The Land Geek Podcast #82

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Hey, it's Mark Podolski, the Land Geek with your family favorite niche real estate website, www.thelandgeek.com. and today I'm really excited because I've got a guy who has been around the block. He's probably forgotten more about real estate than I even know. So today's guest is Larry Muck, the president of Springboard Capital Resources. He's most recognized as the chairman of the American association of Private Lenders. He has a 30 year career in banking and is the host of the very popular Community Investor podcast. Larry Mock, I am pleased and honored that you are spending your valuable time to educate the LandIQ listeners about yourself and your background and your career. Larry, how are you?

You know, I'm doing so well that people are starting to get suspicious of me. Mark, you know, what are you on? Who knows? But yeah, I appreciate the opportunity to be on your show. And as you and I have talked, you know, in my world, we don't talk a lot about land. But you are all about land, and I am. That's why I'm happy to be here.

Yeah, yeah. I mean, and I'm just thrilled that you're here. But before we get into land, like, let's talk about you and how you became Larry Muck, president of Springboard Capital Resources and, you know, one of the biggest hitters in private lending.

Well, I don't know if I'm one of the biggest hitters. I'm certainly, I probably know more private lenders than almost anybody else in the country. But, you know, I started out of grad school and I went straight into banking. I wanted to get into the lending business and, you know, ended up in a smaller community bank in a regional bank holding company and spent quite a bit of my time there. They called me back for a couple of years to be in hr, charge of management, recruiting training, worked in the Kansas City main bank for a few years in the lending business and then started out in community banking. And that really became my passion to work with, you know, our bank back in the day when as a community banker we used to say that we made the loans that made sense.

Sure.

You know, we didn't always on paper, they weren't all pretty, but they generally worked.

Right, right. So what's the cliche about banking? They're like an umbrella when it's sunny. Is that what it is? Something like that.

Right. That is a new one on me. But I will tell you that one of the greatest things I ever heard in banking is that bankers are not generally liked, but in, but they're most often trusted.

Right.

You know, so I never, you know, in a community bank setting, when you're one of the most well known people in that bank or in that town of about 125,000 people in the trade area, you don't know whether anybody really is your friend or not. Was really kind of sad, you know.

Yeah.

You don't know whether people are attached to you because you're attached to access to money. But anyway, that, that was something I struggled with from time to time.

Sure, sure. I mean, I look, I'll kiss up to my banker as much as I can, take him to lunch, whatever he needs, you know, you want, you want sports tickets? Let's get it. You know, they're, they're again, they're, they're just good people to have in your corner. Yeah, but it's like you said though, because you do have that trust factor as well. You know, these are well educated people and they look at a variety of deals. And so, you know, it's good to have that sounding board when you're looking at an investment to be able to go to a trusted banker and say, well, what do you think? Even if they wouldn't lend on it, is that something that you think is, you know, that's pretty valuable?

Well, I think that people should have, frankly, I think that people should know real bankers, people that have been in the business that, you know, were taught the basics and have had an experience that has taken them through a number of different industries. You know, I guess I'm saying that a banker that I would choose to associate with should have a very broad background so that they can, so that they're able to understand what it is that you're trying to accomplish from multiple perspectives and not from some blinders on narrow vision.

Sure, sure.

I'm really up on people creating a relationship like that, but there's less and less of those bankers left anymore.

Yeah, let's talk about that. So the death of the community bank, why has that happened and what are going to be the consequences of that?

Well, you've seen a consolidation in the banking industry over the past many years, 20, 25 years. And really when interstate branching was authorized in 1994. You saw the banking industry begin to merge into larger and larger pools. What that did over time was to create a system where instead of having community bankers, a lot of decisions were being made outside of the market in which the bankers operated. And they essentially were turned into geldings, if you know what I mean.

Sure.

And, you know, really didn't. Have you lost that ability for somebody that really understood the community to be in a position of decision making authority and not to pick on the big banks? But if you look at U.S. bank, bank of America, you know, the top seven banks across the country that own most of the deposits say they just really don't have. Particularly at the small end, they don't have much local decision making authority. When I left banking back in 2009, you know, we'd gone through a situation where really the authority was essentially pulled out of the local markets because things were so bad at that point in time that they just really didn't want people making loans. And that's really what drove me out of banking is when I couldn't, when I couldn't continue to do deals that made sense and to serve the community, then, you know, really, it just. The reason for me being there was no longer there, so.

Sure. So you left and then you transitioned into private lending, correct?

Well, I transitioned into poverty.

You know.

But, you know, I tried a couple different things and if I'd known you, I'd been okay. That's all I can say.

I would have taught you how to start flipping land.

Yeah, exactly.

Probably not in Kansas City, though.

Yeah, probably not. But, you know, the, but the. Back in, back in the day, you know, I just really was trying to figure out what to do, and I ended up going and working with one of my former clients that I had believed in very strongly in. And he owns an insurance company that only insures residential investment property nationally and he'll do liability insurance all day on vacant land. So you need to put that back in your thinking camp.

But yeah, yeah.

But the. He decided he wanted to expand into some different areas. And so the American association of Private Lenders was around and we had been a vendor supporter of those. And it was operated by four guys that sort of did it in their spare time and out of their back pockets. And, and we went in and said, you know, you guys need to pick this up. I mean, this space is exploding. They said, well, if, if you think you can do better than just go ahead. So we did. And they looked around the office, they Said, well, is anybody here ever made a loan? Oh, Larry, you've only made about a billion of them. Why don't you run this association? So all of a sudden I was in the association management business. And you know, a year or so ago we brought in a new Ed and executive director and it was, it was really time for me to consider doing some other things. And although I remained chairman of the association, I'm not really involved on an active basis on a day to day schedule. So we started Springboard Capital Resources. And the whole point of that business is to be able to bring capital together with deals, to be able to find deals for private lenders to fund and to be able to refer those out and to really build a strong practice in underwriting, preparing executive summaries and finding funding for projects across the country.

Okay, so just so I understand this correctly, let's say that I'm, I've got a project and I need, you know, $18 million. Right. And there's, I don't know, let's say the loan to value on it is 40%. Right.

I'm in.

Okay, you're in. And now the, now the traditional, the big bank won't lend on it. And why won't they lend on that deal?

Well, you know, regulatory environment has become so strict with banks now that in a deal like that, if the ultimate repayment source is the liquidation of the collateral, you know, if there's not cash flow, those are much more difficult for banks to be involved in than they used to be. You know, $18 million is a pretty fair sized project. And within the private lending world.

There.

Are people that can do projects that size. But what I've seen is that lenders in general have had to walk away from some projects because they were just over their head.

Sure, sure.

In terms of total dollar amount. And so one of the things that I'm building right now is a platform to be able to share those deals among trusted parties, trusted lenders that understand the underwriting practices of the people that they're doing business with. And so you could take an $18 million loan, you could split that up into four or five different pieces and not overly weight a portfolio with one particular asset. Banks did that all the time and with correspondent banking with participations. And so, you know, that's what I'm working on building right now.

Oh, I've got a great contact for you when, when we get off the podcast.

Cool.

Yeah, so that's really interesting. So you're kind of like the guy that knows the Guy, in a way.

Yeah. It's funny you say that because there's a young lady that if I walked up to her today, she'd go, she'd look at me. She goes, I know a guy. And I'd say, I know the guy that knows that guy. And she's the. She's a daughter of a former pro football player. That's. My brother's married to his sister. And so. A long story.

Sure, sure. So let's, let's kind of circle it back into land. Okay. Let's say, for example, I'm in North Dakota and things are exploding up there and, you know, the counties can't even keep. Keep up. Right. There's just. There's just too much going on up there. And would you loan on, say, a mobile home park that I might be able to. To lock up, you know, if I can lock up the land for, let's say, three to five million dollars? Is that something that you would lend on or does. You know, it's just. You're going to. No, I can't. You know, even though you might say the land value is 7 million, I'm not going to touch it.

You know, there are people that I've met that like lending in North Dakota. And of course, with oil prices going down now, it's kind of hard to, you know, who knows what's going to happen? But surely the oil shale is here to stay. Anyway, I digress, but mobile home parks are, from a private lending perspective. I do know lenders that will do mobile home parks.

Okay.

That would be a little bit. That would be on the riskier side of things for people because, you know, mobile home parks, if. If they're not tied down to the foundation, there's people anyway.

Yeah, yeah, it's definitely risky, right?

Yeah, yeah.

They could all leave tomorrow and then go to a park down the street that's got lower rents.

Right. And so, you know, it's not as easy as that. But, you know, the. But the point is that the private lending business is a niche business, as you have expressed with respect to land. And right now we're in the process of compiling this group of lenders and really doing a deep dive and understanding what it is that they're looking for so that when a project does come across our desk, instead of wasting everybody's time, we would be able to broker that out to the appropriate lenders that really want to see those types of things right now.

Will you do residential and commercial or just commercial?

Oh, no. The private lending industry itself was really focused principally on single family residences, one to four family. There is some mixed use money out there.

Okay.

And you know, but you know, that's, that's where the explosion in private lending has come from is because of the mortgage meltdown and the amount of inventory that's been available. I mean it's, you know, that's been the greatest thing about the great opportunities has come around because the, the inventory has been out there for people to make a lot of money on by going and fixing, flipping, rehabbing. You know, things are much tighter now than they were, but there's still good opportunities out there. I personally believe that private lenders have to be willing to diversify and to be able to go with the market. And those that do will find plenty of opportunity. And those that just decide to stay in their little niche, you know, that niche may not be there for them in another year or two.

Who knows, right. So, so based on your experience and all the deals that you funded and looked at, what, what are some of your favorite niches? Well, five years from now, what do you think it's going to be?

You know, the fix and flip market is, is still a good one, but you know, a lot of people are getting in more or less because rents are so high. There's a lot of money that's going into the rehab and hold market. So you've seen a lot of turnkey providers that are bringing investor money in and particularly IRA or self directed IRA money is going into that. You know, Eddie Speed is a good friend of mine and Eddie's in the performing and non performing node space and he's of the opinion that we've got great legs on this market in terms of being able to buy notes and make those work. I think there's a better than even chance that we're going to see additional problems in the residential space. There's going to continue to be opportunities there because of the maturity of a bunch of the. Oh well, the HAMP loans, you know, that where they restructured, the amortization of the financial arrangements with the homeowners, a lot of those are beginning to mature, those workout periods. And so, you know, it's, it's easy to see that there's probably going to be more opportunities in single family. Although it seems to be quite a bit of competition in there right now.

Sure, sure, yeah, yeah. I mean, has there ever been a time where it wasn't competitive?

Well, you know, you know, back in 2008, 2009, 2010, there was so much inventory out There that it, you know, everybody that could swing a hammer was getting into the business and that's. So anyway, that, that's changed a little bit. But I will tell you just the biggest opportunity I see over the next five years is probably in the small balance commercial market.

What does that mean, small balance commercial?

You know, small balance commercial being anywhere from 250 to up to a couple of million bucks and above. And those would be loans on say strip centers or owner occupied office buildings, you know, office buildings in general in selected markets. But the reason why I bring that up is because there's so much of that debt that's maturing over the next few years, like $1.7 trillion and the capacity to soak all that up isn't there? Because the performance of those units is less than what banking standards really require to get traditional financing. Sure. So in, in, you know, some of those may be, you know, cash flowing at a 1.2 times debt service coverage ratio. You know, and really the standards are higher than that now, 1.4, 1.5. So there'll be opportunities for private lenders to step in, refinance some of those properties. There's probably going to be continue to be some haircuts taken by the traditional lenders. They're, we may be able to pick up debt for cheap.

What do you think of this deal? Let's say I buy a tract of land and it's zoned commercial and I put up a self storage unit, but I need $1.2 million to build it. Is that something that I could go to private lending for or would it have to be? I'd have to figure out a different way. I'd have to buy an existing one.

You know, there are again, there's a lot of niche lenders out there and there's money out there for self storage units. But you know, particularly there was a time when self storage, these things all go through cycles.

Sure.

You know, and you're going to find markets where self storage is overbuilt.

Right.

But you're going to find markets where it's still a viable alternative. I just worked with a woman, I won't say what state it's in, but there was a guy that was just going to sell, he had a bunch of vacant land, he was just going to sell it and you know, just was wanting to get out of it. And she convinced him to come up with a business model that would allow him to store construction equipment and give people, you know, give contractors a place to be able to store Their equipment, you know, equipment yards. Sure, that would be a portion of it. But then the other side of it was that U Haul franchises were available to be put on those. And so it's just a home run.

Yeah.

For the people involved. So I think that as long as you keep your imagination, you know, as long as you're creative and you're. And you're not stuck in a paradigm that doesn't allow you to try new things or to think what, you know, what is the highest and best use of this land, I think there's still a lot of wins to be had out there.

Yeah, absolutely. I like to say I'm flexible like a yogi and just opportunistic because you've got to look at deals and you've got to be creative, and you can't just have blinders on.

Right? That's right.

So that's interesting. I just had someone come to my door with bringing me sweets.

Loud, you know. That's awesome. Right after Thanksgiving, you probably had a whole bunch of pie, right?

Oh, my gosh. Yeah. I mean, I don't consider it a good Thanksgiving if I can actually put my pants on. You know what I mean? Like, that button needs a pop. My wife needs to make a derogatory comment about my gut, like, that's a good Thanksgiving to me, you know, I.

Wish I could say differently, but that's true. I'm with you on that one.

Yeah. You know, this year, though, I went to Disneyland thinking, for real? No, for real. I thought, oh, you know, this is brilliant. I'm so brilliant. I'm gonna go to Disneyland during Thanksgiving, and everyone's gonna be eating, you know, at their table with their families, and they're watching football, and they're doing all those fun Thanksgiving things, and we're gonna have the whole park ourselves. I couldn't have been more wrong, Larry.

You know, I've been around the parks a little bit in my life, but I don't, unfortunately. For example, if you go to Orlando, Orlando's maybe one of the sweatiest places on earth, you know, so Disney World, I just. It doesn't hold. It never held any real attraction to me. And then, you know, if you're going to go to Disneyland. Yeah, it's a pretty busy place out there. It's.

It's crazy. It's crazy. I used a software program to optimize my day. So, you know, we would be zigging when everybody else is zagging. Right.

And I thought everybody else had bought that program. Right.

They must have, because you know, like, we analyzed it. It was like 400 minutes of being in line and 100 minutes of riding on the rides. But, you know, at least having the program, I didn't have to have the conversation with my kids. What are we doing next? I'm like, this is what we're doing next. So that, you know, it was worth the money for that.

That's awesome. Yeah. You know, and I've been to Disneyland, I've been to Disney World, and, you know, I think everybody ought to go once.

Oh, yeah, once. Once.

Make sure you're in shape. That's all I can say.

Yeah, yeah, definitely make sure you're in shape and you have good shoes.

Yeah, exactly.

For sure. And so lots of patience.

Do you buy. Do you find a lot of land opportunities in. In California? Is the state too pricey?

No, I. I mean, there's certain counties I really like in California. Kern County, San Bernardino County. You can find good deals there, for sure. Yeah. But if you're gonna go into LA county or, you know, Southern California, it's gonna be very, very tough. Yeah, but, you know, it just. It really depends on your capital. Right. So if you. If you can find the right deal. I mean, I'd have no problem buying oceanfront property if the person was distressed. And I knew I could. I could flip it 70, 80 cents, you know, retail to someone else real quickly on the other end of it.

Can I tell you a quick story? Do you have time for a quick story?

Yeah, yeah.

Okay. So I'm part of this private lender network. It's called Impact Wealth Wealth Classes. George Anton. You know him?

I know him. Yeah, he's been on the podcast. No, he was on the podcast. I take that back. I have him on the podcast, but I have talked to him.

Yeah, we did a. Yeah, yeah, good guy. And I was talking to some of his people that were part of his community, and they were trying to put together a deal that I thought was kind of crazy. They were going to put, like, $1.7 million second on a property in Beverly Hills that had a $3.8 million first on it. And so they're basically guaranteeing the front end of that. It's a total scrape and rebuild. And so they were out raising money in the community, and they did get the deal done. They actually got it done in six days, which was kind of amazing.

That's amazing.

Yeah. Had to put a few people together, but then come to find out, you know, they were going to build this house. It was going to the total Cost was going to be about 9 or 10 million, and they were going to sell it for 17 million, and they were all going to make a pretty good slice of cheese. And before they ever got the plans even finished, the scope of the project went up. They made the loan, the scope of the project went up, got to the point where it was going to be a $25 million sales price on the house. And so they're having to scramble around to figure out how to get all the construction funding together. But developer came to them and offered them $7 million to take over the project. And that would have meant they would have had about a million and a half in profit to split among themselves. But they said no.

And the guy came back. Oh, wow.

Yeah, they said no. The guy came back the next day and offered a maid, and they said sold. Wow. Is that not amazing?

That's a great deal.

Yeah, yeah. But, but if you, if you swing for the fences, you know, you're gonna strike out more often than not. And you know what I like about your business is the fact that what you teach people is to, you know, that as you said earlier, the tortoise and the hare, you know, you slow and steady wins the race, you know.

Oh, yeah, yeah, we. Yeah, exactly. I mean, our niche, we don't swing for the fences. I have nothing against doing it, but that's not what I teach. I mean, you know, singles and doubles, even though we're making huge margins, you know, 300 to a thousand percent. But we're not, we're not, you know, putting in. We're not doing million dollar deals. I mean, you're talking about, you know, five to $10,000 pieces of land, which probably you would think, oh, my gosh, you can buy land that cheaply in this country. Absolutely. All day long. It's unbelievable.

Yeah, yeah, I. And I'd be all over that. Particularly if you're really good at infill housing. You know, there's people out there looking for lots to build on.

Oh, yeah, absolutely. Absolutely.

So.

Well, they were at that point in the podcast where I get to put you on the spot. I hope there are beads of sweat coming down your forehead when I ask. No, I know it is. Yeah. What is your tip of the week?

Well, like an actionable tip. Well, you know, but the first thing that, as, you know, the first thing that comes to my head is don't take candy from strangers. But, you know, in my years in banking, I turned 60 in August, so, you know, I've been around a little bit as you mentioned. But I've always found that, you know, the risk return relationship is pretty, pretty consistent. There is no such thing as free lunch. The kind of returns that you're making are pretty extraordinary. And, and the reason why you're able to do that is because you're in a marketplace that is probably a little bit underserved. The big money, it's too small for the big money to get in. And a lot of other people really don't understand how to do it. My best advice is to have a system, make a plan and work the plan and don't deviate. I'm a shiny object guy, so don't be looking at all the shiny objects around and saying, you know, maybe I'll try this over here. If you're good at what you do, then just stick with it.

Yeah, I love that advice. That's great. Well, my tip of the week is going to be to go to LarryMuck.com and investscr.com and also check out Larry's radio show on Community Investor. Where can we learn more about you, Larry? Are those the two best places?

Yeah, you know, I got a pretty good LinkedIn profile and I always encourage people to link up with me. My LarryMuch.com I caused a lot of consternation around here when I picked my own name. But, you know, I just decided to engage in the auction battle and really, you know, I won it for a whole 10 bucks.

Nice.

But, you know, it's just as easy for people. If they want to reach out to me, they can email me@larryarrymock.com My website is not what one would call robust where it's under construction. But what I would encourage people to do is if they have questions or they want to know some things that are going on, you know, if they want to, if they want to meet up with me, then just email me. And we'll be making the website more robust. But the Community Investor, you know, this radio, my radio show is a subset of Community Investor magazine, and there is a website for that, community, communityinvestor.com or communityinvestormedia.com and there you can find more about our enterprise and what we're doing.

Fantastic. Fantastic. All right. Well, Larry, I can't thank you enough for taking time out of your very busy schedule to talk to myself and the lane geek community because this is an area that private lending we don't hear a whole lot about, especially in my niche. So I definitely think it's always valuable to like, you said, expand your horizons.

I think that you and I, there's a lot of things that we can do to help your listeners together.

Absolutely. Absolutely. So thank you very much. And I want to remind Everybody, go to www.thelandgeek.com and you can download for free the Passive Income Blueprint, get the ebook how to Avoid the Three Feet of Land Buying Mistakes. And of course, always get this informative and engaging podcast delivered each week to your email inbox. And if you're interested in some wholesale land, go to frontierpropertiesusa.com and please give us some love. Leave us a rating on itunes. I'd really appreciate it. And we'll see everybody next week. Thanks, Larry.

Thank you for listening to another episode of the Land Geek. Join us next time for more tips.

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