MARK…. MY WORDS – A PRIVATE MONEY MORTGAGE BROKER’S DIARY OF DIFFICULT DEALS (Part 1)
By Mark Robbins, J.D.
As many of you know, being self-employed is not an easy task by any stretch of the imagination. I have certainly worked for both small independent companies as well as large corporations throughout my various careers. I’ve worked for the Bank of America’s of the world as well as private real estate development companies and smaller private mortgage companies. I’ve seen both sides of the employment spectrum. Every experience has its own set of positives and negatives. I eventually decided it was best to pursue my career as a mortgage consultant on my own terms.
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It’s been a very challenging endeavor to navigate the world of real estate financing in the private sector as opposed to the more conservative world of conventional banking. I chose the commercial real estate marketplace for two main reasons. I enjoyed the variety of each unique transaction. Whether I was helping a client finance a small apartment building or purchase a retail shopping center, the challenge was never the same. Secondly, financing mortgages strictly for home purchases or refinances involved too much of the same thing repeatedly.
Lending Resources Group Incorporated was born in late 2007 and licensed by the State of California in May 2008, just before the “Crash,” now known as the Great Recession of 2008. It seems like my career path has been dictated by the ups and downs of our economy over the past four decades. Ever since I graduated from law school and sought a job in the financial industry, I have run the gauntlet of the financial markets’ highs and lows.
GAS STATIONS?
When I was starting out with my own corporation in 2008 under the name Lending Resources Group Inc., I needed to find a source of leads for people who needed my services. I found a company that sold leads, so I subscribed to its service.
One of those leads was an individual who owned Shell gas stations. He wanted to purchase two more stations that were up for sale. After three months, I found a lender that approved a $2 million loan to meet his request. Unfortunately, the client had a heart attack. The good news was that he survived; the bad news was that he had to turn the loan down because his doctor told him he needed to reduce the stress in his life and, therefore, shouldn’t buy any more gas stations. Ugh! What can you do? Absolutely nothing—you just move on.
I had another client approved for a loan to purchase a gas station in Los Angeles, but that came at the same time the stock market crashed and banks were hit very hard in September 2008. Many had to close. One of the banks that closed was the one that had approved this gas station loan. So there I was again, working hard but not earning much of a living due to the investor’s health problems as well as world-changing events.
Disappointing? Yes, but that’s life. Those events didn’t deter me from my goal of building a lasting commercial mortgage financing business. Now that I’m writing this, it’s been a challenging task to chronicle my early days of starting my own mortgage company. After all, that was nearly twenty years ago. I didn’t keep a diary of the deals I was working on. Suffice it to say, I took whatever came along and used my know-how to find solutions. My memory still serves me very well, allowing me to recollect some of the more memorable loan situations I faced.
I was barely scraping by, especially with the onset of the Great Recession. I was lucky in one respect. Since the banks were hit so hard by the economic downturn and because I had a sizable mortgage on my primary residence, they left me alone. This bought me the time I needed to build up my business and, in the interim, see what solutions the banks were going to develop, if any, to assist borrowers like myself. I eventually did receive a workout solution for my home mortgage. I was able to straighten out my financial affairs and stabilize our living situation while building my new business.
NON-RECOURSE LOANS
Business was hard to come by, considering we were in a recession just as I was trying to get my company off the launching pad. Somehow, I was eking out a living. I was very motivated to help people achieve their real estate financing goals. One steady stream of income I developed was specializing in helping investors obtain non-recourse loans (loans without a personal guarantee) when purchasing real estate with their IRAs, trusts, or Solo 401(k)s.
Back in 2004, three years before I started Lending Resources Group, I was introduced to the Founder and Chairman of Pensco Trust in San Francisco. Pensco was one of the largest IRA custodian companies in the U.S. It later became Pacific Premier Trust and moved to Denver when the Chairman retired. This was during the time I was working as a mortgage broker for CTX Mortgage, a division of the Centex homebuilding company based in Dallas, Texas.
The Chairman suggested I investigate this type of mortgage because no one in the U.S. was offering it at that time. Four months after that meeting, a small bank in the Midwest introduced a non-recourse mortgage loan program for people who wanted to invest their retirement funds in real estate and needed a mortgage to complete the financing. This allowed investors to purchase one-to-four-unit properties with their IRA retirement funds without personally guaranteeing the loans. This was required by the Internal Revenue Service because the retirement funds had not yet been taxed. The IRS did not want its tax interest in those funds involved in any transaction that required a personal guarantee. If the investor needed to access those funds in the future, the IRS would then receive its taxable share.
Prior to 2004, if someone wanted to invest retirement funds in real estate, they had to pay all cash. There was no such thing as a non-recourse mortgage for residential real estate investing before 2004. As a result of this new product, I slowly began to find clients, mostly through referrals and word of mouth, while working for CTX Mortgage and working hand in hand with Pensco. They were a great source of referrals for me. By the time I started my own mortgage company, I was becoming better known for being able to arrange these specialty loans. That has continued to this day. These loans have provided a helpful supplement to the main portion of my commercial mortgage business.
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BURBANK BUILDING – MONTH TO MONTH LEASES
Getting to the heart of what I have dealt with over the past twenty years is best described through some of the more unique situations I’ve had the opportunity to be part of.
In my constant search for business, I found another client who was having trouble refinancing his property, an office building. He needed to pay off his existing loan and obtain enough money to make much-needed renovations to the building. The property was located in Burbank, CA, and comprised thirty small office units. The client needed $3.5 million to pay off his current debt and obtain an additional $500,000 to make improvements. I remember searching high and low for a lender for this client but constantly running into rejections because the tenants were on month-to-month leases. No lender I found was willing to lend that much money without the assurance that the tenants would maintain longer-term leases.
The positives of this transaction included having a motivated client who wanted a new loan. He also had good credit and a solid income as a certified public accountant (CPA). Moreover, most of his tenants had been in the building for many years, and occupancy was consistently at 90%, even though the leases were only month to month.
In my dogged pursuit of a loan for this client, I found a reputable brokerage firm in Los Angeles that had connections with several private banks. These were the kinds of connections I couldn’t possibly have had, having been in the private money business for only three years at that point. The year was 2011, and coincidentally, I had to be in Burbank for a family celebration. I also scheduled a visit with my client to further strengthen our relationship.
The affiliate brokerage firm’s private bank ultimately provided the loan my client needed. We co-brokered the transaction. It turned out to be my first five-figure paycheck since starting the company. More importantly, it gave me the great satisfaction of overcoming a very challenging loan request and helping this client achieve his goal of refinancing his office building—something no one before me had been able to accomplish. It was a true feeling of accomplishment!
Meet Mark Robbins
Mark Robbins has pioneered non-recourse financing for IRA investors since leveraged financing became available to the public through a small bank in the Midwest in 2004. Since that time only a few select banks even offer these loans. He has established and maintained relationships with these lenders over the past twenty years.
Mark has obtained non-recourse loans, per IRS regulations, for numerous real estate investors in more than 30 states including Hawaii. Mark is a preferred provider for many of the IRA servicing companies including the Equity Trust Company, uDirect IRA, the Provident Trust Group, Entrust and many other IRA custodial and administrative providers for clients who require non-recourse financing for their IRA funded real estate investments.
Mark graduated from New York University in Bronx, New York with a B.A. in History and Western State College of Law in Fullerton, California with a Juris Doctorate (J.D.). Mark is an entrepreneur and has operated several different businesses over the past forty years including a division of a major commodities investment firm, his own hi-tech executive search company and presently a commercial real estate mortgage brokerage company known as Lending Resources Group Inc. that he founded in 2007.
He has been a real estate investor and developer having designed and built four homes since 1982. He became a mortgage banker in 2002 with Bank of America and went on to work for CTX Mortgage, a division of the home building company, Centex Corp., in Dallas. Mark was recruited to start an in-house mortgage division for a popular townhome development company in San Francisco in 2006. That firm dissolved in the wake of the financial crisis in 2007=2008. During his tenure in mortgage banking, Mark has generated more than $120 million in residential and commercial mortgages for homeowners and investors nationwide.
If you have any questions about how to invest your IRA in real estate, please contact Mark at 415-309-1803 or by email: [email protected]. You can also reference his website at: www.lendingresourcesgroup.com.
