31 Jul How Years of Chaos Finally Led to Peace
I’m turning 50 in a few weeks and celebrating a milestone I hope proves to be my chronological mid-life. My dream for the next 50 years is not to acquire more money or material things, but rather, to breathe and relax, to be a good husband, father, and friend…maybe a teacher.
As I write this story, I do not mean to infer that my life experiences are any better or worse, easier or harder than the next person’s. My journey begins as a kid from a middle class, small-town-family in Illinois where manners and work ethic were woven into most everyone’s DNA. I watched my dad pull double shifts, sometimes six days a week, to get ahead. My mom continued her college education in the hours before and after work so shecould have, and give us, a little more. I admired the hard work I saw from my parents and stepparents but I knew early that I was a little different, I was meant to build an empire. Starting around age 7, I sold whistles, Christmas cards, candles and spaghetti forks door to door. I worked in cornfields during the day and restaurants at night. I wanted to escape small-town and hit big-time.
My grandfather provided me a slightly different, more entrepreneurial, lens by which to see my future. I would hang out with him while he worked in his apartments or repaired household items he would buy defective. People say he did this to save money; I knew it was for the feeling of accomplishment he felt when he successfully fired up whatever gadget it happened to be. He told me stories about growing up during the depression, being at sea in the military and about hustling pool. One story that greatly influenced me was how in 1940, desperate for work, he convinced a local restaurant owner to let him clean and wash dishes for free, in the hopes of earning a job. He hustled and a week later was given a job earning $0.05 an hour. In 1949, as another story goes, he invested his life’s savings in Tucker Automotive stock. Sadly, as everyone warned him, he lost everything. Over 40 years as the town barber, he probably made no more than $2.00 a haircut but because of what he taught himself, he built a significant stock portfolio and retired a pretty wealthy guy.
In 1989, largely due to my grandfather’s influence, I started a career as a stockbroker. I wasn’t the overnight success I thought I would be, but I drew on his story about the restaurant job and developed my plan. I saw successful people work 10 hours a day so I worked 12. Other people made 200 calls a day; I made 300. Whatever they did well, I did better and more often. I worked hard, believed in what I was doing and soon it was getting easy. One year later I ranked in the top 5 brokers in my office. Two years later, I was one of the top producers company wide, and by 1999 I was one of the top earning brokers in the industry, making more in a month than my parents combined, earned in a year. I was on my way.
In the Spring of 2000, the volatility in the dot com market seemed like a guaranteed way to hit the home run that would make me famous and solidify my empire. I started buying large positions on price dips, waiting to cash in on the rebound that always followed. I tried talking my grandfather into joining me but he didn’t get it; or did he?
The rebounds were taking longer than I had planned and within a couple weeks, I was down almost half a million dollars. The market continued to chew up more of my money every day, driving my losses to over $750,000 within a month. At the time this was only about 3 months’ income so I wasn’t stepping out onto the ledge, just yet. Unbeknownst to me, events already in motion would turn out to be what painful gut-wrenching movies are, and were, made of.
The continued economic chaos caused most of my clients to pull out of the market. Before I knew it, my income dried up and the $1,000,000 I bet on my home run attempt was gone – I was dead broke and psychologically frozen. Too embarrassed to ask, I silently wondered if that was how my grandfather felt back in 1949. It sounded a lot more romantic and motivating when it was someone else’s story. Before I could get my bearings, like a right hook out of nowhere, lawsuits started pouring in. Clients claimed they were, in hindsight, unsuitable for the stock market. They insisted I maliciously capitalized on their naiveté and should be held liable for their losses. I would have to win these lawsuits or lose my license.
Pulling this off would be tough enough for someone with time to spare and money for lawyers; I had neither but I did have records, conversation logs and notes above and beyond what was required. Alone, I battled against teams of lawyers for over a year. When the final gavel fell, six of the complaints were dismissed and I was victorious in five of the remaining six. I lost one case, alleging lack of supervision over a junior broker. Since the award was for only $2,300 of the $30,000 he sought and because I won cross-complaints in two cases, I considered the experience a victory, and with that chapter of my life closed, I sat back and allowed myself to feel proud for a little while. I didn’t have the empire of my dreams, but I survived a nightmare.
Over the next six months, I worked hard and things improved. I was paying bills and saving a little. I was finally feeling some stability. That ceased when I received a registered letter from the FBI. The massive impact of the market crash and ensuing economic collapse turned a microscope on the industry. Along with dozens of friends and colleagues, I was under investigation for securities fraud. I was facing an unimaginable battle with no idea how to survive it, let alone win it.
After months of responding to subpoenas, compiling reports explaining my trading strategies, and in debt with legal bills, my future boiled down to one moment standing over a speakerphone in my attorney’s office. “Do you plan to indict my client?” He asked. Seconds of silence seemed like a lifetime before they announced, “No, your client has been cleared and is not a target of our investigation.” While that closed this chapter in my life, the trauma of the event hasn’t been easy to shake.
Desperately needing a change, I requested a transfer from Wells Fargo’s securities department. Despite the dramatic pay cut and the more micromanaged environment, I liked the people and loved learning about mortgage lending. For a year, the 9 to 5 was going surprisingly well and in 2003, out of the blue, I met and married Liz, admittedly way above my paygrade.
A couple years later, we learned that Liz’s cousin was in foreclosure on her house. I tried to help her through the bank, but she was declined. As a last resort, I reached out to a friend who specialized in hard money loans.
Within a few days, we got her the money she needed to bring her loan current, do some repairs, and place her home on the market, capturing a lot of equity she would have otherwise lost. Unlocking the door to this world, I saw opportunity everywhere and soon Liz and I had a good side business making hard money loans to rehab contractors and builders that the bank wouldn’t fund. Shortly after, I quit Wells Fargo to make a full time go of the hard money business. It was also the day Liz left her career to have our first child, Cross. Maybe not well-planned, but we both agreed it felt right.
The next few years making loans and buying real estate were fun and profitable. We spent the first year working out of the lobby at Kinkos where, after a long day “at the office,” we would take our baskets of opened and used items up for checkout. To me it wasn’t about saving the money on office space, it was that same entrepreneurial feeling my grandfather had when he flipped the switch on one of his gadgets. Liz and I were a team; we had an adorable son, another one on the way, and good money in the bank – I couldn’t imagine how things could get any better.
Well, they didn’t; instead, we were hit by yet another sucker punch. Now, smack dab in the middle of the worst real estate crash in 70 years, borrowers we lent money to walked from construction projects, second position loans evaporated overnight, our rental properties plummeted in value and good tenants moved out as the neighborhoods fell victim to foreclosures and squatters. On top of this, we learned that some real estate brokers and investors we dealt with were really bad guys. They stole identities and used falsified applications and appraisals to borrow money they had no intention of ever repaying. Over 40 victims in all, we spent the next few months helping authorities with their investigation and fighting with title insurance companies over our claims.
During all of this, plain old life happened too. My grandfather passed with unresolved issues between us. I watched friends with life experiences like mine recover and saw others tragically implode. Liz and I spent heart-breaking weeks in a burn unit beside our then 2-year-old son Maverick and 6 months later, beside our 3-day old daughter Katya, born with a heart condition.
Eventually, the dust settled and we realized that we needed to rebuild once again. We decided to stay with real estate and hard money. As risky as it had been, we felt that with some of the risk mitigated, it could be a far safer option than the stock market. Realizing others could benefit from a little more stability in the industry, we decided we could build a business that would “do good, by doing good.” We worked with investors, borrowers, and industry professionals to build relationships, develop tools, and provide services that make for more efficient, transparent, and compliant hard money transactions and therefore, a better industry overall. Out of this came our brand purpose, Connect Build Transform. Our commitment is to provide clients with unbiased-third-party products, due diligence and experience-share that increases returns and helps avoid sucker punches, at little or no cost to them.
Over the years, our Team has used lessons learned assisting in over 10,000 transactions to help brokers make more money, investors avoid bad guys and bad decisions, and homeowners work out ways to stay in their homes during times of crisis. Because of our client’s support, the San Diego Business Journal ranked Del Toro as one of “San Diego’s 100 Fastest Growing Companies,” two years running, and we are currently a finalist on Inc. Magazine’s list of the “Fastest Growing Companies in America.”
Reflecting, I see some events during my first 50 years that I would like to have avoided, if I could. Knowing that altering the events would affect where I am today, I wouldn’t take the risk. I believe the inability to alter these moments to be a gift, meant to serve as tool for being a better husband, father, and friend…maybe a teacher. Along the way, I have learned that most sucker punches have warning signs that I ignored or missed due to arrogance or inexperience. I have learned that preventing a problem is easier than solving one – the hard way, and I have learned that at heart, I’m still a kid from a middle class, small-town-family in Dwight, Illinois who appreciates the example and support that my family provided.
Despite realizing that my journey didn’t have to be so hard, I know that I am where and who I was meant to be. I am sharing the lessons I have learned, and some of that mid-west DNA, to encourage my children to live boldly, know that they are stronger than they realize and to embrace their journey. Once I have done that, my journey will have been worth every step. That would be my empire.