By Susan Thomas Springer
Jeff Ball’s education and career prepared him to be successful in just about any sector. In college, Ball studied economics and theology and earned a law degree and an MBA. Add to that a position in banking and tech, as Global Head of Semiconductor Investment Banking at JP Morgan, and you have a professional equipped to take real estate investing in fresh directions.
Today Ball is president and CEO of Visio Financial Services, an asset-based lender offering mortgage loans to investors purchasing single-family residences, and president of Econohomes, a leading reseller of mortgage foreclosure properties in the U.S. Both are based in Austin, Texas.
Ball credits patience and long-term vision with running two successful companies. He’s also motivated by the individual success stories his companies make possible, such as a borrower who is a single mother.
“She buys investment properties and turns them into rentals for single mothers—that’s cool,” says Ball. “She’s building her own net worth, and she’s also accomplishing something else that she has a passion about. She’s got a longer-term view of what she’s trying to accomplish.”
Past paves way for the future
“It’s been helpful to be able to interact with regulatory attorneys, real estate attorneys, title companies, to understand contract issues and how to potentially structure lending instruments,” says Ball.
Since he has two sets of customers—those to whom he loans and capital partners from whom he borrows—his finance background is helpful, too. Ball says most of the larger private lenders are financed primarily through high-net-worth individuals. The advantage to that model is flexible capital; however, “it’s not very scalable.” So Ball’s organization has created another model, thanks to company executives’ finance backgrounds.
“We’ve been able to access institutional capital, which provides the ability for us to grow our business,” says Ball. “Also over time, we have access to less expensive capital, which makes us more competitive in the market.”
Ball says because the semiconductor device market is one of the older segments of the tech world, it gave him an interesting look at how the market evolved over time.
“What I’m really interested in, in real estate, is how the market for buying, selling and financing properties is changing, and how might it change over the next 20, 30, 50 years. So, that experience of being in a market that’s very large and has gone through a lot of change gave me an interesting perspective when I now look at real estate,” says Ball.
Ball left JP Morgan to take a different career path, moving to Austin hoping to be an entrepreneur. He was one of the first investors in what became Econohomes. He was intrigued with the first business model that brought a for-profit model to affordable homes, a space historically served by not-for-profit or government-sponsored programs.
“I thought there was going to be a growing need for affordable housing solutions in the country,” says Ball.
He was interested in bringing distressed properties back to productive use, in a business model that was effective, scalable and for-profit.
In the beginning, Econohomes sold homes to owner-occupants. Then, in the midst of the financial crisis, the SAFE (Secure and Fair Enforcement of Mortgage Licensing) Act was signed into law in 2008. SAFE required mortgage loan originators to be licensed and registered. The intention was to create uniform licensing standards nationwide, where previously they had differed by state. However, it made it “incredibly cumbersome” to become licensed in a multi-jurisdiction basis. So Econohomes stopped selling to owner-occupants.
The company shifted, focusing instead on selling properties to small investors. Its executives saw an “interesting opportunity” to finance small investors who buy distressed properties, renovate them and then either sell them to an owner-occupant or rent them. To date, Econohomes has bought and sold about 11,000 single-family properties around the country, the vast majority of those for less than $100,000.
“We felt like we had ‘a better mousetrap’ around understanding the wholesale value of property,” says Ball. “Also, we had a disposition platform that if we made a loan, and the borrower failed to pay us and we had to foreclose, we had a ready-built distribution platform to re-sell that property.”
That’s an advantage over other lenders who would be stuck if they ended up owning a collateral. The company is differentiated as a private lender by offering “speed, simplicity and certainty.”
Ball says that while there isn’t a benchmark of the length of process for private lenders, he goes by customer feedback. Customers and third parties who bring them business say, “we bring Visio business because you guys work quickly. You’re very simple to deal with, and you do exactly what you say you will do.” Visio’s average funding time is 17 days.
“We’ve now achieved this scale that most private lenders have not. So, we have clarity and certainty around our availability of capital that most private lenders do not,” says Ball.
The lending criteria are clearly identified on Visio’s website so investors can quickly determine if they meet the requirements and can get their loan. The company only asks for a handful of items, including two forms of ID, insurance, title policy, property address and 35 percent down. They don’t bother with pay stubs, tax returns, bank statements, investment history or even a business plan. Interest rates are based on FICO credit scores.
“There’s essentially no funding risk, meaning we never fail to fund a loan, because we’re fully capitalized to fund loans,” says Ball, adding that’s in contrast to many private lenders who fail to fund loans because they become over-extended.
Jeff Ball on the future of private lending
Historically, Ball says, obtaining private loans was an opaque process. Investors needed to know the right people. And lenders tended to be “capital-limited” so one month loans might be paid off and they had capital but another month they might lack funds.
Also, private lenders typically require a ton of paperwork. They ask investors to describe their project, answer questions about their background, experience, the property and future plans with that property. Then they get the property appraised, examine the business plan and assess the cost, timeline and exit strategy. Also, they like to see the last five deals an investor has done so that they can check city records.
After reviewing all that information, the private lender tells the investor what loan it will make, how much down is required, what the rate and points will be and what the construction advance will be.
“That introduces a tremendous amount of uncertainty,” says Ball, “because investors are spending all that time working up the project, and they don’t even know if they’re going to get the financing, or on what terms.”
Ball predicts private lending is heading to a more automated underwriting process. In the ideal world, he envisions a day when investors drive by a good property and park for a moment to check out his app, fill in information about purchase price and credit score (or better yet already have a Visio account). Then the system works in the background to pull information about that property. The investor learns—in real time—what kind of financing he or she can get and clicks a button to apply.
Role of tech
Early this year, Visio raised $6.7 million in a Series B round of funding to advance its technology platform and increase the number of short- and long-term loan options available to residential real estate investors building small businesses. In the company’s announcement, Ball said the goal was “to quickly and efficiently connect investors with capital providers by offering loan products tailored to real estate investors’ needs.” To date, the company has raised more than $100 million in debt and equity capital to provide real estate loans to investors in 34 states.
Ball says technology can enhance customer engagement. For example, typical mortgage applicants don’t apply online.
“I think there is a growing desire for people to transact in commerce at all times—and most real estate investors are part-time,” says Ball.
Company data show more than 50 percent of the real estate investors are part-time, with many working full-time jobs. So technology and an automated underwriting engine are attractive to them.
“We now have the advantage of having made nearly 3,000 loans, and more than half of those have already paid off. So we actually have a lot of performance data as to how loans have performed. So, we’re using data science to learn from that data set and help us more quickly and more accurately underwrite future loans.”
Ball adds they’re approaching a little over $80 million in originations.
Lessons to the wise
“I think one of the most clarifying questions that somebody can ask, says Ball, is, ‘Knowing what I know right now, would I make the same decision that I have been making?’ ”
Too often investors fall into the mode of just doing what they have been doing. They look at the time, effort and money they’ve invested and stay the course—when instead, they need to assess if they should make adjustments since the real estate market is cyclical.
“To be successful, they have to look and really measure over an entire real estate cycle. So you need to have a little bit longer-term horizon, and you also have to develop a multifaceted strategy,” says Ball.
A fix-and-flip investor may do well until the market changes and he or she is forced to pay more to buy a property—the result being gross margins compress on the resale of the property. Ball says that “early indicator of trouble” should signal the need to consider another strategy.
“It sounds like a cliché, but wealth is built over time,” says Ball.
Ball says surveys of his database show most people are income-oriented. Other people are wealth-oriented—yet that requires patience over time when it comes to real estate investing.
“There are no get-rich-quick schemes that really work. So, what that really translates into is going into transactions with reasonable expectations,” says Ball. “It’s rare in our economy because it’s something that’s very well-developed. It’s rare that you just have these abnormally large returns on things.”
So don’t get greedy—don’t over-reach. Ball has seen investors who were successful with the results of two projects, so they try four. Yet they found the complexity was not two times more—it was exponential.
Build a solid team
Universally, Ball and team look for employees and partners who are continual learners, rather than people who just want to do what they’ve always done. He seeks good communicators, specifically those with well-developed listening skills.
At the senior level, they look for “athletes,” or those with demonstrated ability and versatility to take on different challenges. For example, the CFO by title also has an extensive operations background, is experienced in capital market transactions and can play a variety of roles. The marketing and digital strategy expert also “a pretty heavy-duty technology background so he handles a lot of the technology development for us.”
Econohomes and Visio have a history of community work, especially with nonprofits that help the homeless. Employees have been active for five years in Austin’s Mobile Loaves & Fishes, which provides food, clothing and other necessities to the homeless. Also, the nonprofit is providing affordable housing through its Community First! Village, a 27-acre master-planned community of sustainable housing for the disabled and chronically homeless in Central Texas.
“It’s really the first of its kind in the country, built around the premise of the chronically homeless and those who really need an alternative community to live in with like-minded individuals,” says Ball.
Whether it’s high-quality tent structures, refurbished trailers or tiny houses, they’re “awesome permanent” structures that break new ground for the homeless—fitting volunteer work for Ball and Visio and Econohomes employees who are accustomed to breaking new ground.
About Jeff Ball:
Company: Visio Financial Services
Position: President and CEO
Office Phone: 512-334-1411
Hometown: Lansing, MI
Education: Received JD and MBA degrees from Santa Clara University and earned undergraduate degree in economics and theology from Georgetown University in Washington, D.C.
First real estate deal: In 2006, bought a wholesale package of 30 homes.
Guiding principles: Lasting success requires doing little things right every day. Failures are learning opportunities.
What makes you get up every morning: Helping others succeed.
When you’re not working: Hanging out with my wife and two daughters. We like to play golf and spend time on the lake.
Best advice ever received: Fire bullets before you fire the cannon.
Technology you can’t live without: iPhone 6
What most people don’t know about you: I wanted to be a doctor but can’t handle gore.
On competition: Healthy, if it brings out the best in you.
If you had to do it all over again: I would have taken a couple of years off before college to work and travel.
Most memorable award: Second Fastest Growing Private Company in Austin, Texas, in 2012.
Most impactful book: The Bible, nothing comes close.
About the author: Susan Thomas Springer is a regular freelance contributor to Personal Real Estate Investor Magazine. Contact her here.