HI 173: Mortgages As Assets & Private Lenders vs Public Banks with Larry Muck

Welcome to the Heroic Investing Show. As first responders, we risk our lives every day. Our financial security is under attack, our pensions are in a state of emergency. A single on duty incident can alter or erase our earning potential instantly and forever. We are the heroes of society. We are self reliant and we need to take care of our own financial future. The Heroic Investing show is our toolkit of business and investing tactics on our mission to financial freedom.

Welcome to the Heroic Investing Show, a podcast for first responders, members of the military, veterans and anyone looking to improve their financial future and gain some freedom with their time. We teach America's heroes how how to build passive income, build their startup business and safely grow wealth through real estate and other alternative investments. We help current and prior first responders put protections, systems and a team in place to help them build a life where they can focus on their passion, that service or product that they are uniquely gifted to share with others, making the world a better place for all of us. My name is Gary Pinkerton and I co host this show with Jason Hartman. This is episode 173. In this episode Jason talks with Mr. Larry Muck. Larry represents some private lending resources for the real estate space. So like me, there might be some of you out there that are either unable to get conventional loans or are beyond their 10 and they may even have, like me, their spouse beyond their 10. And so you're looking for other opportunities for lending. This is a replay of who creating wealth show from Jason that goes back a bit. The concept is still there. Those lenders are still out there and they're still fairly unknown. And that's why I want to introduce you to this. My podcast is about introducing you to things that perhaps you haven't considered yet. One other reason is that I'm personally looking for these. And then a third reason is that a very close friend of mine, Aaron, has been for the longest time in the traditional lending Fannie Mae space. And I believe personally that Fannie Mae loans are an asset. They are not a liability. I know on the balance sheet, you accountants out there, it's definitely a liability, but I follow Robert Kiyosaki's teachings and that something that puts money into your pocket is an asset. And I think having a great W2 job or having a great earned income and potential for more income means that you, you have the ability to walk into a bank and get something that many other people can't get, which is a guarantee from the US Government to back a loan for a lender, enabling you to get a 30 year fixed rate mortgage. And I believe that it's pretty close to criminal to convince people to pay off these things. They're an asset. Just ask anyone who can't get one. So I love getting the Fannie Mae loans, but you get to the end of those eventually and, and then what do you do? Well, my buddy Aaron is about to introduce his ability to participate and bring some fantastic stuff to those of us who look for people like himself, specifically ethical individuals that you can surround yourself with, that you can depend on, that are looking out for your long term financial success, helping you get your real estate business up and running. So there's a few different prongs for my reason for bringing this one in. This is a fairly short episode and, and so before we get to it, I want to just introduce or talk about a couple of other things. I've had some people. If you go to my website, GaryPinkerton.com you'll see a snowy road that kind of diverges in the wood and overlaid on top of it is Robert Frost's famous poem, the Road Not Taken. And it starts off with two roads diverged in a wood. And I, I took the one less traveled by. And that has made all the difference. And that's intentional, right? And if you, if you ever have a meeting with me, you'll see that my screensaver is a very similar summertime view of a road like that. Right. There's a very well traveled path that everyone's on and they travel up and down that path without thinking too much about it. And then there's that less traveled path. And it seems very disconcerting to consider taking that path. When you're on that path and there's no one around you, you, you feel like maybe I took the wrong path. What am I talking about? I'm talking about a different way to look at financial security, about safety, about growing a life that you can set up so that it supports you and seeking your unique genius, something that you have happiness doing whether you're paid or not. And what does that other path look like? Well, that other path actually is not about life insurance and storing cash in your life insurance, which is one of the primary tools that I use to help others. And, and you know, in my own life, it's actually about recognizing that Wall street or a large pile of money somewhere in a 401k or a brokerage account is never going to make you safe, no matter how big it is. Listen, if you have a $5 million pile and your neighbor's got a $2 million pile. The only difference is that the guy who comes to take your money just has to be a little bit more creative, but you still have the ability to lose that money. It might be in a market, correction, it might be from a swindler. But if that money's gone, and that's what you've depended upon for your security, it's gone, right? So the only thing that will ever keep you eternally safe is the ability to generate income by providing value to other people, either a service or a product to other people. And I'm talking about into your 80s and 90s, and until that last breath of air, you have the ability to provide value to other people that no one can take that from you. Dr. Viktor Frankl, in his book Man's Search for Meaning, discussing what he learned from concentration camps, he talked about that the one thing that no one can take from you is your choice of how you respond to a situation, right? How you react to a situation. And we all have to respond to challenges in life, but if we choose to be able to, you know, keep ourselves relevant, you know, the word retirement, by the way, means take out of service. So you're choosing to take yourself out of service and put all your eggs in the basket of some mountain of money, even if it's a tall mountain. I have seen too many people lose those tall mountains, and they are eternally scared because they have taken themselves out of service. So I'm not saying work every day to the end of your days on something that you don't enjoy, but I do. I am saying that I recommend you remain active and that you recognize, just simply recognize that the thing you look at in the mirror every morning and night is the thing that's going to bring the most value to your world. The most monetary value, not just the most meaning, but the most monetary value. So Bill Gates didn't have a cool company, doesn't have a cool company. He had a really cool idea and he had work ethic and he had the ability to add that to other people's lives. And I have no doubt that if he loses everything, just like our president has lost everything a few times, they get it back quickly because they have the knowledge, the experience, and most importantly, the confidence. And they have not taken themselves out of service. Please don't take yourself out of service. Remain valuable. Continue to add value to the world with your unique genius, with any genius, just don't take yourself out of service. And so really taking this other path on you Know the two roads diverged in the wood. What I'm trying to say is consider something else. Consider that working a job that you don't like, that you're uninspired by, just to build a mountain of money that's not going to make you safe anyway. Perhaps take another path. Take a path where you can help create some cash flow with multiple distributed sources of income and where you focus on adding value to the world with your own unique way, the thing that you do better than others and that people value and pay you for. That's the other path that I think might be worth considering. If you want to learn more about that, I recommend Patrick Donahoe's book, heads I Win, Tails you Lose. If you want to know more about my incredible friend Aaron and lending opportunities, reach out to me and I'll connect you guys. So, you know, Jason has a great way of teaching and he's about to teach us some great stuff by talking with yet another individual. He he's got 1100 creating wealth episodes and counting. There's a lot of content out there. I also helped him create a kind of Getting started podcast series and my wife sue will gladly I can connect her up and she will gladly send you the link to that. That's a great little series of kind of the best of the best. So there's a lot out there. Folks, consider taking that path less traveled and reach out to me and definitely read Patrick's book Heads I Win, Tails yous Lose. And with that, let's learn about another potential way to get lending resources to use other people's money and boost your returns in real estate. That loan, remember, is an asset. Okay, everyone, dig in. Here we go.

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Let's break this down and look at some of the strengths of income property as an asset class.

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The other advantage of this weekend is networking, meeting new property managers, meeting new area specialists and seeing the product they.

Have to offer that changes year by year. Register now@jasonhartman.com Masters.

It's my pleasure to welcome Larry Muck to the show. He is the executive director of the American association of Private Lenders. And you know, in the real estate industry and the private lending industry, it's a very fragmented business, as we all know and I've talked about many times on the show. And there are some organizations cropping up here and there to try and organize things a little bit more, and this is one of them. Larry, welcome. How are you?

Thank you very much. I'm great today.

Good. Where are you located?

Our headquarters are in Kansas City. We moved the headquarters of the business from Raleigh, North Carolina to Kansas City in August.

Fantastic. And tell us about, you use the acronym aapl, the history of it just quickly and what the the vision and the role it fills.

Yeah, AAPL was formed about four years ago by four guys that were involved in the industry from various aspects. An attorney, a CPA portfolio examiner and a private lender. And their idea was to help raise the standards within the industry and to develop a brand really that could be used by private lenders to say, hey, we, we're vetted, we're good lenders, we belong to the association and therefore we're fairly trustworthy. We all know that in this space there are people that are predatory lenders. And the association was formed really to begin to emphasize the educational aspects of private lending, to bring better knowledge and to raise standards in the industry. We got involved in the association this summer, made a capital investment to bring it to a full time staff, to bring full time staff positions to it, and to really work on building the value proposition of the association. So we are in the midst of working hard to identify private lenders and to begin to build that network of people across the US that really are both vendors to that space and investors in it, and then the private lenders themselves.

So the members would be private lenders, certainly not borrowers. They're not going to join an association, but the private lenders would be the members and then I assume different people that provide different tools to private lenders and so forth. What are the membership fees?

Well, we've restructured our membership fees. We have $400 minimum membership, $800 for a premium membership and $1,600 for a corporate membership. We're looking, we continue to review that membership structure because frankly, our goal is to get to the point where we have over 500 members and then beyond that over the next year or so, we've got a long way to go. We're at about 120 to 130 members now, but we are working at it full time.

Right, Right. So it's a pretty small association, just120,130 members. But what do you estimate? I mean, and this is probably impossible to really know, but what do you estimate as the number of private lenders out there in the country? I mean, are there thousands of them? Are there millions? Oh, I know there's thousands. Are there hundreds of thousands? Are there millions of them? Just anybody who makes a loan. And you know, I assume we're always talking about secured by real estate, right, in this conversation?

Not necessarily. I mean, we have, we principally represent. The lenders in our association are principally commercial lenders. And I say that we don't have many mortgage lenders that are doing owner occupied. The laws related to that are fairly onerous. Right.

It's investor property that they're financing because they don't have all the legalities of these homeowner oriented RESPA laws and the predatory lending laws. In other words, when you lend to invest.

Right. When you lend to an investor, the law makes something of an assumption that the investor as a borrower knows what they're doing and can protect themselves. Would that be fair to say?

Exactly. Yeah, exactly right. But we do have members that are doing larger deals, the commercial loans, building loans, office buildings, that sort of thing. But the bread and butter is that lender that's looking into the residential space. Again, we hope to expand the definition and draw in other parties to the, to the association.

Let's talk about why someone would want to be a private lender. I mean, you know, when you can earn a whopping 2/10 of a percent in the bank, why would someone want to fool around with this? I'm of course being sarcastic.

Well, of course, yeah, it's, you know, I mean, the private lenders do get a much better return than you can get almost anywhere. And as we look at, as we look at the future, where are people going to put their money? Are you going to bet on the stock market for the next four or five years with the debt bubble that we've been building, are you going to be in the bond market? It's really hard to see any kind of positive returns in those asset classes, but there have not been for 13 years.

And don't forget to mention though that on those asset classes you have no control.

Being a private lender. You're a direct investor. I mean, you exert direct control over the investment, the choices and you know, it's not hard to learn. I mean, this is not a complicated thing. You don't have to know how to evaluate a business which is an incredibly complex creature with so many moving parts. And that's what you do as a stock investor, really. And then of course, bonds have massive inflation risk. I mean, I wouldn't touch bonds in this world nowadays. It's just too, too risky. But, but hard money loans or private loans can be short term. And you know, I think they offer some great opportunities. Again, as I mentioned before we started recording, they're my second favorite investment, my first being actually owning the property itself. But the thing I love about the lending is it's just very streamlined and simple.

Right? And you know, your listeners know this as a fact that when we got up to 70% homeownership in this country, we knew that wasn't sustainable. And now the way things are going, the trends are that we are becoming a much greater rental society than we ever have been in the past. And so homeownership, who knows where that will settle out. But there are tons of opportunities for people to get into this business. And frankly, there are more tools available now to support investors. Lenders across the country that talk about.

Some of those tools, if you would. What are they?

Well, guys, one of the. I've met a lot of people over the past couple of months as I've gotten very involved in this industry. And as I mentioned to you, I'm a 30 year lender. I was in banking for that period of time before I came to the association. But you know, we have. One of the ones I was mentioning to you was a real property management franchise system that is really putting tools in the hands of people. They have GPS tracking tools for your maintenance guys so that you know exactly how long they were at an address. And for those that are managing properties for remote investors or out of market investors, they offer an opportunity for you to prove what it is that you're doing with your investment.

And that's great on the management side, but you know, anything on the lending side to make lenders safer, to reduce risk. Property evaluation tools, of course, we're all familiar with the stuff that's available just kind of publicly. Everybody knows about Zillow nowadays and Trulia and things like that. You know, there are some great research opportunities on the web, of course, better than ever had in the past. But are there some specific tracking tools or evaluation tools that your association is seeing and recommending?

We're working with a company by the name of brentrange.com sure.

In that space.

They really own that space from providing critical data to property managers in terms of what the rents are. And they're particularly useful when you're looking at buying properties. We're also working with another company that is rolling out a tool at our annual conference and.

They provide a nationally validated risk profile for investment properties. As a matter of fact, these guys are private lenders themselves and we're using this tool to evaluate risk. And they have now really developed that tool to be rolled out to other investors and lenders that want to use it to evaluate the situations that they're getting into. Our lenders tend to be local market people, although some are starting to branch out into other markets. And as they do that, they need some of these evaluation tools to be able to. To ferret out the risk.

Sure, Absolutely. Absolutely. The problem with being a local market investor is you may not live in the right place and even if you do, you won't be diversified. So that's the challenge.

Exactly.

As we've talked, more and more people are beginning to marry up in this industry. You have turnkey providers that are looking, that are soliciting investors, becoming fund managers themselves. Also you have an expansion of people that are, that are wanting to get into this lending space. And our association, really, for people that are looking at getting into lending, we can network you with guys that have been doing it for a long, long time and are professionals at it. And that's really one of the major benefits of joining the association is to network with professionals from across the country that not only can help you from an educational standpoint, but will also enable you to push deals to each other in different parts of the country.

So you have an event coming up in Las Vegas. When is that? What is the price and how many people do you expect?

Well, the event is at Caesars palace in Las Vegas from November 4th through November 6th. And you can read all about the event at www.aaplexpo.com. and that, that's our event website. We're expecting in the neighborhood of 150 to 175 people. We have very high quality vendors to the private lending industry that are going to be there, as well as mortgage brokers, private lenders. We have a number of attorneys coming and who doesn't want to talk to an attorney and get.

Advice from them that they don't really have to pay for at a conference? So.

We have a wide variety of people. This is, I want to make clear that in this, at this event, this is not a pitch fest. This is an educational event. And it's not about selling things. It's not about selling at the back of the room.

It's truly an educational network event. We have a keynote speaker by the name of Mark Calabria and most people probably don't know him, but he is with the Cato Institute and is director of Banking Regulation Studies. He's worked on the Senate Banking Committee. He was a staffer on the national association of Realtors and the national association of Home Builders. And he will be at our reception on Sunday evening and then giving the keynote address on Monday. And I would urge anybody that would want to come to the conference to get an absentee ballot because we are going through election Day on Tuesday.

Good stuff. Well, hey, thank you so much. And I believe you gave out the website. Do you want to just quickly mention the website again?

Sure. It's www.aaplexpo.com.

Fantastic. Well, Larry, thank you for joining us today.

Okay, thanks.

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