing, land home packages and impact driven investing. If you're a lender, land seller, or a partner who believes money should move with meaning, you're in the right place. Hey, everyone, welcome back to the Purpose Driven Investor podcast. I'm your host, Robert Howell, and today's episode is going to be a great one for anyone thinking about capital relationships and how deals actually get done, especially here in South Carolina. Our guest today is Carter Grooms from Renovo Financial. Carter was born and raised right here in South Carolina, went to Clemson University and even walked on the Clemson football team from 2016 to 2019, which tells you a lot about his mindset and work ethic right out of the gate. A couple of years later, Carter stepped into private lending, financing builders, investors across the country. And recently he made a strategic shift to focus exclusively on South Carolina, financing everything from ground up construction, multifamily, to detitle manufacturer home and DSCR loans. What I like about Carter's approach is that he understands both sides of the table, the investor trying to execute and the lender thinking about risk, structure, and long-term relationships. Today, we're going to talk about his journey, how private lending really works behind the scenes, what he's seeing in South Carolina, and how purpose and discipline shows up in the capital decisions. So let's jump right in. Welcome to the show, Carter. I appreciate it. Thanks for having me, man. Yes, sir. Glad to have you here. So let's start with your background and really your competitive foundation. I know we talked a little bit before we started recording about growing up in South Carolina, going to Clemson, a lot of mutual connections, which is great. So tell me about your time at Clemson and starting with walking on the football team and what that taught you maybe about discipline and resilience. Yeah. I mean, that four-year experience of walking on the football team, I mean, that basically changed the trajectory of my life. Coach Sweeney, number one, I can't thank him enough for all the opportunities that he gave me and the team. He's probably the best leader of men that I've ever encountered in my life. And so, yeah, it all starts at the top with Coach Sweeney, and it just kind of trickles down all throughout the coaching staff with Coach Jeff Scott and all the graduate assistants. And so, yeah, I got in there in 2016, came from Daniel High School, walked on and didn't really see the field probably for my first two years. And not many people know this, but I was about to quit the team after my second year because I was so frustrated. And I always tell people that I was putting all my eggs into the basket of, like, I was finding my identity in my performance as a football player and my performance as a student in school. So I had like a 3.75 GPA after two years, and I thought I was doing all the right things on the football field as well to earn more playing time. But that was the entitled 20-year-old Carter Grooms thinking. And yeah, I just kind of had like a breaking point. And the biggest thing that it taught me was, like, when I love the title of your podcast, The Purpose Driven Investor, and I didn't really have a purpose my first two years of playing football. And it kind of made me reset, okay, why am I doing this? Why did I come to Clemson as opposed to going to Newberry or North Greenville where I could have played a little bit more? Why am I really here? And it all came down to impacting my teammates. And also, it's just like being a really, really good teammate and finding ways to lead off the field. Because I wasn't really a leader on the field, obviously. I was a walk-on, didn't play much. And so I was finding ways off the field, whether that was like helping build our Paul Journey program, that's like our professional development program, or just like being a leader in the weight room. And that's kind of like, really, where I saw my trajectory take off was like guys really respected me in the weight room showing up 5.30am on Fridays and like every single day and being the guy that's always going to give 110%. And yeah, I mean, at the end of it, like all four years, like I ended up earning a full scholarship my fourth year. That's huge. Yeah, that was awesome. And I was like, Coach Sweeney didn't even know this, but I was about to have to take on student debt that year, because my parents were kind of tapped out and I was going to have to go work in the summers to build up a big little piggy bank to pay my own rent. And then Coach Sweeney kind of pulls me up in front of the team and says, Carter, you're on full scholarship for the remaining year. And like, I went home and like broke down and I look back on it and it's exactly what you said. It's discipline, being able to wake up in college at 4.45 in the morning, five days a week to go go to classes for five hours and then go to football for seven more hours and then study on top of that. Like it's literally like having a full time job while also playing college football. And yeah, I mean, like the work ethic, you have to have work ethic to be able to be a walk on. But then it also teaches you how to overcome adversity by not getting what you want in the moment. And it's kind of that whole delayed gratification concept of like, I thought that I deserved it after two years, but it was really four years later that I saw all the rewards that I had worked for for four years. And then all of that's kind of translating into like what I'm doing now, and I couldn't be more grateful for that experience. Love that. Yeah, that's set a great foundation probably for business, too. So tell us about how that how that experience shaped how you approach business today and really, I guess, in the future, too. Yeah, for sure. I mean, the biggest thing and how it applies to the business world is that like building relationships takes time and especially in real estate, because real estate is a big trust game. People people do business in real estate with people they like. And I can't just show up on Robert House doorstep and knock him and say, hey, I want to work with you because then you're going to be like, well, who are you? And if I just took that as a grain of salt and was like, well, dang, Robert's never going to work with me. I'm never going to talk to him again. That would be like the like the old Carter mindset. But all those things from college kind of taught me, OK, like just like build a relationship with him, find ways to add value to his business. It might not be lending, like whether it's connecting you with people who are looking for manufactured housing or connecting like you with contractors to help like build or rehab some of these homes, like that's my job as a partner and like to build a relationship. It just takes time. And a lot of people in this day and age like want that instant gratification of the immediate. Oh, like I got the business. But like at the end of the day, if that's your sole focus, if your sole focus is the transaction, then you're missing the whole relationship that's potentially there. And that's the whole purpose of my business and why I shifted from doing deals in 48 states across the country, because I want to sit down and be able to have conversations with a guy who my best friend lived on Pool Lane in Clemson, South Carolina, growing up. And I saw you lived on Pool Lane. Yeah. I actually just moved over to Shorecrest, sold my house last week. Well, congrats. Yeah. So it's just like, I wouldn't have had this opportunity at my old gig. I love the company of Lima One Capital. I am super grateful for all the stuff that they learned, that I learned while I was there. And they taught me like, they gave me the opportunity to be in this business. And now at this new opportunity, I'm able to just focus in on my market of South Carolina, like really dig deep and just like explore like what the state has to offer. Man, that's exciting. Yeah. And I wish I had that same mindset when I was starting out and I know you're not starting out necessarily. You've been doing it a few years now, but, you know, if I would have been able to take advantage and not really take advantage, but build relationships from day one. And of course, some of the relationships I've built over the years have been very fruitful. And, you know, but having that mindset of, it's not necessarily about, can I give you a loan today, but how can I add value in your business today? And a loan may come a year from now, it may come a month from now, it may come five years from now. Right. Exactly. Yeah. That's the exact mindset. And yeah, it's just, it's a people business. I know everyone says that, but at the end of the day, it's like whether the person actually means it or not. So that's great. So tell me about finance. Was finance always on your radar or did that come later as you graduated or something you thought about during college? That's such a funny story. So I majored in pre-med. I was dead set on wanting to go to medical school and I graduated from Clemson with a pre-med degree. I took one business class. So you took the easy route. Oh yeah. I took the easy route. All the anatomies, the physiologies, the organic chemistry, biochemistry, I took it all. But what I didn't take was finance. So I graduated with pre-med, got out and started studying for my MCAT and I was like four months deep of studying for the MCAT. And I was working for a doctor's office here in Greenville, South Carolina, scribing for them. And I just kind of like, one day I was super stressed out. My girlfriend, now wife at the time, kind of looked at me, she was like, you're just not yourself. And I was like, yeah, I just, I'm just so stressed out about this test. Like I really want to do well. And I just like, I feel like that I was putting like everything into like basically trying to perform for that MCAT. Obviously that's the goal. But I kind of sought some mentorship and I was like, I'm passionate about medicine. I love serving people. But at the same time, like a lot of people have told me that if you go to medical school, it's like the first 10 years of your 20s are just like washed away. And I didn't really want that. And basically someone kind of laid it down for me and said, if you're not 100% in for med school, then don't go that route. And so I kind of stopped studying and it was a big, big reset moment for me. And I kind of sat down and back to the drawing board, didn't have a job. I was two years out of college at this point and was kind of like, what do I do now? And I got an entry level sales job at TD Cinex doing technology services sales here in Greenville. Love that company. It was right in the middle of COVID. It was kind of a weird time to have a remote sales job that's supposed to be in person. And then a year later, my brother took a job at Lima One and he was like, Hey, it's a great company. Come work with us. And so I then made the jump from tech sales to then real estate finance with Lima One Capital in downtown Greenville. And that was about four years ago. Great. What surprised you most early on when you got into lending and finance? Well, people don't want to hear this, but five years ago, I couldn't tell you what a cash out refinance was. And so what surprised me most was like, number one, like how much real estate, like there's are so many real estate transactions going on every single day. Like there are so many different types of real estate transactions and I'm continuing to learn to this day that there's just so many different facets of real estate that like it's an endless black hole. And I kind of missed all this in college and it's kind of partly why the reason why I wanted to go back to school and get my MBA from the Citadel was because I wanted to dive into finance a little bit more to figure out, okay, where's all this private money coming from? Like when someone says private money, what does it actually mean? And so, yeah, the biggest thing that I learned was just how much is actually out there in terms of real estate and potential in real estate. It is wild to think about when you think, man, you're one guy in the whole real estate world and how many transactions you do a year. And then you think, man, I'm just one guy out of how many thousands of guys that are in the space and girls. That's pretty wild to think about. What do you think investors misunderstand the most about lenders? Well, it depends on the type of lender, right? And so in our space, I kind of put it in three different columns. There's like bank financing, there's private money, and then there's hard money. And so I can kind of get into this later. But the purpose of what our company, Renobo, is trying to do is we're trying to basically bridge the gap between bank financing and hard money financing. And that's kind of how the private money industry was created. And by private money, I don't mean like by a rich doctor or like a rich lawyer or somebody that's like a high net worth individual. I'm talking like institutionalized private money that is typically coming from a Wall Street company. And you're trying to bridge the gap between banks because banks are very cheap. That's why people go to banks. I love banks, but people don't go to banks because it's super easy to use. But then hard money, people go to hard money because it's super convenient and super easy to use. And our whole approach at Renobo is basically we're boots on the ground. We're like your local bank. We're also like your local hard money lender in terms of convenience and like how we underwrite transactions and how we underwrite deals. And so that's kind of how our whole space was created. And it's a very niche industry. And the big misconception, back to your original question, the big misconception is that private money lenders like us don't really have a way to compete, in my opinion, with actual private money lenders like the high net worth individual. I think everybody has their place. But a lot of investors that I talk to, like the immediate conversation, especially in the upstate is, oh, I already have a private money guy. And I'm like, great. Keep using them. I'm just saying like there's a spot for everybody and everybody has a purpose. Yep. That's great. So let's talk about Renobo and about the company. We'd love to hear more about the company and also your lending philosophy. So tell us a bit about what Renobo Financial specializes in today. Yeah, so Renobo was based out of Chicago, founded in 2011 by our co-founders Daniel Rosen and Kevin Warner. And so if you look us up, so those two guys founded it in 2011. It was a strictly Chicago based, kind of like hard money lending back in the day. And then they kind of slowly grew it out. And they saw that if you, number one, treated people the right way and you basically did what you said you were going to do, then people wanted to keep coming back to you. Like, it's crazy how that works. And then the business grew a lot. And then they kind of saw this niche that I was talking about. And so then they expanded into Dallas, Texas, with a guy named John Shipley. He's our managing director in Texas. And so they did the same thing. Boots on the ground, local market presence, like prioritizing the customer experience and like how we get transactions done. And Shipley just grew that business to about like over $200 million a year in total private money loans, just himself, a single individual. And then as the years went on, they kind of just kept expanding. They said, OK, it worked in Dallas. Why don't we go to San Diego? Why don't we go to Boston? Why don't we go to New Jersey? And then I'm the most recent hire, like about six weeks ago. And basically, it's South Carolina, North Carolina. If you read all the stats out there, it's the two states where people are moving into. Like, it's two of the hottest markets. And so there's a niche now for, I'd say my top clients are builders, people who are DSCR investors doing like buy and holding, multifamily investors, and then rehabbers that are flipping houses. Those are my four types of clients that I work with on a daily basis. And it's really finding if it's a good fit. And I tell everybody that I work with, and they probably hate me saying this, it's like I'm not a good fit for everybody. I would love to work with everybody, but I would be very ignorant to say that I can work with everybody because I can't. So it's up to me to kind of figure out, are you a good fit for what we do at Renovo? If not, can I help you in other ways, kind of like I mentioned before, to help you grow your business? Love it. That's great. When you think about a deal, what makes a deal an easy yes for you? I was actually thinking about this before the podcast, and an easy yes for me, it comes down to a couple of things. I want an investor or a builder who is confident in the deal and knows the deal better than me. And I pride myself by like knowing my borrowers and my deals better than anybody, better than the underwriters, better than my closing team. So if an investor comes to me and I can't pick holes in the deal, like trying to figure out like a flaw in it, then I think that's a home run investor. That's a home run deal with me. Because that means that the investor did their legwork on the front end to comp the deal. They also did their legwork to make sure their paperwork or financials were like up to date and in a good spot to start a project or to get a loan. And then, I mean, on paper, it's just got pencil. At the end of the day, like I'm an asset based lender. So it's got a pencil on paper. Did you run the market rent analysis? Did you run it by a local appraiser, a realtor with access to the MLS? I mean, it just all comes down to these things of doing your due diligence before coming to a lender. Got it. Making sure you're prepared, right? Yeah. That's great. Where do you see deals usually fall apart from your perspective, from a lender's perspective? From a lender's perspective, I mean, it all comes back to the due diligence up front. And I can probably take some accountability for this. Like if the borrower didn't comp it and then I didn't comp it on the front end, and then we get the subject to appraisal and it comes in lower than anticipated. And then like the entire deal falls apart because now the loan is substantially less than what the borrower was anticipating up front. So that's where it's a true partnership of the borrower does their due diligence, then I do mine, and then we come together and see what exactly we think the value is supposed to be. Or just people not being transparent in a transaction. The biggest thing that can ruin my business or hurt my business is fraud and people just not being transparent with what's going on. And so I'm the most transparent person you'll ever meet in my life. And I mean, it's just at the end of the day, like, just be honest with me and tell me all the holes in the transaction or tell me all the holes on your financials. And I'll find ways to like overcome those. That's great. Love it. Love it. Let's talk about South Carolina. Love South Carolina. That's where we primarily invest. And I've been extremely successful in South Carolina. I think there's a ton of opportunity. And maybe that goes into the first question I'm going to ask you is why did you decide to solely focus on South Carolina? I think you hinted at it at the start in terms of relationships, but you want to expand on that a bit more? Yeah, so it's a couple of reasons. Number one, I want to be able to go meet my clients in person. And so face-to-face contact is the biggest thing for me in building a relationship, especially when you're dealing with people's money and finances. And so my week this week is going down to Columbia right after this podcast, going to walk a couple of projects, going to grab coffee with an investor that I'm doing a portfolio refinance for. And then tomorrow I'm going to Greenwood, South Carolina to go walk a couple of projects. And then Thursday, Friday, I'm going to Charleston to five meetings in Charleston. So it's just meeting people face-to-face was the biggest thing to me. I loved my job at Lima, but a lot of it was Zoom meetings. Teams meetings and seeing them virtually and not really shaking hands. And so that was reason number one. And then obviously, like reason number two, I'm born and raised in South Carolina. I mean, if people can't tell, like people in my company make fun of me for my accent because nobody talks like me in the company because they're from Chicago or New Jersey or Boston. And so I know the state of South Carolina like the back of my head. I'm born in Orangeburg, South Carolina, a vacation all along the coast, Myrtle Beach, Charleston, Edisto, Seabrook, Keowaw, Hilton Head, Savannah down in Georgia. I've been to every city, I vacationed in every city. I'm a big golfer. I golfed in just about all the big golf locations in South Carolina. And so people, especially borrowers who are looking to scale a business and are very experienced, they want somebody that knows what they're talking about. And I've lived here my entire life and I've lived in numerous locations across the state. And I just feel like bringing that confidence to my borrowers is just a huge value add. Yeah, no question about it. I was talking with somebody about this last week and I invest primarily in South Carolina, but currently doing deals in Georgia, North Carolina, Tennessee, and would love to do more deals in other states. But it's so easy to do deals in South Carolina just because you know it, right? It's like somebody sends me an opportunity in the Charleston area. I'm pretty quickly know that, hey, even though I don't live in Charleston, I know that this is a good area or it's a bad area or people want to live here and also have a network to be able to depend on people to say, hey, maybe I don't know this area of Dorchester County like I should, but I know somebody that does know it and can easily reach out. Exactly. And that's a huge thing for Renovo as well. It's like they really lean on us as the lenders in the market. If we like a borrower and we really like a market and let's be honest, the people in Chicago that are looking at some of these deals probably don't know where Saluda, South Carolina is. But I can tell you that it's a little bit northeast of Augusta. It's a little bit south of Columbia. Um, so yeah, it's a little tertiary, but there's, I mean, there's a lot of activity going on in both of those cities. There's strong rental markets. And so, um, someone in Chicago looking at the deal on a screen is going to be like, where in the heck is this? And then I come in and I'm like, okay, let me just kind of give you the background of what Saluda, South Carolina is. Man, it sounds like when you put you on the market intel team for South Carolina, tell us all the different pockets to focus on. Yeah. Um, all right. That's awesome. So, uh, when you, when you see investors in the market today, what mistakes do you think that they're making? Uh, maybe today that they were, they thought was okay to do two years ago. Yeah, for sure. And so it depends on the type of investor that I'm dealing with. So why don't we, uh, start with, uh, just start like with a rehabber who's looking to build a rental portfolio, um, or just like flip homes. And so I would say, number one, if you're using hard money, private money, um, it's also just knowing your numbers and having consistent contractors who are going to show up to the job site. Cause the last thing that you want is a team of subcontractors who are not reliable because you're on the clock. Once you sign that like car money loan and it's a 12 month note. Um, and then, yeah, I mean, it's all about like having that reliable team. And then the second is if you're planning for an exit, like whether it's a sale or refinance, if you're planning for refinance, this is the biggest mistake that I see any type of flipper make that's looking to hold onto their flips as rental properties. They, they go into these flips and then they jack up their credit cards and then they're like at a hundred percent utilization. And every DSTR lender that's not going based off of DTI or 1099 or W2s, we're looking at credit score. Cause when we're basically going to hold these on our balance sheet or sell them off on the secondary market, like credit score is the, is the driving factor on this. And when you just jack up your credit cards, because you got to pay for materials and labor and all that, um, then it just tanks it. And then you come to me for the refinance and you have a six 40 credit score. And I'm like, I throw my hands up in the air and I'm like, I told you use our draws. Like I give you draws for a reason. Um, and so use your draws sparingly and don't jack up your credit cards. If you're planning on a DSTR refinance exit, because then it's going to really hinder you from being able to execute that burr as some people say. Love that. I think that's great advice. And probably it's something that people don't think about often enough to it's like, all right, well, this is my issue today. I need money. Right. But my issue tomorrow is I need to get refinanced. And what I did today is going to impact that. Yeah. And that's the purpose of draws too. It's like, okay, you front it with a home Depot credit card. I get it. And then maybe two weeks later you get a draw for that exact amount. Just pay it down, pay it down. That utilization six months down the line is not creeping up to the 50, 70%, 80% range where it's really going to impact your credit score. And then on the other types of investor, like ground up construction and builders. I like working with builders. I'd say 60% of my clientele are builders because South Carolina has so much land. And I've worked with builders who, who sell 200 homes a year. And I've also worked with builders who do luxury specs at the like $5 million price point. And the number one biggest mistake that I've seen over the last four years is over leveraging. I've seen a couple of guys just get out way over their skis. They think, oh, there's a bunch of private money guys who want to give me money. And all the deals pencil great. And now they go to a couple of private lenders and they get these loans that are super great, but then they cap themselves out at every lender. And then one thing goes wrong. All it takes is one thing or one dollar to fall and it just starts to chain. And now you have all these loans with like six different private lenders and you're over leveraged and you didn't really approach it from a strategic standpoint of, okay, like what if one project gets delayed? That's going to slow down your cashflow. That's going to then impact the next project. And then that's going to slow down the cashflow on the next project. And then it's a domino effect. And I've seen it time and time again. And it's kind of funny as a lender, like, I'm not like super, I don't like debt the most, like me and my wife, like we're not super leveraged, like, right. But I think there's appropriate ways to use it. And I love builders who are strategic and they look at, okay, if things were to go south, how am I going to execute this project still? And that's how I approach my business with like all my builders is like, I want to sit down and like build a business plan with builders because that's their full-time job. And I want to make sure with what we do as a builder of finance.