American Association of Private Lenders with Larry Muck

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Hey, this is Mike Hambright with the FlipNerd VIP Show. Welcome back for another exciting episode. Today I have with me Larry Muck, who’s the chairman of the American Association of Private Lenders, which is a private lending association that promotes education and ethics in private lending. Larry’s got a lot of insights on how to raise money, how to get money, how to be a private lender, and how to work a private lender. So we’re going to talk about a lot of that in just a moment. Before we get started, let’s take a second to recognize our featured sponsors.

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Hey Larry, thanks for being on the show.

Larry: Glad to be here, Mike. I get to go to California tomorrow, and I was in California last week, but as you can tell I’m in Kansas City and it’s rather cool here.

Mike: Yeah it’ll be nice to get away from the cold for a little while, I guess.

Larry: Yeah, it’s supposed to be 80 in LA, so yeah.

Mike: That’ll be nice.

Larry: Yeah, looking forward to it.

Mike: Great, great. Well, why don’t you introduce yourself, Larry?
Tell us a little bit about your background, and then maybe we can talk a little bit about your association.

Larry: Well, let’s see. I was born nine pounds, 11 ounces. I was a big baby, still am. I spent 30 years in banking. I got my graduate degree from the University of Kansas, go Hawks. Then went on and spent 30 years in banking. And I spent most my time in a community bank, and I was with a large regional company for a lot of that time, then went to work for an even larger regional company. I was in banking at the time when lenders could actually make decisions.

Mike: Right.

Larry: We used to say in our community of about 100,000 that we made the loans that made sense. Well, I became very disgusted, honestly, with banking towards the end of my career, and probably vice-versa. I decided I needed to go out and find something else to do. I’d been president of a bank. I met my personal challenges in life and just wanted to go off and do something else.
So I got attached to the National Real-Estate Insurance Group, which insures investor-owned property nationwide, as you know. They had been a vendor supporter of AAPL for a number of years, AAPL is about five or six years old. They had thought that, given the burgeoning opportunities that were available in the market, as you know, through being an investor yourself and a flipper, rehabber, whatever, we became convinced that the association itself needed to grow, because there were many people that were getting back into private lending.
So we decided to get involved and offer administrative support, and next thing we know we were running the association. We have been involved with it now for about 18 months and have seen tremendous growth in the association and interest in what we’re doing. It’s been a good ride so far.

Mike: Good. And can you talk a little bit about what your constituency is? Who does the association serve? Is it hard-money lenders?
Is it all hard-money lenders?

Larry: Well, you know we have primarily hard-money lenders. Of course, Mike, we like to call it peer-to-peer lending. Because community banking is on its death bed, and because those banks are no longer making the loans that need to be made to rebuild the communities and rebuild the housing stock in the companies, that’s one of the reasons why we’ve seen this growth.
Typically, our member is involved in lending to rehabbers, to flippers. We have some notes people in our space. They range in size from pocket lenders to private equity fund managers. Our members range in capital deploy from $1,000,000 up to $250,000,000. That’s the range that we have in our membership.

Mike: Okay. Talk a little bit about the association, like what the intention is. What’s the primary role that you play with bringing lenders together? And obviously, in the whole real-estate investing space, and lenders are no exception, it’s an extremely fragmented group of people. I think associations, generally speaking, are fantastic to pull people together to educate and otherwise. But talk a little bit about your association specifically and what your charter is.

Larry: We were formed by a group of four individuals that had seen some really bad practices in private lending. One of them in particular had been an auditor of loan frauds. Their idea was to build a national brand around people that cared about ethics in the business. As you know, our space is largely… it’s not unregulated. We of course have to comply with all state and federal lending regulations. But in the main, it’s a group that doesn’t have a huge amount of oversight. And we’d like to keep it that way. The way we keep it that way is by promoting good actors in this space, and leaving bad actors behind.
Our primary goals in the association are to lift the standards of private lenders and to engage with those that will operate within those standards. One of the tenants of our membership is that you have to enter into transactions with the understanding that you expect both parties to win, or all parties to win. We discourage predatory lending practices. Although, predatory lending is a little hard to define. What is one man’s idea of supplying capital into a need is another person’s…well, he expects to take the property back and profit from that. It’s really a fine line. Really, through raising that AAPL brand awareness, we want to be able to provide quality lending experiences for the people, you know, the FlipNerds. We want them to succeed. We want to partner with people across the country and we want to be able to provide capital through our network of lenders to your constituent base.

Mike: Yeah, absolutely. And I think, for a lot of folks that are listening, if they’re veterans, they understand the power of working with somebody with private money, and how much easier that can be. I use money from banks, and I use money from private lenders, but I’m an entrepreneur at heart, we won’t get into the political side of things, but what better way to dig America out than people using their own money and making their own decisions, rather than having to rely on essentially branches of the federal government, which we now call large banks. So that’s great.
How do you do that? Can you talk a little bit about… Go ahead.

Larry: I’m sorry, I felt my soap box slip up under my feet.

Mike: I was standing on it. I’m sorry.

Larry: Thanks. I’d like to get it back, please.
The FDIC and other regulatory bodies want nothing more than to consolidate banks into cookie-cutter decision-making troughs, because they don’t have to have to continue to fight what used to be 14,000 banks but is now down to 7,000. We expect that number to continue to shrink. So when you say you support entrepreneurship, I’ve got to tell you, entrepreneurship is what’s going to save our neighborhoods and our country. I firmly believe that. And I’m going to get down off of that box. But I have to tell you, that your listeners, the people that engage with you, they are the salt of the earth. They’re out there, for profit obviously, let’s do this to make money, but they’re out there rebuilding communities.

Mike: Absolutely. There’s no doubt about it. Talk a little bit about how you spread your message through your association. I know you have some national events, some annual events, but on an on-going basis, talk a little bit about the training and support you provide your constituents.

Larry: We do have some networking events, and that’s frankly a lot of the reason why people get together with us. So that they can share deals. We want to facilitate that process of sharing deals through our website and through our certification and accreditation processes. We have several different levels of accreditation that our members can reach, and we’re in the process of developing another level, a little bit higher level. We have certified private lenders where people have to go through some coursework and then pass a test to be able to achieve the CPLA designation.
We have also, this past year, we’ve been working with brokers . We’ve developed a certified brokers associate program to teach people that want to supply deals into private lenders how to present them properly, and how to get the best results for what they are trying to achieve. So we want to bring deal sponsors into the mix with the private lenders, and that’s one of the things that we do.
We do have, as I mentioned to you, we have an event coming up at the end of April that’s a combined event between American Association of Private Lenders and our national association that houses all of our insurance clients, long story there, but the Professional Real Estate Investors and Managers Alliance. So AAPL and PREIMA, as it’s known here, having an event at the end of April to provide education to both lenders and spenders. And we’ll have a little KC barbecue there. Your listeners, your viewers can go to www.AAPL-PREIMA.com to engage with us in that event.

Mike: Awesome, we’ll have a link below the video for that. So, in terms of some of the certifications, what’s the intention? Obviously the intention is to create some consistency and practices and ethics and things like that. My real question was, can you talk a little bit about your membership and their willingness or interest in being certified in something that they previously weren’t before? Can you talk a little bit about the value they would see in a certification like that?

Larry: Sure. Let me give an example, we work with a company by the name of Wealth Classes, and they are our only private lending training company that we’re in bed with. Wealth Classes is training private lenders. You can get trained as a private lender, you can raise your flag up and say, “I am a private lender,” but until you are accredited by some third-
party, it’s difficult to distinguish yourself to the marketplace. So, frankly, the people that we have are interested in doing it because it helps them brand themselves as somebody that actually subscribes to the ethics and the standards that we’re trying to set within the industry.
The other thing is, that we want to, and have, some effort to do more in terms of getting on Capitol Hill, to get into legislative commentary. We want to be able to help people understand the nature of what we do. I will tell you that private lenders have done a lot of owner finance on properties, but that has become much more difficult with the Dodd Frank Act and the Consumer Finance Protection Bureau. When they were putting that legislation together, they didn’t even know, they’ve told us, they did not know that private lending existed.
So that law was crafted to smack down all of the big banks and develop some standards where they wouldn’t be doing liar loans anymore, or robo signing, But it had an unintended effect, and has eliminated a great percentage of the market that would like to own a home, that really should qualify, but given the strict rules, do not anymore. So that’s had an effect, not only on home ownership, but as you know, rentals are [inaudible 0:16:37] rents are raising in many markets. We’re becoming more of a rental society. There are a number of factors for that. One is lack of availability in credit for home ownership.

Mike: Right, right. Why don’t you tell us a little bit about how regulation is changing, and where you see things going from here? It appears to be continually worse for real estate investors and private lenders, and citizens of the country, but talk a little bit about where you think regulation is going and the context of lending and real estate investing and things like that.

Larry: It depends upon the jurisdiction that you’re in. of course, a lot of lending is dictated by state law. We continue to see states like California continue to enact additional restrictions on lending. One of the recent things they came out with in the last year or so was anybody that’s doing more than $100,000 in modifications to a house, that loan as to be pre-funded and held in escrow. And that’s not good for the lenders, but for the borrowers it’s good to know that that money has been set aside and that it’ll be available to them when they actually need to draw it for their construction process.
Regulation is a living, breathing animal, it’s got to feed. It feeds on it’s young, it grows. We’re never going to see… well we may see a few retractions in laws. Right now, people just continue, our lenders just continue to stay educated and work hard to be in compliance, and really that’s the only way they can be successful in their business.
I will say this, that the California Mortgage Association, the CMA, which is really just a group of private lenders, they do a good job of quarterly meetings that have great education. We actually love and support what they do. We wouldn’t aspire to be similar in having eventually regional groups and talking more specifically about state laws and compliances that relate to different states within a company. It’s just a matter of time. I know that you’ve got 24 hours in a day, and you probably work about 22 of them, so that’s where we are. More like 20. There’s a lot of opportunity, but there’s a lot to be done, right?

Mike: Yeah. So, can you talk a little bit about your membership overall? Obviously with the real-estate market roaring back here recently, I assume that you’re seeing similar increases in your membership and the private lending community. Are you guys seeing some significant growth right now?

Larry: Yeah we have. We’ve been, for example you can take our conference, our annual conference that three conferences ago had about 60 or 70 people there, then we raised it, when we got involved, to 150 the next year. Then this past November we had 300 people there. Our membership continues to grow. We would expect it to continue to grow significantly because we’re actually out there and people can find us now.
We have a great website that our members can develop good profiles on and they can actually use as marketing tools for the individual lending practices. It’s our goal to be able to capture as much of this space as possible. We are working again with Wealth Classes on developing a deal now where [inaudible 0:21:00]. We’ll be rolling that out to all of the participants very soon.

Mike: And those are individual houses?

Larry: Well the deal network…We want to be able to find investors that need capital. We want them to come through our investors to get that capital. We’re working on crowd funding platform that wouldn’t really be available to the public anytime soon, but we are going to be able to place sponsored deals on there to be funded by other members of the community. We’re hoping to integrate the Wealth Classes community with the American Association of Private Lenders community, which gives us somewhere around 600 people that are involved with lending nationally overall.
If it sounds like I’m selling the training at Wealth Classes, here’s what I know. I know there’s a lot of very professional people there that are successfully getting involved in private lending. Software engineers, architects, other people like that that are actually being able to be trained for private lending. It’s a great service and it’s a great community.

Mike: So those classes, are they primarily online? Or are those in-
person type classes?
Larry Much: They’re all in person. Everything they do is in a group, it’s in a community. As a matter of fact, they’re having their platinum event starting tomorrow, I’m going to for that. I’m actually going to go through their training Friday, Saturday, and Sunday, and I’ve been in banking for 30 years, so. I’m looking forward to it.

Mike: Yeah, that’s fantastic. Awesome. Well, so Larry tell us again how folks learn more about the association. You kind of want to walk through how folks can find them or how to find these various websites?

Larry: Sure. We have www.AAPLonline.com and that’s our primary website. Our association that’s a sister organization to AAPL is called the Professional Real-Estate Investors and Managers Alliance, and that’s www.PREIMAonline.com. You know, we have national magazine that we’ve launched that’s called Community Investor. It’s a great tool and a great magazine, and people can subscribe to that for free. It’s better than the cost would indicate. It’s a good tool. That’s at www.CommunityInvestorMedia.com. We have many more assets, and you can ask me about RentFax someday and how we’re doing location risk index, and rental projections and ROI projections for people, based on an algorithm that boils down 300 data points, but that’s for another day.

Mike: All right, need more time for that.

Larry: Yeah, no kidding.

Mike: Awesome. Well then tell us again about the event that’s coming up in April for folks that want to find out more.

Larry: Sure. They can go to www.AAPL-PREIMA.com and they can find out about our… it’s at the end of April, it’s lenders and spenders and Kansas City barbecue. It’ll be at the Kansas City Convention Center. If people haven’t been to Kansas City, they need to come, it’s a great town. And these are awesome facilities.

Mike: Especially at the end of April. That’s a good time to come.

Larry: Yeah, it really is. We promise not to have any tornados or anything. That is the Midwest though. And you know about those, right?

Mike: Yeah, yeah. Awesome.

Larry: Sorry.

Mike: That’s okay. Well hey Larry, thanks so much for your time today. I appreciate you joining us.

Larry: Mike, I really appreciate the opportunity to be on the show with you.

Mike: Absolutely. And we’ll have links to everything down below for all the various websites so folks can track you down one way or another.

Larry: I appreciate that. Alright man.

Mike: Thanks so much for joining us today.

Larry: Okay, thanks Mike.

Mike: All right, bye bye.
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