The executive Real estate investing Show
Choosing Your Lender: The Benefits of Credit Unions with Mark Ritter
Act Locally: Using A Credit Union to Finance Your Investments. This week on The Executive Real Estate Investing Show, host Michael Holman talks with Mark Ritter.
As head of MBFS, an aggregator of credit unions across the country, Mark Ritter helps bring potential real estate investors to lenders. Why credit unions? Mark thinks it’s the personal touch that comes from local lenders. A credit union will often give face time to borrowers and let them know exactly what needs to happen for the loan to go through. It’s this hands-on approach that gives credit unions their positive reputation over the big banks.
Listen now as Mark lays out the benefits of credit unions, and how you can use a credit union to finance your real estate investments.
Not All Lenders Are the Same!
LISTEN TO THE PODCAST HERE
READ THE TRANSCRIPT HERE
Note: Audio transcription has been automatically transcribed
Welcome to The Executive Real Estate Investing Show. This podcast is for you, the busy business owner or executive looking to create generational wealth. Here, we’re going to show you how to do that through real estate investing from multifamily to industrial and everything in between. You will become a real estate investing expert. And now, here’s your host, Michael Holman.
Michael Holman: Hello, everyone, and welcome to another episode of The Executive Real Estate Investing Show. I’m your host, Michael Holman and today we got a really exciting episode. This is a person who specializes in lending via Credit Unions. His name is Mark Ritter, he’s the CEO of MBFS really excited to have him on the show has some great insights. The thing that people don’t understand, and he outlines this perfectly is when you get into Credit Unions, or when you get into lending specifically. The bigger the lending, or the more creative, there really is a lot of negotiation. It’s not a loan, is not a loan. A lot of people look at these like car loans or credit cards. It’s like I submit an application, I’m either approved or not approved in 10 seconds, because they have some algorithm that says whether this happens or not and that’s not true.
Every loan, every lender is very different as you start getting into larger spaces especially in Real Estate. There’s a lot of negotiation, there’s a lot of back and forth. There’s a lot of communication and one Credit Union, one lender, one bank is not the same as all the other lenders out there. I love how he’s going to get into this. So definitely stick around for this episode. If you haven’t yet, go ahead and hit subscribe to The Executive Real Estate Investing Show, we’d love to have you follow along with us every single week, because we love getting new followers. We love it when people come in, and just really dive into the show. We’ve had a lot of great people on there, and a lot of really great advice. So go ahead and hit subscribe. Also, leave us a rating and review. We love hearing your feedback and your comments.
Lastly, go out and check out our website, www.ExecutiveREIshow.com. Drop us a question. You can ask an executive question on there, you can subscribe to the newsletter, all sorts of cool things, you can go ahead and check that out www.ExecutiveREIshow.com. To get started today, we’re going to start with our executive tip. Today’s executive tip is exactly what I was saying earlier, I jumped the gun, but I’m going to reiterate it here. When you are looking for a loan, and whether that’s a small business loan, whether that’s a Real Estate loan, whatever the loan might be, you need to understand not all lenders are the same and not all loans are the same. People get discouraged often times when they get rejected by a loan or by a lender the first time.
Well guess what if I quit after being rejected by a specific lender, I wouldn’t get any deals done. The first 10 deals I ever did would have never gotten done. The reason being is because every lender has different appetites. They cater to different individuals. If you’re just barely getting started, and you’re like, hey, I got my very first multifamily loan that I need. And you’re going to go out and go to some giant bank that caters to the largest Real Estate operators in the entire country. There’s just not a fit, of course, you’re going to get rejected there. That is the advice today, understand that not all lenders the same, not all loans are the same and sometimes that necessitates sometimes if you don’t know, you might have to go to multiple lenders. But guess what, you’re going to get it figured out, you’re going to pivot, and you can get this done. So let’s get into this today’s episode with Mark Ritter.
Hello, everyone, and welcome to another episode of The Executive Real Estate Investing Show. As always, I’m your host, Michael Holman and we are joined today with Mark Ritter. Mark, reading your profile talking with you a little bit, it appears like you are just the person who knows all things Credit Unions. It is really what I started to get at as I looked at this, and it’s really exciting. I deal with a lot of Credit Unions, we talk with a lot of Credit Unions. And I feel it’s almost like this thing that nobody really understands or talks about exactly how to deal with these Credit Unions. You just think banks, the Credit Unions almost get lumped in with banks. So I’m really excited to get into things today. Mark, before we begin, though, I’d love to let everybody hear about yourself, why don’t you introduce yourself.
Mark Ritter: My name is Mark Ritter, and I’m the CEO of MBFS. And we are what’s called a business lending Kuzco which is a Credit Union service organization. Myself as I talk to you, I’m in the suburbs of Philadelphia, Pennsylvania. I grew up in Northeast Pennsylvania in the cold region and I was a Penn State grad at that time there and really got into the whole banking world. Over a little over 20 years ago morphed into the Credit Union just because I love dealing with community lending and been there ever since.
Michael Holman: That’s awesome. Penn State that’s a great school, great place to come from. I noticed in your bio, it appears before joining Penn State you were big into football.
Mark Ritter: I love football. I hate to say it more than Credit Union. I grew up in not a very glamorous town. I always say if anybody’s seen the movie, All the Right Moves. The old high school football film from the 80s. That’s where I grew up and then from there, actually, the reason I got to go to Penn State, is one of the coaches came through and offered me a job to work for the team. They end up paying me more money than I would if I would have went and played college football somewhere. I spent four years at Penn State and my last year was there was ended with Penn State’s first big 10 Championship, and first Rose Bowl win in the mid-90s.
Michael Holman: That’s awesome. I must say, speaking of college football a little bit, I’m just excited because my college football team is finally about to join a power five conference. I went to Brigham Young University BYU; we’ve been this independent thing for the last little bit. I’m just excited. We’re now joining the big 12 We could take Texas and Oklahoma for their departure. We’ll see how it goes from there.
Mark Ritter: That’s going to be great for their rivalries, for the profile, get the consistent teams on there every year, get their rivalries going again.
Michael Holman: Exactly. I just had to throw that in there as we’re talking about college football. As we sit today, as we’re recording, it was just barely selection Sunday. So it’s all things college sports right now. I love it. Maybe we should just ditch the Real Estate investing and you and I could just talk college sports for 30 minutes.
Mark Ritter: We could talk for hours instead of 30 minutes.
Michael Holman: Mark, one of the things that you mentioned as you’re going through this, is you made this switch from banking to Credit Unions, because you really loved that community lending field. Talk to me more about that. What caused you to go from the banking industry to the community lending world?
Mark Ritter: I was in the banking business and doing well. It was your typical banking career. I was working and doing a lot of consulting. After 911, the company that I was working for, like many other companies, it virtually came to a standstill overnight. That’s when I started to re -examine and figure out what I wanted to do. And at the time, Credit Unions were virtually non -existent into commercial lending. But a few years before that a law was allowed a past that allowed Credit Unions to finally get into business lending and commercial lending with some scale. Really, prior to that time, every town had First National Bank of whatever first community bank, but all of those were disappearing.
Grown up in a factory town my father was always part of the local Credit Union and used to always tell me, my Credit Union was there for me. I had absolutely no idea what that meant growing up as a kid, but it triggered me to start looking into the Credit Union space. Just because I love what I do. I love helping businesses. I love helping Real Estate investors. But I didn’t want to get to that big bank mentality. I like wanting to get that situation in there. So it was a great opportunity. The timing couldn’t have been better for anything I’ve ever done in my life. Because it was this untapped industry with just 1000s and 1000s of institutions there’s many times more Credit Unions than banks. So I started up a commercial lending program at a Credit Union. And it was great because I didn’t know what I didn’t know, and I just jumped in.
We had nothing, no policies, procedures, business members, anything. But it was just like, hey, let’s figure it out. It was a very entrepreneurial time in my life, and I was at this Credit Union for 10 years. We really grew it from zero just an idea, by the time I left, we were fourth in the country among federal Credit Unions and the number of loans that we held. If you’ve ever been around Credit Unions, they are cooperative financial institution that we got to talk about really what differentiates that. Credit Unions love to work with each other and other Credit Unions, which is really the whole genesis for the company that I am at now and MBF. We are a bunch of Credit Unions working together, so that we can bring loans better, faster, stronger, cheaper, to Real Estate investors across America.
Michael Holman: There’s so many things in there. One of the things that you mentioned. I just want to touch on. It’s like when you got into this Credit Union for the first time, there was nothing, no policies, no procedures, and isn’t it funny how there’s usually a point in all of our careers that you have the opportunity to say, I’m going to tackle this super, unknown path, where there’s nothing laid before me or I’m going to go down the safer path and depending on who you are, and what your goals are, either path could be good. I talked to a lot of entrepreneurs and a lot of business people, some of the best experiences and then they look back and they say the turning point in their careers are usually when they hit that fork in the road, to where they say I have to go create something out of nothing.
All of a sudden, it’s like all the light bulbs are going on, you start feeling empowered, because you know, you’ve created something from nothing you you’ve done that you can do it again, you know how the process works. And that’s really like a turning point in a lot of people’s careers I found.
Mark Ritter: It’s really fascinating because I have teenagers now and I always try to talk with them about the different paths, you can go on life, you can bet on yourself, and try to fail and if you’re going to fail, it’s better to fail when you’re young, as opposed to my age now. But it’s okay to try and fail. As long as you do it on a fast basis and figure that out and try something else. This Credit Union space the more I dug into it. I knew people love their Credit Unions. If you ask anybody to tell me about their Credit Union, usually they have a favorable impression. Nobody’s out there protesting on the streets against their local Credit Union. It was really a great time to jump on an industry that was just growing. Last year, Credit Unions funded more than $40 billion in commercial loans. And people just don’t think about it because most of the time, they’re just thinking, well, I can get a car loan, and they really don’t know anything about what a Credit Union is otherwise.
Michael Holman: Talk to us about the type of loans that you get from these Credit Unions. You said MBFS they group these Credit Unions and provide these loans. What types of loans are you giving? Is there like a specific niche or is there a size or what are the types of loans that Credit Unions are offering?
Mark Holman: I’ll back up and just define who I am a little bit more, because sometimes that’s the most confusing piece. MBFS is a company that’s owned by 12 Credit Unions, and we work with close to a 100 different Credit Unions. If you want a mortgage for your house, that’s great. If you want a car, that’s great. I don’t do that. I’m just the commercial and investment guy. What’s nice is when people ask me what do Credit Unions do? Other than some exotic asset-based lending, it’s really all of the above. A lot of our business is your traditional multifamily, the office space, the retail centers, but we also will work with the small pieces like say you have a job and you’re an executive and you want to start to diversify for your future income, we’d love to work with that first time investor to help build them up, maybe it’s just a simple rental property that you’re doing.
We work with the smallest of the smalls and can grow up to that. Whereas this year we’ve done some 20 plus million-dollar transactions in the Credit Union space. And we’ve done $150,000 transactions in the Credit Union space. We’re also heavy into the small business world. So if you have your day job as a business, we do all sorts of small business financing, we do the fast quick loans, we do SBA loans, but probably 80% of our business is that core investment, Real Estate, into helping either the business grows and lease it back to themselves, or your supplemental income for Real Estate investors.
Michael Holman: I love the idea because even just personally I do a lot of my personal banking at a Credit Union. There’s a couple of large ones here in Utah that compete with a lot of the community banks and things like that. I think that people love the idea of continuing that relationship on, it’s kind of comfortable. There’s a lot of people that personally do their business at a Credit Union, and to be able to continue that relationship on into their investing world. Normally, there’s like a big jump there, oh, I got to go from my local Credit Union, where I do all my local banking and business and everything, all the way now I got to go work with Wells Fargo to try and get a loan for five Plex. And that oftentimes, I think feels like a daunting task. I like this transitional piece where it’s like, hey, you’re still working with the same guys that you essentially go get your car loans from just on a little bit bigger scale. I love that.
Mark Ritter: You’re lucky in that you have in Utah is filled with some of the best Credit Unions in America, they do a great job. They do a great job helping Real Estate investors and businesses, particularly with SBA loans. But a lot of times people don’t realize what a credit unit is. It’s a not-for-profit financial cooperative. When you look at it, it has an ATM, the teller line, drive thru windows. Let’s face it, money’s money and my car loan at a Credit Union isn’t that much more exotic than any other car loan and one of the finance, but the difference is really that philosophy of doing what’s best for the cooperative and doing what’s best for the member and growing with them. You’ve done this dance enough. Where else is it easiest to get that relationship expanded. Than where you have an existing relationship. There’s over 125 million Americans who belong to Credit Unions. This is why I enjoy doing the podcast talks, because many of them don’t even think about knocking on the door of one of their local Credit Unions, when they need that help.
Michael Holman: Let’s say, I have my day job. Well say I’m a developer. I’m a Real Estate developer by day but I want to go purchase a four Plex or five Plex or something personally, on my own. I’m looking at Credit Unions, what are the keys for getting that loan? Are they that much different than your typical banks or is it essentially the same? Tell us about that give and take on working with a Credit Union versus a traditional lender?
Mark Ritter: Sure. When it comes to the nuts and bolts of lending. We’re a federally regulated financial institution banks are federally regulated financial institutions. My list of documents that I need is identical to probably nine out of ten banks out there, we need your projections and rent rolls, and personal tax returns and a personal financial state, and all of those boring things. That’s the easy part. But really what differentiates the Credit Unions is really two factors out there. First of all, it’s the accessibility to decision makers and the conversations. I’ve never had somebody tell me, they went to a Credit Union, they had that process and sometimes I wish we could give everybody the answer they want all the time for every situation.
But at least we can have that conversation. If you want access to the executives at the Credit Union, to talk about what you need, generally, you can get it. If you want access to an understanding their process, and meeting the people behind it, you can get it. There’s nothing worse than giving your package and it goes into the black box at headquarters and spits out and answer in the decisions. The other piece that I like about Credit Unions, is we can be flexible on the terms. One of the big reasons is that Credit Unions generally are lending their own money. If you look at a Credit Union balance sheet, they’re usually lending out somewhere between 80 and 90 cents of the deposits in loans.
We’re not out there borrowing the money from Wall Street, that’s going to cause us to lock in with prepayments and rigid terms and conditions. Nothing a Federal Credit Union do can ever have a prepayment penalty. Which for Real Estate investors gives you a lot of flexibility. In that, where we’re lending out our own money, as opposed to borrowing money, and doing a lot of exotic financial moves, where we’re really beholden to the money, and you have to look at where’s your lender getting their money.
Michael Holman: You just hit on two super, super important things that I don’t think most people understand. These are things that even I’ve dealt with in my business over the last few years. That first one is the access to the decision makers, just so that everybody who’s listening understands this is extremely important, especially as you get bigger, and you start doing more and more deals, or especially as you get, sometimes I know, we’ve had a couple of creative deals, that just need some explaining. The access to the decision makers is huge. I can give you example, after example, after example, about how it is always better to work with the decision makers than to work with a bigger company.
I find that the companies or the lenders who I can talk to the president of the bank, or the president of the Credit Union, nine times out of ten that loan is going to go through. But it does it falls into this black box with these bigger lenders. If you get into the regional lenders, or even the national lenders, you’re not talking to the bank president, you’re not talking to anyone 10 steps down from him, you interface with a loan officer or an originator and that’s it. They go to everybody, you don’t get access to the underwriters, you don’t get access to any of the people. They just go into this into this cave, and do their thing, and out comes an answer and your loan officer comes out and tells you yea or nay.
Mark Ritter: Many people look at lending institutions as just this homogenous industry, where they’re lending money, and it’s the same as everybody else. You really have to treat yourself as an equal to the institution and understand their culture. An even that way, in the Credit Union space, I’d like to say every Credit Union can help everybody for every type of situation. But that’s not always the case. You really need to treat them more like a restaurant. There are restaurants that cater to the high end.
There’re ones that give you fast, quick, cheap, and easy and there’s everything in between. You really have to understand the culture of the person that you’re talking to, and what they’re selling. If you don’t understand what the restaurant is that you’re at, you’re going to be confused when the food comes out. And you really need to look as your lender in that same scenario, to say who is this? What are they selling? What is their culture? Who are they trying to reach? Because not everybody does everything for everybody and that’s okay. But you really have to find that person that’s a fit for you, and how you want to eat?
Michael Holman: Completely agreed. I have dealt with this a number of times. We just dealt with this one time where we worked with this lender for six to nine months. And come to find out at the end of the day it’s the first time we were going to do a loan with them, they’re a big regional bank. Come to find out, we just weren’t compatible at the end of the day is really what happened. It wasn’t necessarily anybody’s fault. I was a little frustrated, had some conversations with the particular people I was interfacing with at that lender. But at the end of the day, they just didn’t cater to who we are and what we needed, and we didn’t fit their box.
It just fell out. It was almost like we were trying to force it, and all of a sudden, you start making a pivot, and you find another lender who might have the exact same terms and it’s like, oh, yes, absolutely. Like, this is perfect, because we’re compatible with each other and I love that you say that. That’s really important. Especially as you get into more and more commercial lending. People kind of look at car loans, I feel like and they’re like, hey, a car loan is a car loan is a car loan. You might have a little variable on the interest rate, but they’re essentially all the same. And as you get more into the commercial space into larger loans, it’s not that way. There is negotiation, there’s back and forth, there’s understanding of what’s needed, what’s not needed, it becomes much more of a negotiation versus just a transaction, like purchasing a stock on E- trade where you press it and out comes the answer.
Mark Ritter: One of the reasons I like what we do so much, in our business model is I look at us as an aggregator for the Credit Union industry. There’s probably about 12 companies like me spread throughout the country. Many Credit Unions will or lend on a regional basis. They’re much more community type lenders, maybe it’s a state, maybe it’s only one metro area, Real Estate investors have business all over, you’re not just tied to one area. So last year, one of our good Real Estate investors in Pittsburgh was buying a $14 million property in Florida.
We turned and we facilitated the whole thing and transferred it to our Credit Union in Florida. They got their loan without ever having to go and meet somebody because we have these different relationships throughout. I don’t have Credit Unions in Montana. But we have friendly relationships with people who do, and we simply help you out, getting you matching up with a Credit Union that’s a good fit for you. We really try to bring this industry, there’s over 5000 Credit Unions in America. Nobody has time to go and knock-on doors of all these people. But we try to help bring that a little bit easier for somebody that is a fit for you with the lending you want to do in the markets that you want to.
Michael Holman: Mark, I want to turn and talk about the elephant in the room with lending right now. The Fed just announced all these interest rate hikes. We’re dealing with inflation we are seeing at the time that we’re recording this we’re dealing with the war between Russia and Ukraine and what’s happening there. Where do you see the lending going in the near future? Where are we headed on the lending side?
Mark Ritter: I see two big factors out there. The first that I look at is the American job market and the American economy. And to me, if people have jobs, costs may go up but generally they’re going to pay that rent of theirs, if it’s in the multifamily. If I see unemployment start to trend around, that’s where I’m going to get very worried for Real Estate investors. And as you know, there’s a lot of jobs open where I don’t see that turning around anytime soon. The other factor that I look at now is migration. When I say migration, you’re in Utah. Have you heard of anybody moving from California to?
Michael Holman: We got billboards about it out here in Utah.
Mark Ritter: If I owned a retail and office building in downtown Los Angeles, I’m going to dig into it and be a little more nervous than the apartment building in Salt Lake City. We’re seeing the work from home, flatten out the American economy, of people who needed to work in Silicon Valley, Los Angeles, New York, Boston, now they can simply move somewhere to a secondary market, or third, they can move out, as long as you have good internet access, a lot of people can work from anywhere. We’re really seeing this flattening out and people are moving much faster than Real Estate can be built. And that’s probably what you’re seeing in your local marketplace and what I see here in the different marketplaces along the East Coast, people move, they didn’t switch jobs, they just simply moved where they are.
Now those people who moved from Los Angeles to Salt Lake City, they need doctors to go to, they need offices to go to, they need services, they need grocery stores. You’re seeing this flattening out and leveling between the boom cities and the other markets in America. Now, when it comes to the lending environment, what you’re going to see you’re going to see rates go up, period, you can’t sustain this inflationary period without rates going up. Is it going to completely mess up your transactions and deals? depends how tight it is.
Now, and this is where it’s very important to understand where your lenders are getting their money from, for lenders who are highly leveraged and borrowing a lot of their money, when rates go up, rates go up immediately. But for Credit Unions and other lenders that are lending with their own base of funds, even a lot of community banks are still lending with their base of deposits, they’re going to have a lot slower, gradual, they don’t increase their entire depository structure by 25 to 50 basis points overnight. But if you’re borrowing your money from Wall Street, it did. So this is where understanding those terms behind the conditions. Do you have callable notes? Do you have loans that are variable loans and are going to get jacked up?
A lot of us love to have 15-minute loan closings where we just sign a stack of documents. Now it’s important to pull those out and read those documents, to see what those terms are of your loan and what it’s going to look like when it resets in a year or two, because you just locked in a couple years ago on a low rate. But we really see, obviously inflation, the fix for high costs in inflation is high costs. Because you’ll eventually you reach the point where the price of gas settles down, the price of other things settles down. As I mentioned, the outlook is we are going to look at the properties in that marketplace, we’re going to look at the unemployment rates, we’re going to look at people’s income and sources and that cash of the local economy and the local citizens will pay back the loans many of times, but there are certainly some pockets to be worried about.
Michael Holman: I think that’s interesting, and I love how you just were very blunt about it. Interest rates are going up I asked a lot of different mortgage bankers and mortgage brokers about this, and you can always tell the ones who are trying to get the sell because it’s kind of waffling. It’s like, oh, well, like maybe this and this and this happened. Yeah, we’ll see. I love how straightforward you are. Interest rates are going up, which is going to have an effect on Real Estate.
You’re going to see we’ve had these crazy high in some of these areas. We’ve had crazy high inflation on the assets. The assets maybe were worth 20 million, we’re now finding are worth 30 million. But interest rates are definitely one of the factors that play into what the market value of that asset is, because you can only sell an asset for what somebody can buy it for. That is market value and if 95% of the people are going to put a loan on that, there’s a restriction based on what the debt service coverage ratios are, and these other metrics that are going to force that price to be at a certain level. And so really interesting.
Mark Ritter: I’m a lender, in my business, I give my product away and then my job is to get it back. Many Real Estate investors today, many times they’re looking at the value of the property. But really do that second analysis of what is the repayment of my asset, if it’s the local economy and local jobs, and your unemployment rate is 3% the reason those prices went up is because your local people have more money. So that’s a good move. If you’re in an area where maybe that factory is going to close because of some inflationary pressures and pressures from China, or they can’t get the supplies in. That’s when you have to be concerned. But that’s very rare in America today. So really, if you’re listening to this, look at your local business and your people, and how are you getting paid back.
Michael Holman: Fantastic. I often tell anybody who I start bringing on to help me getting, because I run a lot of getting the construction loans for our projects. And the first thing I tell everybody who comes in the circle, I said, okay, look, when you’re talking with a lender, there’s one thing you need to understand, and it’s the most important thing, a lender doesn’t care about anything, they have one goal. They want to know that they’re going to get their money back. So everything that we do going forward, is to help give them confidence that they are going to get their money back. That’s what they care about. If they were trying to hit homeruns, they wouldn’t be in the lending business. They’d be out there doing equity investments into these speculative properties, but that’s not what they’re doing. They want their money back. Honestly, it’s like the first thing I tell every single person who starts helping me with a construction loan.
Mark Ritter: Great advice.
Michael Holman: Alright, Mark. We are going to start wrapping things up here. But we have two questions we ask every single person who comes on to the show. So first question, Mark, what is the best business advice that you were ever given?
Mark Ritter: Football coaches invariably give the best life advice. The best advice that I’ve ever been given is, every day you either get better or worse, but you never stay the same. It’s really focused me in my life, personal life, and business life, just to work on incremental improvements. Everyday getting slightly better, getting your organization slightly better and over the long run, you come out significantly ahead than just trying to hit a homerun every day. Just work on that incremental improvement and you come out much, much ahead.
Michael Holman: I love it. I think that’s fantastic. I actually was really impressed. I was just interviewing a candidate for an open position here and one of the things that he said is, he said, I am probably the most consistent person in the world. He’s like, I would put myself up against anybody. There’s a lot of respect to that and I think it goes right along with what you were just saying, is, hey, doing the small things day in, day out to be a little bit better today than you were yesterday, I think it’s phenomenal. Great advice. Next question, Mark. What Real Estate investing advice would you give other business owners or business executives?
Mark Ritter: If you can’t understand the business and the cash flow and the deal, walk away. Stick with what you know, just because there’s a lot of people out there pumping a lot of things, but make sure you understand it. You can look at yourself if the deal goes great and if the deal goes bad, as opposed to some of these wacky schemes out there that you really don’t understand. But it seems like a good story.
Michael Holman: I think that’s fantastic. I believe it was Warren Buffett who made the phrase famous, invest in what you know, and Real Estate investing is no different. I oftentimes give the people advice, hey, if you want to get into something new, that’s fine, but make sure you be willing to give up something, to partner with somebody who knows what they’re doing in that space. I think that’s phenomenal. Mark, thank you for joining the show. As we wrap up, I just want to give you the opportunity how can people get in touch with you?
Mark Ritter: Sure, the easiest way to get in touch with me on all the different items that we have going on for Real Estate and small business is Mark Ritter.com and you can connect with me right on there and we’ll get you set up with a local Credit Union.
Michael Holman: Anybody who’s interested in investing in Real Estate, these Credit Unions are a great option to really make that jump start getting invested in Real Estate or continue your portfolio if you have already invested. Mark, thanks for joining the show. Appreciate you coming on and everyone, we’ll see you next time.
Thank you for listening to The Executive Real Estate Investing Show. Ready to learn more? Go to ExecutiveREIShow.com for more episodes and resources to help you create generational wealth through real estate investing. That’s ExecutiveREIShow.com.
WATCH THE EPISODE HERE
MENTIONED IN THE SHOW
Real estate investing costs money—there’s no way around it. Whether you are dipping your toes into the industry with your first investment or are a long-term investor, you need access to capital. Working with a lender is a necessary and important part of your journey as a real estate investor. But here’s the thing: not all lenders—or loans—are created equal. Unlike a car loan, for example, which varies little, real estate loans differ significantly. It’s
- Mark Ritter is the CEO of MBFS (Member Business Financial Services) a service organization jointly owned by 13 nationwide credit union. MBFS helps credit unions fund business loans within their local markets.
- As a CUSO (Credit Union Service Organization), they provide credit analysis, loan document preparation, relationship management, and loan servicing for credit unions.
- Mark grew up in the coal region of northeast Pennsylvania. After graduating from Penn State, he began his career in banking. “A little over 20 years ago that kind of morphed into the credit union, because I love dealing with community lending.”
- Mark was content at his bank—but like so many other Americans, 9/11 was a turning point. “After 9/11 the company that I was working for virtually came to a standstill overnight, and so that’s when I started to re-examine and figure out what I wanted to do.”
- In the late 90’s, legislation was passed to allow credit unions to begin business and commercial lending. “Prior to that time every town had first national bank of whatever—a first community bank. But all of those were disappearing, and growing in a factory town, my father was always part of the local credit union. And he used to always tell me my credit union was there for me. I had absolutely no idea what that meant as a kid, but it triggered me to start looking into the credit union space.”
- Mark likes the idea of helping businesses and RE investors, without the big bank mentality. His approach was successful almost from the start. “It was this untapped industry with just thousands of institutions out there. There’s many times more credit unions than banks, so I started up a commercial lending program at a credit union and it was great.”
- “I was at this credit union for 10 years, and we really grew it from zero–just an idea–to when the by the time I left we were fourth in the country among federal credit unions and the number of loans that we held.”
- The strength of credit unions is that they love to work with one another. And that’s the genesis of Mark’s company, MBFS. “We’re a bunch of credit unions working together so that we can bring loans better faster stronger cheaper to uh real estate investors all across America.”
- “I look at us as an aggregator for the credit union industry. There’s probably about 12 companies like me spread throughout the country and many credit unions will lend on a regional basis. They are much more community-type lenders.”
- Last year credit unions funded more than $40 billion in commercial loans. Why are credit unions so successful? Because of the local touch. “People love their credit unions. If you ask anybody, ‘tell me about their credit union,’ usually they have a pretty favorable impression. Nobody’s out there protesting on the streets against their local credit union.”
- While credit unions are great for car loans and mortgages, MBFS deals strictly in commercial and real estate loans. “A lot of our business is your traditional multi-family, or the office space, the retail centers. But we also will work with the small pieces. Say you have a job and you’re an executive and you want to start to diversify for your future income, we love to work with that first-time investor to help build them up. Maybe it’s just a simple rental property that you’re doing. So we work with the smallest of the smalls and really kind of can grow up to larger things.” MBFS transactions have ranged from $20MM loans to $150k loans.
- Mark says that many people don’t really know what a credit union actually is, and considers it a part of his mission to set the record straight. “A credit union is a not-for-profit financial cooperative [that looks like a bank.] The difference is really that philosophy of doing what’s best for the cooperative and doing what’s best for the member and growing with them.”
- The transition from being a credit union member who perhaps has taken out a small loan to someone taking out an RE loan is smoother because the customer already has a relationship with the bank.
- The nuts-and-bolts of securing a credit union loan for RE investing is pretty much the same as with a big bank. Where credit unions differ is access. “You have the accessibility to decision makers. Sometimes I wish we could give everybody the answer they want all the time for every situation–but at least we can have that conversation. If you want access to the executives at the credit union to talk about what you need, generally you can get it. If you want access to an understanding of their process and meeting the people behind it, you can get it. There’s nothing worse than giving your package and it goes into the black box at headquarters and spits out an answer in the decisions.”
- Credit unions can also be flexible with terms, because they are lending out their own money. “We’re not out there borrowing the money from wall street that’s going to cause us to lock in with prepayments and really rigid terms and conditions. A federal credit union can never have a prepayment penalty–which for real estate investors gives you a lot of flexibility.”
- Michael says that it’s always better to work with smaller lenders than the big banks. “Lenders who I can talk to the president of the bank or the president of the credit union–nine times out of ten that loan is going to go through. But it does falls into this black box with these bigger lenders.”
- When searching for the right credit union to borrow from, Ritter advises to treat them like a restaurant. “There are restaurants that cater to the high end there’s ones that give you fast quick cheap and easy and there’s everything in between you really have to understand the culture of the person that you’re talking to and what they’re selling.”
- Ask, “Who is this, what are they selling, what is their culture, who are they trying to reach, because not everybody does everything for everybody and that’s okay. But you really have to find that person that’s a fit for you.”
- As an aggregator, MBFS helps customers find the right lenders. “There’s over 5,000 credit unions in America. Nobody has time to go and knock on doors of all these people. We try to help make that a little bit easier for somebody that’s a fit for you with the lending you want to do in the markets that you want to.”
- While interest rates might go up, Mark isn’t worried too much, especially if the economy continues to grow. “If people have jobs, costs may go up, but generally they’re going to pay that rent of theirs if it’s in the multi-family. If I see unemployment start to trend around that’s where I’m going to get very worried for real estate investors.” Migration is another factor: people moving from one state to another, for whatever reason. “If I owned a retail and office building in downtown Los Angeles, I’m going to dig into it and be a little more nervous than the apartment building in Salt Lake City.” Since the pandemic has made working from home a reality for anyone with good internet access, we are starting to see a migration of workers to places that were previously unthinkable. Which creates opportunity. “Those people who moved from Los Angeles to Salt Lake City, they need doctors to go to, they need offices to go to, they need services, they need grocery stores, so you’re seeing this flattening out and leveling between the boom cities and the other markets in America now when it comes to the lending environment.”
- “I’m a lender. In my business I give my product away and then my job is to get it back.” So working with borrowers to come up with mutually amenable terms is the advantage of a credit union.