David Halabu started his career as a trader at Broadway Trading in NYC. In 2001, he moved to Miami to head the trading desk for Assent LLC (division of Sungard Data Systems) in South Florida. David is a serial investor in many alternatives such as real estate, distressed debt (public & private), proprietary trading systems, and medical businesses.
He co-founded Group 10 in 2013 to invest in non-performing real estate debt. Since then, Group 10 has evolved into having separate divisions for private lending, fix and flip, commercial value add, and residential rentals.
David is a graduate of Tulane University and resides in Miami Beach with his wife and three children.
Tell us about the early days of Group 10.
In 2013, just as the JOBS ACT had passed and a marketplace allowing individuals to have better access to institutional-type products began to take shape, my partner and I decided to take a “side hustle” and turn it into a startup.
I came from a securities background and was investing my own capital in bridge loans and other alternative debt instruments such as structured settlements and non-performing loans. We had a lot of success in the limited number of deals we did, either as originator and/or part of a syndicate. We decided to create a marketplace for such products, as I would always have others ask if I can put them in deals I had access to, so my business partner and I started Yield Crowd.
Over the course of 18 months, we built out some technology, hired numerous attorneys, traveled the country attending alternative lending conferences, narrowed the scope of the startup, spoke with VCs and Angels, and further narrowed the scope of Yield Crowd. We were met with doubt, uncertainty, and an occasional “I think that’s a good idea.” We never wavered as we knew this was a very early shift in the way people would be able to invest in individual, non-traditional debt-like products. We ultimately decided to create a marketplace for bridge loans whereby we could create a uniform-lending parameter allowing lenders around the country to use our centralized backend and connect them with large institutional buyers of loans while we stand in the middle helping them vet loans to purchase and deal with any notes that go into distress. While we were solidifying contracts with some large lenders around the country, and had many term sheets with hedge funds that wanted access to purchase these loans, we started to see many other marketplaces like Yield Crowd were raising tons of capital. We had offers as well to raise capital, but after digging into their offers, we had a grand revelation. We began to see other direct-to-consumer lenders enter the market who were able to offer lower costs of capital through the use of credit facilities and ultimately decided that if we went down the path of raising capital, we would be responsible for that investor capital and the net benefit to us personally, and we would need to grow and sell YieldCrowd to a very large number to make it all worthwhile. As a former trader, I weighed the risk vs. reward as the marketplace began to get very crowded and we decided to move in another direction, which was to start Group 10 Capital, the company that was an offshoot of the relations, knowledge, and skills we learned while building out Yield Crowd, but with a focus on just doing deals in Florida.
Starting in 2015, Group 10 Capital opened and focused on lending capital to those who fix and flip homes and partnering with such home flippers specifically in SE Florida, where we are based. We decided we could make great money, and more importantly, have a better lifestyle by having a narrow focus and deep relations in Florida, without the added stress of dealing with outside investors. We were successful in getting the word out as a lender with our licensed lending arm, Refresh Funding LLC. We partnered with some of our borrowers, first on one home with one partner. Over time, Refresh grew and grew in scope of loans. Group 10 partnered with a number of other borrowers to be able to buy, fix, and flip close to 50 homes over three years. With the knowledge we learned about construction through 2015 and 2016, we were able to do about 50 flips internally as Group 10 alone from 2017 to 2019. We also have syndicated the purchases of over 80 rental units, one commercial re-purpose mixed use project, and are currently in partnership to develop two commercial buildings in an up-and-coming area, one large scale apartment complex, one other small scale townhouse project, and purchased a mold, water, and fire remediation business.
All of this growth, both as a real estate owner and lender, was predicated on a combination of a number of factors. First and foremost, we were obsessively focused on setting goals and documenting a path to achieve them. We had weekly one-hour meetings, a goal-setting quarterly meeting that lasted a day, and a 15-minute WIP (Work In Progress) meeting daily to remind us of where we are and where we want to be.
We set up goals to find capital partners for our lending business, goals to get lending leads per month, goals for loan closings, goals for homes to purchase, goals on how quickly we could renovate and put them on the market, even goals for meeting sources of real estate origination. Second, we always partnered with those who were better at doing what was needed than we were. We have property managers with minority shares in our rental portfolio. We have partners on all of our developments with construction backgrounds. We even brought in a partner over time as we grew to head our loan origination side of the lending business. Our theory is more 1 + 1 = 10 as more gets done when proper partners are put together and aligned on a project and it should benefit all involved. We are very big on accountability. Everyone at and who works with Group 10 has very defined roles. We pride ourselves on not micromanaging, but putting the right people in the right seats. That way there is no confusion on who does what, and normally there is one person making decisions for the tasks at hand. The larger decisions are obviously spoken about, but once we set processes – for loans, homes, and now development – they usually are documented and handed to whoever is executing on those roles, always with a mutual alignment of interest on success for all parties. Lastly, we still to this day are looking for market signs to anticipate shifts in the marketplace and where to focus our energy. Numbers never lie. I analyze our numbers weekly and notice trends, successes, failures, where we can save, and where we need to spend more. I think a focus on numbers is our secret to success and we try to use current date to further predict possible future trends and shifts. For example, we decided to slow down our house-flipping arm almost eight months as our average time from listing to sale has gone up and the average loan duration has gone from seven months to almost eleven months, which tells us houses are not selling as fast as they use to. This is what led to our most recent addition, the remediation business.
There has been a small number of successful startups in the space when we started Yield Crowd that are still around today, but there have been many, many more failures of similar businesses that started around the same time we did. We were very blessed to have made the shift from technology startup to classic real estate integrated company. It was a very difficult decision, because we felt we were at the cutting edge of a change in the way people invest, but since we both came from a finance background, it’s a decision we do not regret as it played more to the strengths of me and my partner. The timing of the market, our access to capital, and our narrow focus of both product types, geography, and company roles, I feel helped us gain traction and success at a very swift, yet manageable pace. We continue to use these factors of goal setting, weekly meetings, defined roles, accountability, and study of numbers and trends as we strive to continue to grow Group 10 in the South Florida marketplace into development and other real estate related verticals. That fateful decision of turning down outside capital to venture on our own, of turning down potential national notoriety to focus on a regional traditional real estate company, to being a cool tech company or being a boring real estate company, all turned out to the best decision and turning point to the success and growth of where we are today.