Episode 62: Accessing Credit Unions for Real Estate Investments with Mark Ritter

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Who is the Guest?

Mark Ritter is an expert in all things credit unions and real estate investing. Mark is the CEO of Member Business Financial Services or MBFS. MBFS is a credit union-owned company providing investment real estate financing through a network of over 90 credit unions.

Visit Him at: 

Linkedin: https://www.linkedin.com/in/markrittermbfs/

Website: www.markritter.com

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Transcript

Axel Meierhoefer: 0:01

Hey guys, today we have a really interesting conversation with my guests, Mark Ritter. He is actually an expert in lending, but from an area that you might not actually really expect, you probably all live in a location where there are credit unions. But did you know that credit unions can also provide lending for investments, especially real estate investments? I didn't know this, I learned a lot through the conversation with Mark and you want to pay particular attention, how the whole thing about memberships and credit unions were because I didn't know and I'm sure you might not be aware of it. So stay tuned and listen to our conversation with Mark Rader about credit unions and how they can help us with our investing and lending. Hello, and welcome to another episode of The IDEAL Investor Show today we have a special guest. His name is Mark Ritter, and he comes to us from the member Business Financial Services. So Mark, welcome to the show.

Mark Ritter: 1:12

Thanks for having me. Looking forward to the conversation.

Axel Meierhoefer: 1:15

Yeah, absolutely. So tell me a little bit and our audience a little bit about how did you end up where you are, and what made you become a part of this kind of credit union special entity?

Mark Ritter: 1:27

Sure. I have actually been involved with credit unions for the last 20 years. And I always was more of a small town guy. I enjoyed community banking, I enjoyed relationships. So I knew the Wall Street and New York City, financial world wasn't for me. And about 20 years ago, when I was looking for my next career, I've always enjoyed banking and financial services. And that's when I really discovered credit unions, because it was only back then that really, the laws and regulations changed that allowed credit unions to get into real estate investment lending and commercial lending. So I spent 10 years at a large credit union in Pennsylvania, developing their business lending program. And we really grew it to be one of the top 10 in the country. And then 10 years ago, I just celebrated my 10 year anniversary, where I'm the CEO of member business, financial services. And we're what's called a que ce o which is credit union service organization. So we're owned by credit unions. And an easy way to think about us is, instead of every credit union going out and developing the infrastructure and people and systems to offer real estate loans, they formed a company that the credit union's own with our all of our underwriters and loan officers and systems and expertise so that they could scale and use the services. And now we're owned by 13 credit unions and work with over 90 credit unions all over the country.

Axel Meierhoefer: 3:15

Yeah, that's awesome. And I mean, part of the reason why I was so excited that you're coming on our show today is obviously right grower in the The IDEAL Investor Show is both myself, and then our client, investing in residential real estate. And the one thing I would say, you can debate it, but I think personally, and I know this from several of our clients, the lending and not really the activity of the lending itself, but all the stuff that is around it. I mean, one of the lenders that we work with quite a bit, we always say they want everything from you. And soon they will also ask for DNA and blood samples before. So it's, I mean, the paperwork, I have found the more properties over time that I acquired and our clients acquire what I would call it becoming content, right, like not fighting it anymore. You can change it anyway. It's like hundreds of pages and duplications in announcement of disclosures, and then the pre disclosures, and then the actual disclosure, and so forth. But still the process fears, especially if you keep investing over time, over and over again, as if you start over every time. So I hope you can tell us a little bit what makes MBFS and the way you do it to cutting credit unions different and maybe better.

Mark Ritter: 4:35

Sure, and let me just say what I always find is the first loan with a new relationship is usually the most difficult. And then I like to find after that it's a little bit simpler. And really there's two avenues of that. There's what I'll call the quantitative side of the lending. And from there, unfortunately, I wish we could do just have a conversation with everybody and say You seem like a nice person and the property's good. You know, let Here's your money. You know, we tried that about 1520 years ago, and the whole world almost ended overnight on on it. But we do get the financials and tax returns and things like that. And we try to be very clear and upfront about what we need, here's the list of things that we need, let's go through what I really like about the credit union environment in our company is the other side of that, which is really that qualitative side. And this is where I think we shine because we don't take your financials, put it in a black box, and then spit out a decision of either yes or no. And here's your terms, we like to have that conversation through the process. So that really we understand who you are, and where you want to take your business. Maybe you're just starting out. And this is your first property. And we have to walk through and a little bit closer. Maybe it's your 50th property. And you're an old veteran of this, and it just goes through, but we really like to lead through the process. And credit unions, by their natures are cooperative institutions. So it's that conversation in the process that we like to make as friendly as possible. And really to make sure you're comfortable with us, and we're comfortable with you. And there's no surprises if you're able to predict and know where you're going with your lender. everybody's on the same page. That's a good relationship in my viewpoint.

Axel Meierhoefer: 6:39

Yeah, absolutely. And I have actually kind of for myself, but on behalf of our audiences a few questions about how that actually works, because I can imagine that some people say, Hey, that sounds nicer than what I've seen so far. With other lenders, maybe I should try this out or work with Mark, you mentioned that you are supported by 13 credit unions. Are there any restrictions of where the people that can get funding or the properties that they want to invest in need to be?

Mark Ritter: 7:05

Sure the short answer Yes, the long answer no. If for anybody who's joined the credit union, there's over 125 million Americans belong to credit union. So most of the audience, maybe you got a car loan or have your checking account at your credit union, you have to become a member of your credit union. And credit unions are generally what I'll call regional lender. So you know, maybe you can, if you're driving past your credit union, you can open an account. But if you're in Pennsylvania, and where I am, and they have a property, maybe if your properties in Montana, maybe they can't lend on it. But credit unions, the whole purpose of our organization, is to bring credit unions in different regions together to collaborate on loan, which is quite a common occurrence for us. You know, this year, we had somebody who was from Pittsburgh, and buying a property in Florida. So their local credit union relationship, we just simply transferred it to a credit union in Florida. And the two credit unions work together to fund the loan. Were a cooperative nature, a cooperative industry, and the cooperatives work with each other across the country.

Axel Meierhoefer: 8:22

Okay, yeah, that's cool. Now, you mentioned something that I hadn't been planned to ask. But I want to clarify, you said 125 million people in the United States members have been members of trade unions. And I have actually the exact example that you mentioned, my last company car was actually financed by a credit union, like a few miles away from where we live. That brings up the question, when you get a loan or stuff like that, how long does the membership last because I ultimately paid off the car. But I don't know that I ever did anything that would sever the membership relationship or anything like how does that work?

Mark Ritter: 8:57

There's actually a piece of the Federal Credit Union Act that says once a member of a credit union, always a member of a credit union. So you probably didn't realize it. But to get that car loan, you had to open up what's called a membership share. And as long as that you have that in there, you can have the credit union surfaces for life.

Axel Meierhoefer: 9:20

Okay. Yeah, I did that, actually. I mean, they explained it to I just didn't know if that was time limited and when the car was paid. So that's good to know. Because, like you said, I mean, there's probably a lot of people who have had that membership in some way, shape or form at some point. And so if they had it, then they probably still have it and just don't know that they had it.

Mark Ritter: 9:39

And that's the whole reason I like to go on shows like this and kind of talk about what we do because so many people have that credit union relationship or they have a favorable impression of credit unions, but historically that wasn't somewhere where you went for your investment property. It wasn't a choice but now Now it's really in recent years boom.

Axel Meierhoefer: 10:02

Yeah. I mean, I would actually say the person and this is one thing that I did was grow is actually priding itself on a lot is like you were saying the personal relationship with people. So being able to or potentially in the future, being able to form these kinds of personal relationships, where you can go over and over and over and get your funding is obviously preferable.

Mark Ritter: 10:24

Yes. You know, everybody says they want that relationship. And by nature, that's a good viewpoint for what we do.

Axel Meierhoefer: 10:29

Yeah, I mean, part of the thing about the relationship is for one, the treatment, I would say, Now, the other pretty important part, especially in real estate, investing are the terms. So are there any differences in terms between getting a loan from you or anybody else?

Mark Ritter: 10:45

Sure, what I would say is for credit unions, you can trust that you're getting a fair term, they tend to be very reasonable when it comes with the fees, any fees that are up front and the rates, you're going to find that they're very competitive, the biggest difference that you're going to find is that any Federal Credit Union by law cannot charge a prepayment penalty. Okay. Now, the last two years, when rates were 3%, or three and a quarter percent on your apartment building that wasn't seen as a big attraction, even though our business was booming. But in today's world where rates are increasing, that can be a big, big factor, because you know, then you're able to negotiate in the future you're able to buy, you're able to sell and not be locked into a penalty for the rates that you have. Because you don't really think about it too much. Until rates drop, or the interest rates change, and you want to modify those terms or refinance, then you get the surprise of a lifetime. And that can be very expensive.

Axel Meierhoefer: 11:55

Yeah, that last part, what you just said, Mark is probably the most likely for our clients and myself. I mean, I always say, you know, the only biggest mistake you can do in real estate investing is selling when it's. So you basically might have to, especially in these times, and what the foreseeable future looks like you might come to a point and three, four years ago, from now to refinance into something more reasonable again, which is important to know, for people, that's not the same like selling, right, because most contracts, say you can sell and then pay off and there is no penalty. But if you just refinance, it's important to realize if there is a penalty or not, so yeah, I agree that that's important. Now, one thing that people in, you know, obviously, since I was a member, or as I just learned, I still am a member of a credit union, think that the money that is being used not just for investments, but for car loans and other things is basically coming out of the pool of the members. Is that true for investment loans, too?

Mark Ritter: 12:55

Absolutely. Well, that's the nice piece with credit union. And as we think of the holiday season, when you hear about Buy Local and Small Business Saturday, and the benefits of shopping locally, it's really the same with credit unions, typically, for every dollar of deposits, credit unions will lend out about 85 sets. So they're not going and borrowing from Wall Street and expensive rate to lend to you. They're lending out the local money from your community. And the more deposits they put in their community, the more that they could lend out locally, to your real local real estate community. And it really becomes a cycle. That's good for everybody.

Axel Meierhoefer: 13:40

So theoretically, since you're using your own money, you wouldn't have to use Jay Paul rates, right?

Mark Ritter: 13:46

Yes. Yep. Yes, yeah, it's nice. And when you look at credit unions, historically, they typically have the lowest cost of funds from any financial institution, banks or other lenders. Because of that, they're typically not highly leveraged out, and they're borrowing with the deposits there, which are generally a lower cost for them, which can be passed on to people.

Axel Meierhoefer: 14:13

Right, right. Okay, that's cool. And then the last prepared question that I had about that aspect of getting financing from basically your organization or credit unions is, and this is going a little bit more towards the general situation that my clients and I experience in funding for investment properties, it appears and maybe I'm just dreaming that we live in a day and age with advancing digitization and stuff like that, where it should be possible that after I went through that first painful process that you mentioned, and I think everybody understands when the relationship is fresh, you have to basically provide everything at least for the first time, but what I find maybe it's a little bit the pet peeve, but I find it unbelievably annoying that the information I have provided the last two times for applications for loans are being asked down to my social security number and my living address and my mailing address and my phone number and stuff like that, which basically makes me and I know several of our clients feel like this supposedly interest in a relationship that both sides like you mentioned yourself, typically claiming to be looking for is one sided, because if it were both ways, why would then my partner constantly asked me, you know, what's your first name? What's your last name is I thought we know each other. I thought, you know, my birthday. Like I gave everything to you, you know more about me than most other people that I call my friends? Is there a way or a future? Or are you maybe a little different, where you say, Okay, we gather the information, and we put them where we can reuse it. So we don't force an applicant who is already a member through the same painful process over and over and over again?

Mark Ritter: 15:59

Yes, absolutely. And the good news is, you know, the only thing that we deal with in my business is investment property. So we have a little bit more flexibility than the Residential Mortgage world where it's in people's homes, and it's sold on the secondary market, I think I'd pull my hair out if I was in that business, we have spent a lot of money on technology, so that when we get those second, third, fourth, fifth requests, we're really just looking for update, and give me what we have and can build off of it. Because yeah, that is brutally painful for everybody, if we're just recollecting the exact same information. And because we actually store it all electronically these days, it's really superfluous for us to ask for the same information over because all we're going to do is drag it over the same files that we had in place. When I hear stories like that it's as frustrating for me as it is you just because you're talking to the same person, and you're giving people the exact same information every single time.

Axel Meierhoefer: 17:07

No, absolutely. And the main point that makes it so hard to swallow is that when I asked and I'm the kind of person who is pretty direct and straightforward and asking, Okay, why do I have to do this? And the answer is almost every time and it's not just one lender, it's across multiple lenders, is when you bought your last property 13 months ago, you said, Yeah, I mean, I admit that, but my life and my situation hasn't changed. And I'm not saying when a lender says, Okay, we want to see your W two, I want to see your 1099. And we want to do your tax return, I don't think anybody has a problem with that, as long as it is only either uploading it or emailing it, because I know anybody who keeps their stuff reasonably organized has that. But when you ask to fill out all kinds of forms, that's when you start questioning their relationships. So I'm totally with you. What other things that we haven't touched on, do you want to point out that, you know, it would be attractive for people to say, Hey, I should get in touch with Mark and figure out if I can qualify?

Mark Ritter: 18:08

Yeah, we really like to work with people from the smallest up to large, massive multifamily properties. Our largest loan this year was$38 million. And our smallest was, you know, under 100,000, for properties and credit unions, by their nature want to lend regional. So some people may say, as a lender, we only lend in these cities in these areas. But that's not how investment works. Sometimes you have good deals in smaller markets or country, you know, rural properties. So our lenders want to lend in those areas. It's more about helping you grow and making good decisions for the cooperative as it is for anything else, because we're not managing our business to sell it or make the earnings per share number. So I always kind of joke, if I went to a bank, I'd probably get fired in a first week. Because I tend to be more casual and relationship based. So really, we think we're a fair deal. And maybe you lend or buy property in multiple marketplaces. And that's where, you know, because we work with so many credit unions, we can match you up with the local lenders in that area, because there's 5000 credit unions in the area and but that can be a frustrating process to search for everybody. So we try to be an aggregator and bring everybody together.

Axel Meierhoefer: 19:36

Yeah, absolutely. And I think that's very helpful because people like to have a relatively small core group. I mean, that's our business. I'm mentoring people in the investment world and they basically appreciate besides the educational side, they also appreciate it I connect them to the margaritas and the other lenders and property providers and stuff like that because they are I existing relationships that have proven to be good. And the people that we're working with are trustworthy and stuff. And I don't want to say it's a shark pool out there. But if you can fall into traps, and if you can avoid it, it's definitely advisable.

Mark Ritter: 20:14

I'll say it's a shark pool out there. So and this is my business.

Axel Meierhoefer: 20:18

Okay, cool. So I always ask two questions at the end of the podcast. So I want to ask you to if you could meet anybody, who would it be in why?

Mark Ritter: 20:28

If Ican meet anybody, I would love to go back and sit in Albert Einstein's office and just suck in the knowledge of what was going on for science and research in history at that time.

Axel Meierhoefer: 20:43

And was that still in Europe? Or in the US? In the US? Okay. Yeah. All right, then he had already a lot that he brought. Yes. But I mean, he probably always had it. He just hadn't put it on paper. But yeah, no, that's good. Okay. And then the second question is, if you had a time machine, you could go forward, backward anywhere, you know, what, you know what? You can change the space time continuum, where would you go and why

Mark Ritter: 21:09

I would go to the early 1800s. Okay, and why? Because there's nothing more than I would like then to get rid of my cell phone and some technology in the world. I love to hike, I love to fish. I love the outdoors, and the lack of stress that brings into the world. So to spend a little bit of time, just enjoying nature. Now I realize there's probably a lot of conveniences I have today that I missed, but I would love to, to live in that time period and spend some uninterrupted time outdoors.

Axel Meierhoefer: 21:42

Yeah, that's pretty cool. I mean, for that, I actually just recently said to my wife, because we were dealing with some international transactions. And I was saying I still remember because I was in the Air Force. And I came over to the US to an exchange program. But we obviously wanted to keep the ties to the family. So they had at the time 16 to 20 digit numbers that you had to put into your phone, not a cell phone, a regular phone, then the actual number. And the whole thing was that because of that number, your rate was like $1 a minute instead of $2. A minute, right. And now we do WhatsApp around the world with people all over the place for free. You know, but I hear your point that, you know, you can get too much of fundamentally good thing. So yeah, that tranquility would be probably really amazing. So I think you gave us a really, really good idea of how basically investment lending in credit union environment could work. How can people get in touch if they actually want to follow up and say, Hey, maybe I should try that instead of being annoyed with filling out the same forms 100 times?

Mark Ritter: 22:53

Sure. The easiest way to connect with me is my personal website, markritter.com, M A R K R I T T E R.com. And from there, we'll connect you with one of our credit unions. And if we don't have any credit unions directly in that area, we have relationships all over the country where we'll match up with a local lender and get you started.

Axel Meierhoefer: 23:17

But just as a quick follow up, does it mean that the person who wants to do that already have a property in mind? Or could they just get in touch and get started without the property?

Mark Ritter: 23:28

We would love to get to know you a little bit so we're ready to pull the trigger for that next property of yours. Or if you want to see how our programs compare with your existing portfolio. Now that would be a wonderful conversation.

Axel Meierhoefer: 23:41

Awesome. Yeah, exactly. I always advise that you know, if you really want the relationship, and you mean it and the best days today, yes, absolutely. All right. Cool. Well, Mark, thank you so much for being on the show, you provided tremendous value. So I really want to thank you for that. And maybe we can do it again sometime in the future.

Mark Ritter: 23:59

Absolutely. We'd love to talk as the market is crazy marketplace changes.

Axel Meierhoefer: 24:04

Absolutely. Thank you. Thanks for listening. And I hope you enjoyed today's episode of The IDEAL Investor Show more info and the links we mentioned during the show in the show notes or you can go to our website at Idea wealth grow a.com and sign up for the Apple podcast link. And if you'd like to talk to me sign up for a strategy call. Hopefully you want to share what you learned with your network and bring more people in we are really eager to hear your comments and until next time, be well stay safe and ciao.