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Show Summary
In this conversation, Matt Murphree discusses the dynamics of the real estate market, emphasizing the importance of understanding market movements and economic indicators. He reflects on past economic turbulence, particularly the subprime mortgage crisis, and shares insights on how his approach to conservative underwriting has allowed his firm to navigate these challenges successfully without experiencing foreclosures.
Resources and Links from this show:
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- Investor Fuel Real Estate Mastermind
- Investor Machine Real Estate Lead Generation
- Mike on Facebook
- Mike on Instagram
- Mike on LinkedIn
- Matt Murphree’s Website
- Matt Murphree’s Email Address: [email protected]
- Matt Murphree’s Phone Number: (562) 858-9269
Listen to the Audio Version of this Episode
Investor Fuel Show Transcript:
Matt Murphree (00:00)
That’s just, that part is about networking ⁓ and knowing your market ⁓ and also networking with business owners. You hard money comes in different ways. And what hard money is, if people out there don’t know what that term means, and I think it has the wrong impression. Hard money is when you make a loan to someone based on the valuation at the income of the hard asset, which in this case is real estate.So our decisions and our underwriting is always going to be based on the income that’s driven on that asset. And the value is that you just don’t make a loan where you can’t make that payment with the revenue on that property. So that’s the key element.
Kristen (02:17)
Welcome back to the Real Estate Pros podcast. I’m Kristen and I’m here with Matt Murphree, who is the co-founder of EMAC Mortgage Fund LLC. So thanks for being here, Matt.Matt Murphree (02:27)
Thank you for having me.Kristen (02:29)
Well, EMAC Mortgage Fund, you guys do private and hard money, you guys do real estate sales. I’m excited to get into all of that, but let’s first talk about your background. How did you get into this industry?Matt Murphree (02:40)
I got into mortgages. I had some relatives that were just a click older than me, seven, eight, nine years or so. And I’d watched them as a young person. I was actually, I think I did my first intern when I was in high school. And I did an intern with Warehouser Mortgage Company, which at that time was kind of a behemoth company. That was my first exposure. I’d been around real estate, real estate development, real estate sales my whole life.being from a larger family, that I was just inspired in this direction.
Kristen (03:12)
Amazing and then so early in your career, what did that look like? Did you work for some of the big institutions?Matt Murphree (03:19)
Yeah, I did. I came up through that process. ⁓ When I got out of college, I went through the interview process and I ended up working for a thrift, the California thrift. what that is, is there was like an institutional hard money company. It was actually a bank that did harder money. And so I didn’t know anything about that. But I think the first loan that I did out of college is I think I did a gas station loan.in the Meridian District in San Francisco. And so that’s kind of an odd deal for your first transaction out of Collins. But I learned a lot. And I learned about risk, and I learned about not just residential mortgages, but I just kind of learned how the concept of where the income on the property’s gotta fulfill your payment and just the general concept there.
Kristen (03:54)
AllDefinitely. And what kind of led you to co-founding EMAC Mortgage? Where did you see the benefit of having a boutique company?
Matt Murphree (04:21)
I think you become a boutique kind of after you go through the process. After I’d worked for the thrift, I went through a whole corporate process that led me all the way to Wall Street in risk-based lending, which at that time in the 1990s, there was the proliferation of the subprime industry. And so ⁓ as I made my way for the first 10 years of my career, I’d worked for bigger bigger firms with bigger positions. And at the end of that whole odyssey, ⁓I found myself being on Main Street as opposed to Wall Street and finding a preference, being able to kind of determine what I wanted to do instead of moving with the market like that. And so we found a home, you know.
discovering the needs of Main Street versus Wall Street. And that’s kind of a, I think that’s the essence where a lot of boutiques come from. And I think you have to kind of go through that process to be effective at the boutique. You have to the background.
So that’s what you brought.
Kristen (06:12)
Absolutely. think having that background is really important and then you can adjust your strategy based on where you think people will benefit most. So talk a little bit about EMAC and kind of how you guys are structured.Matt Murphree (06:25)
Yes, so we came out of the 1990s. I started a brokerage. literally got married. My wife was my partner. We literally got married and put up a shingle on Main Street in Seal Beach, California. I just started doing loans, local loans, putting out in the newspaper. And that’s how we started. We grew it from just her and I to, I think our peak was probably.25 employees at the peak of the market. We had our own warehouse lines. We were mortgage banking. ⁓ And all along the way, we also had always done private money loans, which is essentially putting a private investor into a mortgage. And typically these mortgages are shorter term. They pay a very attractive return to the investors. So we were offering 10 % rates on mortgages along the way.
And as we evolved, we just started doing more and more of those transactions and developed a bigger investor base. And that’s ultimately what brought us to the EMAC model, which is we decided to turn that smaller concept into an actual mortgage fund.
Kristen (07:33)
Amazing. And you guys have real estate sales as well, kind of the other side of it.Matt Murphree (07:38)
Yeah, Lorette runs that side of it. ⁓ She’s impressive. She does a lot of coastal, ⁓ higher end transactions. She’s based out of Seal Beach. And she’s also, she has an interesting position with the National Association of Realtors, because she’s the ambassador to Holland and Belgium. So she does lot of international travel. She also represents a lot of international clients. And that’s a unique angle that we have as a company with those relationships.Kristen (08:08)
Yeah, talk a little bit more about that. You guys are worldwide. imagine each state, each, certainly each country has its own regulations. How do you navigate that?Matt Murphree (08:13)
Yeah.I mean, that part’s ⁓ handled wherever the transaction’s being done. We’re always, either it’s us knowing and understanding our marketing in California or the United States, or ⁓ in the case of doing a deal in Europe, you’re gonna have sources there to vet out the regulatory aspect of it. The unique thing is, Loretta’s a dual citizen, so she’s Dutch originally. She came to the United States ⁓ to play field hockey at Northwestern. So that’s her background, and then she… ⁓
Kristen (08:46)
Mm.Matt Murphree (08:48)
ended up with a dual citizenship and that’s why she’s able to navigate that role with the National Association of Realtors.Kristen (08:56)
Very cool, and you guys have 20 million in management, correct?Matt Murphree (09:00)
Yeah, we’re just about under 20 million in management and that’s in loan servicing and assets that we manage.Kristen (09:07)
Very cool. mean, I think that’s really impressive. You guys have been able to scale that really well. ⁓ And you’ve been in the game for a long time where you’ve definitely seen turbulence in the market. You’ve seen it go down, go up. How has that been? What trends have you seen? And kind of what’s your breakdown of where we’re at today?Matt Murphree (09:26)
Yeah, you the market moves in big gestures, right? So you have low interest rates and that drives a refinance market. Or for example, the biggest turbulence we’ve ever seen was when we had the proliferation of the subprime market which drove real estate valuations up that peaked out in 2007 that led to the Great Recession. you ever saw the movie The Big Short, you saw some of the elements that created that. ⁓And we were able to navigate that because we understood the market. We also understood what was happening to the market in terms of we knew that there were problems and we knew there was going to be an implosion. I think most people, if you’ve been around long enough, you’re just kind of waiting for something to happen. And so we gauge that appropriately in terms of the private money side. We were never exposed to a huge back, you know.
backlash in terms of valuations because of how we underwrite our deals. And that’s true moving forward. So literally in our 20 years, we’ve never had a foreclosure in our private money category because we’ve anticipated the market and we’re also very conservative. But at the same time, we offer a very attractive rate.
Kristen (10:33)
Bye.Yeah, yeah, talk more about how you guys are able to pick winners. I know that’s a big strength of the company.
Matt Murphree (11:23)
That’s just, that part is about networking ⁓ and knowing your market ⁓ and also networking with business owners. You hard money comes in different ways. And what hard money is, if people out there don’t know what that term means, and I think it has the wrong impression. Hard money is when you make a loan to someone based on the valuation at the income of the hard asset, which in this case is real estate.So our decisions and our underwriting is always going to be based on the income that’s driven on that asset. And the value is that you just don’t make a loan where you can’t make that payment with the revenue on that property. So that’s the key element.
And you just got to cast the fishing net out there. We drive most of our business from real estate relationships. It is retail. So we have the relationship with the borrower.
And I think that’s another key component of having a successful performing asset is that we have the relationship with the borrower and also with the investor. A lot of companies out there are taking third party deals and for a referral fee. They really don’t have that relationship with the borrower. So that’s a huge component to.
Kristen (12:39)
Absolutely, I mean, I think that’s it’s a really good breakdown. ⁓ Talk a little bit more about, you know, what makes you guys a better choice than the bank? We kind of like touched on that, but how do you guys work with people? How hands-on are you? Do people come to you with a plan or do you kind of create it with them?Matt Murphree (13:02)
Yeah, no, I I underwrite all the deals. I also underwrite for family offices. And I’ll be sometimes approached by other lenders that will, because I’ve been doing it for so long and I’ve sat on loan committees for banks and we network a lot. There’s no one that’s specialized in all of the categories of lending. So like some people are very specialized in industrial.they’re gonna understand the lease is better, they’re gonna understand maybe elements to the property relating to the type of business. mean, that’s not us. We stay in our lane and that’s staying in the component basically of properties and related commercial and residential kind of in the stream that we understand best. Hopefully I answered that right.
Kristen (13:51)
Definitely and you guys now have a fund as wellMatt Murphree (13:55)
Yeah, the fund started six years ago. So here’s how that works. We do two types of investments. Investment number one is when we take a private investor and we actually put them in a trust deed loan. So essentially the investor’s name is on the deed of trust on the property we’re securing. And those investors typically have a bigger checkbook to write. They may need to come up with a half billion or a million dollars at a time.we are able to sometimes put multiple investors on those transactions. But the idea and the concept of the fund was we wanted to be able to offer our fund to people that weren’t willing to write the bigger checks. The minimum in on our fund is $50,000. And also the concept of risk is different. For example, if we’re putting an investor on AD to trust, that investor is underwriting the transaction.
They’re signing off on the risk and they’re taking the collateral with their name on it on one loan. In the mortgage fund, it’s a little bit different because you’re investing in the fund and so you’re investing in a pool of loans. So it’s kind of like putting your eggs in a basket. They’re not underwriting the deal. They’re relying on the criteria that we describe the fund as. So for example, the loan to value or loan.
risk is something we discuss with all of our investors.
So they’re agreeing to the terms of our underwriting criteria and then they’re betting on a pool of loans. So the concept is if one loan goes bad, you’re only losing a little bit versus if you’re invested in one loan and the whole thing goes bad. We try not to make loans that go bad and we’ve been lucky there. ⁓ So that’s not an issue. ⁓ Also another difference between the fund and the
Kristen (16:12)
Mm-hmm. Right.Matt Murphree (16:23)
trusting investors is that we are able to capture a higher market rate, I think, in the pool of loans. So for example, last year we paid 9.46 % to our investors net. And we were able to do that because we have a mixture of loans. Typically in shorter term loans, you might have a higher APR because you’re charging points and you’re churning that money.faster, excuse me, versus a deed of trust loan where you’re going to be in there for a term of time. So a lot of times we’ll actually capture a higher rate in the fund than we do on our deed of trust loans.
Kristen (17:04)
Definitely. And I’m sure you deal with the same, you know, types of issues every day. What are some misconceptions that people have just about borrowing money?Matt Murphree (17:16)
⁓ That’s a good question. Well firstly, we don’t make loans to consumers. So ⁓ I think out there like when we talk about making hard money loans, sometimes people think that we’re making loans to individuals and we’re charging them an excessive interest rate. ⁓ When we actually, we’re making loans to businesses. So these are business purpose loans that we make.And there’s a difference between ⁓ the circumstances and the rules and the regulations of making a loan to a person, for example, buying their house versus someone who’s taking a loan out on a business for business purpose.
Kristen (17:53)
Right, definitely. And talk a little bit more about the people you work with and kind of how you ⁓ expand your network like that.Matt Murphree (18:01)
Yeah, we work mainly in the real estate community. And that could be with real estate agents, real estate attorneys, ⁓ really anyone working ⁓ in that space where we’re known as being the provider of these types of loans. So we network with regional and local real estate groups. ⁓ I do a lot of interaction with business groups because most business owners ⁓ have a banking line of credit.in our alternative to their banking line of credit for regulatory reasons is to provide our private mortgage side. The last couple years we’ve been getting more loans from people that have a banking relationship with one of the bigger banks, but the criteria they want, for example, these banks want the financials every quarter, or they reduce the lines of credit. They can come to us, they’re gonna pay a premium, but they’re not gonna have any of those headwinds in getting what they need or having us harp on them for like…
documents
Kristen (19:02)
Definitely. Well, it seems like EMAC is such a great option for people. Talk about kind of where you see it going in the next few years and how people can get involved.Matt Murphree (19:12)
Well, this has been a verypopular category. So we just know we have more experience than 95 % of the people in the business. Because we’re so focused in our market and in our scale, we think that we’re going to be very attractive to entities out there that want to be in private lending, private debt, whatever you want to call it.
And as we get our name out there, we believe we’re gonna create a lot of demand for what we have to offer. Sometimes I’m like sitting on a panel or someone else is pitching investors. We’re looking across the table at someone that may only have five or six years experience or they’re on their fifth company, right? We’ve been one company. Our background’s easy to go back and search. Never.
really had a problem with any of our loans and we just have a history of just delivering stellar results. We’re small, but we’re mighty and we’re looking to expand and we’re looking for good partners out there.
Kristen (20:19)
Amazing. Well, tell everyone where to find you, where to find EMAC, and how to get involved.Matt Murphree (20:23)
Yeah, if you want the background, can find us at emaclending.com. That’s emaclending.com. We’re based out of, we have two offices. One office is in Seal Beach. And my office for lending is in downtown Los Angeles. So ⁓ it’s not hard to find us if you do a quick search. And I’m always available. You can get my number and call me direct, send me an email. And I’m happy to answer any questions or…Kristen (20:41)
awesome.Matt Murphree (20:53)
information.Kristen (20:54)
Awesome, well thank you so much for being here, Matt.Matt Murphree (20:58)
Thanks for having me. Appreciate it.Kristen (21:00)
Yeah, I think that people probably learned a lot and hopefully got some inspiration in their own business, switched things up a little bit. Definitely everybody reach out to Matt, check out EMAC, and we appreciate you listening. So we’ll see you back next time. -
