Heroic Investing
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Mortgages As Assets & Private Lenders vs Public Banks with Larry Muck



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Gary Pinkerton starts the show illustrating the importance of viewing your mortgages as assets. He explains that they allow us to get returns that outperform Wall Street. To continue this discussion, Jason Hartman hosts Larry Muck, the Executive Director of the American Association of Private Lenders. Muck gives us an overview of AAPL’s history, mission, and vision.  He explains the major differences between private lending and banks.

Announcer 0:04
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.

Gary Pinkerton 0:39
Welcome to the heroic investing show, a podcast for first responders, members, the military, veterans, and anyone looking to improve their financial future and gain some freedom with their time. We teach America’s heroes how to build passive income, build their startup business, and safely grow wealth through real estate and other alternative investments. We have 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’re 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 Mk. 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. And this is a replay of 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 Larry Muck. 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 these teachings and that something that puts money into your pocket is an asset. And I think having a great w two job or having a great earned income. And potential for more income means that 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 alone 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 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 when it’s a fairly short episode. 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, Gary Pinkerton comm, you’ll see a snowy road that kind of diverges in the woods 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 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 and your life insurance, which is one of the primary tools that I use to help others. 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 and might be from a swindler. But if that money’s gone, and that’s what you’ve dependent 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, 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 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 a 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 his 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’s got 1100 Korean 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’s who will gladly I can connect her up and she will gladly send you a 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 you 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.

Announcer 9:33
Join us March 23, and 24th for the 2019 meet the masters of income property. Let’s break this down and look at some of the strengths of income property. As an asset class. I found that this event is really helpful because I’m totally a newbie to real estate investment. And so I picked up so much information. One of the great things about it is that it’s so fragmented, right? embrace the fragmentation.

Announcer 10:01
We’ve actually been learning a lot about the tax benefits to real estate and a lot of I’ve been investing actually well over 10 years now. And I learned a lot of new things today. 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.

Announcer 10:23
Register now with Jason hartman.com, slash masters.

Jason Hartman 10:26
It’s my pleasure to welcome Larry, muck to the show. He’s 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?

Larry Muck 10:49
Thank you very much. I’m great today.

Jason Hartman 10:51
Good. Where are you located?

Larry Muck 10:52
Our headquarters are in Kansas City. We moved the headquarters of the business from Raleigh, North Carolina to Kansas City in August.

Jason Hartman 11:01
Fantastic. In tell us about you use the acronym AAPL, the history of it just quickly, and what what the vision and the role it sells?

Larry Muck 11:10
Yes, ATL was formed in about four years ago by four guys that were involved in the industry and from various aspects and attorneys, EPA, portfolio examiner and and a private lender. And their idea was to help raise the standards within the industry and to develop a brand really, that can be used by private lenders to say, Hey, we’re, we’re vetted, we’re, 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, to emphasize the educational aspects of private lending to bring better knowledge and, 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.

Jason Hartman 12:39
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 what are the membership fees?

Larry Muck 12:53
Well, we’ve restructured our membership fees, we have $400, minimum membership 800, for a premium membership, and 1600. dollars for a corporate membership we’re looking at, 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

Jason Hartman 13:27
a pretty small Association, just 120 130 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? I know, there’s thousands or 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?

Larry Muck 13:55
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, that the laws related to that are fairly onerous. Right, it’s investment

Jason Hartman 14:16
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 a bank, and yeah, you know, right. You know, when you lend to an investor, the law makes something of an assumption that the investor is a borrower knows what they’re doing and can protect themselves. Would that be fair to say exactly, yeah,

Larry Muck 14:40
right. Yeah, exactly. Right. But we do have, we do have members that are doing larger deals, the commercial loans, building loans, office buildings, that sort of thing, but that the, the bread and butter is that lender that’s looking into the residential space. Again, we hope to Expanding the definition and drawing other parties to the, to the associates, let’s let’s

Jason Hartman 15:05
talk about why someone would want to be a private lender. I mean, you know, when you can earn a whopping two tenths of a percent in the bank, why would someone want to fool around with this? I’m of course being sarcastic?

Larry Muck 15:18
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 that 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 hard to really hard to see any kind of positive returns in those asset classes,

Jason Hartman 15:48
but there have not been for 13 years. And And don’t forget, don’t forget to mention, though, that on those asset classes, you have no control with being a private lender, you’re a direct investor. I mean, you exert direct control over the investment 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 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 there, 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,

Larry Muck 16:41
right? And, you know, your listeners noticed 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, 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’ll settle out, but there are tons of opportunities for people to get into this business. And, and, frankly, there are more tools available now to support investors, lenders, across the country that

Jason Hartman 17:21
talk about some of those tools, if you would, what are they?

Larry Muck 17:23
Well, guys, one of the I’ve met a lot of people over the past couple of months, as I’ve gotten very involved at this industry. And that’s I’ve, as I mentioned to you, I’ve met a 30 year lender, I’ve 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 guide, so that you know exactly how long they were at an address. And for those that are managing properties. for remote investors are out of market investors, they offer an opportunity for you to prove what it is that you’re doing with with your investment. And that’s great on the management side.

Jason Hartman 18:09
But you know, anything on the lending side, to make lenders safer to reduce risk property evaluation tools, 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,

Larry Muck 18:38
we’re working with a company by the name of Brent range.com. And in in that space, they, 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 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 they need some of these evaluation tools to be able to, you know, to ferret out that risk. Sure,

Jason Hartman 19:40
absolutely. Absolutely. The problem with being a local market investors, you may not live in the right place. And even if you do, you won’t be diversified.

Larry Muck 19:48
So that’s the challenge. Exactly. And so, you know, as we talk, 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.

Jason Hartman 20:41
So you have an event coming up in Las Vegas, when is that what is the price? And how many people do you expect?

Larry Muck 20:47
Well, we’re the event is at Caesar’s Palace in Las Vegas from November 4 through November sixth, and you can read all about the event at WWW dot A PL Expo calm. 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 on for and get advice from them that they don’t really have to pay for at a conference. So so we have a 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 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, 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.

Jason Hartman 22:27
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?

Larry Muck 22:33
Sure. It’s www.plxp.com. Fantastic. Well, Larry, thank you for joining us today. Okay, thanks.

Jason Hartman 22:45
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