How Hard Money Lending Helps Real Estate Investors Scale Faster | Monument City Capital

Shaun Magner (00:00)
And that was scary. and it speaks to her character tremendously in that she stood by and she said, “I believe in you, I know you’ll get out of it.” 18 months later, I went from neg— it was almost $300,000 between credit card debt and a private loan for my private lender that was interest-only with no collateral, no way to pay it down. Eighteen months later, we went from negative almost 300 to positive two two hundred plus. And the— the plan worked. But good God, it was a lot of time, it was a lot of work. I had to swallow my pride, my ego ho— took a check, I had to sell properties I didn’t want to.

Issa Hanna (01:35)
Welcome back to another episode of the Real Estate Pro Show. Today I have somebody who is helping empower investors by raising capital so that they can scale their businesses to where they wanted to go. Everybody, welcome Shaun Magner. Shaun, welcome to the— the show. How are you doing?

Shaun Magner (01:53)
Great, man. Thank you so much for having me.

Issa Hanna (01:56)
I’m happy to have you. So, to our viewers, you’re in hard money lending, can you please break down a little bit more about your business?

Shaun Magner (02:06)
Sure thing. So I— I’m based in the central Maryland area outside of Annapolis. I’ve been at it for about a little over a decade now. But I run what’s called Monument City Capital. And we are a private boutique direct hard money lender. We service all of central— all of Maryland and parts of South Central Pennsylvania, you know, offering fix-and-flip, buy-and-hold, short-term interest-only loans for, you know, real estate investors that are buying and renovating properties and or renovating properties. And we’re also structured as a fund, and as part of that we raise capital. So we offer a pretty— pretty solid investment vehicle for capital investors as well. So that’s what I do on a daily— on the— on a daily basis. but we’ve been in the real estate investment space, different assets or different facets of it for over a decade now.

Issa Hanna (02:50)
Beautiful. And how’d you get started in— in our business? How’d you get started in the lending business? And— and you know, in our previous conversation you also own a portfolio of rentals. So where did young Shaun get started? Where d— when’d you get bit by the bug?

Shaun Magner (03:03)
Sure thing. So like many, if you probably can’t see it, but over my shoulder is the original print of Rich Dad Poor Dad. I was gifted that book at the turn of the century, about twenty-some years ago, I was gifted that book and it was a bit of a paradigm shift, right? I realized the difference, I learned the difference between assets and liabilities. And I always knew that corporate route wasn’t gonna be my thing, but I had to do it for a time. So I was in building material sales, sales management, ultimately sales leadership for different manufacturers over the years, ultimately leading to some time and financial flexibility that allowed me to start a side hustle back in twenty fourteen or fifteen, twenty fourteen actually, that I then turned into a full-time thing. I started buying fix-and-flip in Baltimore, and then started building a rental property portfolio, predominantly long-term subsidized rentals in and around Baltimore City. We own some stuff in the city and the surrounding counties, Pennsylvania, Airbnb in Ocean City. We’ve got a little more of a diverse portfolio today. But then in 2021, I took advantage of some historical interest rates and I was becoming a father that year. So my decision-making couldn’t be so selfish as it had been over the years. and so I decided I was re— I refinanced about thirty or thirty-five of my properties, pulled out a significant six-figure nut, you know, put pr— no no taxes. And so I decided I was considering what I wanted to do. And I could have— I and I did consider just, you know, self-funding my own deals and driving down my cost of capital as a result. But I decided I wanted to maybe entertain throwing a new fishing line in the water. And so I sat down with a lot of people, asked a lot of people what they were doing, what they would do. you know, crypto was on a big run that year and there was a lot of options. and the two people that resonated most with me, both from their income, their personality, their lifestyle, were hard money lender friends of mine. And so one of them offered to show me the ropes and peek— let me see behind the curtain and help me build my business in the image of his. And so I struck while that iron was hot and that’s kind of how I got into hard money and I— I kinda got into the— the real estate thing. you know, the barrier of entry is very low. I didn’t go to a four-year institution, so I didn’t have the credentials to get into something, you know, more sophisticated, and though so I got into hard— or I got into the— the residential real estate business back because I was in construction, right? That was the field that I came from. and so it’s— my whole life has been building in businesses— or I’m sorry, building in construction and and residential properties. And so even before the— the corporate career, I went to a small trade school in Pennsylvania, got a degree, believe it or not, there’s an Associates of Applied Science with a major in carpentry. It’s a real thing. Proud to say I sit on the board of that school and I have a scholarship back at that school now. but it was a— it was that place means a lot to me. And so, you know, construction has always been my thing. so that’s kind of the— the one-minute blurb of my la— the last twenty years of my life.

Issa Hanna (06:41)
Well, you’re a— a blue-collar guy, you built it from the ground up. You struck while the iron was hot, which kudos to you because a lot of people don’t take that, you know. They— they— they maybe sit on it and and let that opportunity pass. You were able to get a mentor who was able to show you the ropes and like— like you said, mold— molding in his own image. So kudos to you, man, for being such a hard-working blue-collar, you know, you built it from the ground up guy. And a lot of guys start in construction and get into the real estate, and the construction guys always do well because you guys know how to look at things. You guys know what stuff costs. So definitely, definitely applaud that. Great, great origin story. I’m— I’m always interested to hear people’s origin story. I want to hear a different story now from you. I want to hear a time where things went bad, an investment, maybe a real estate nightmare that you had to overcome. find a— our viewers love hearing that too.

Shaun Magner (07:41)
I’ll give you the best one that I that that I can think of. So it was tw— I twenty seventeen, twenty eighteen, twenty nineteen, somewhere in there. Now it’s— it’s seventeen, eighteen, somewhere in there. I was really growing my hard— or my— my rental portfolio. I was still working a W-2 job in sales and in sales leadership, but also, you know, building, you know, renovating properties and building a portfolio and a flipping business. And admittedly, I took on too much debt. I got out in front of myself. I found myself in some of the projects— this is a tip that everybody should know: construction always goes over. I can count on probably one hand the number of my projects over the course of hundreds of deals that the construction budget came in under or at budget. So they always go over. and as a result, your hold time tends to go over. So your carrying costs tend to go over. And so it started compounding. My first year out, I bought 18 rental properties and I was off to the races. We were going pretty hard. This is back before people were doing a hundred single-family houses in a year, right? The DSCR market would— didn’t exist. I had to go to banks for— for long-term loans. So anyhow, I got out in front of myself and took on too much debt. And I had— there were— there were some sleepless nights in there, so such that I had, I mean, the stress that I was taking on was too much. It was manifesting physically. Believe it or not, I had like a white spot on my beard here, and I was at the dermatologist for something else, and she said, “What is that? How long has that been there?” I told her what it was. She grabbed it and tugged on it and she said, “Are you under a lot of stress?” I’m like, “Lady, if you only knew.” She goes, “Get rid of some of the stress and it’ll come back.” I thought, “No way.” So I went out and sold ten of my— five duplexes, ten of my problem children, if you will. Got rid of those, paid down some debt, and sure enough, the stress started to— to subside. But I also had my— I was having I had two panic attacks during that time, which if you don’t know what a panic attack is, I didn’t. It feels a lot like a heart attack, freaked me out. And so, one of them, my now wife, what we were laying in bed one evening and she— and she s— witnessed it. It was crazy. But there were countless nights that I would lay next to her, staring at the ceiling, burning a hole in the ceiling with my eyes, lying to myself, lying to her, and letting it— letting it be known or letting it seem as though everything was fine when it wasn’t, which I’m sure anybody listening to this has had that experience before. If you are listening to this show and you’re the type of person that consumes this content, you’ve been there before or you’re going to be there if you haven’t yet. And so, I set out a plan. I took the Excel spreadsheets and I’ve figured out a plan, but I had to, and this is to your question, this was the most difficult time. It was twenty nineteen and I was going to propose to my wife, and I couldn’t propose to her in good faith without her knowing this. So I had to craft the plan of how I was going to get out of it, and then I had to present it to her. but I haven’t made the same mistake. And now as a lender who underwrites, I can see when people are in the same situation by running their credit and listening to their story and looking at their REO schedules and understanding what they’re doing. I can see when they’re in the same thing and I can help to them to— to avoid it. I’m not a credit repair guy, don’t get me wrong, but I can also— I, you know, I can kind of see the— the road ahead because I’ve been down that road. So I would say that’s probably one of them. There’s another story that I have that’s more recent. Last year, Baltimore— I won’t go into it, but last year Baltimore experienced a big fraud case. It’s known nationwide, a big appraisal and mortgage bank fraud. None of my borrowers or myself were involved in it, but a lot of the long-term lenders pulled out of Baltimore, causing some disruption in the market. And as such, one of my borrowers defaulted on a few deals that I had to take back. And so that’s kind of par for the course. that’s gonna happen. What I’m proud to say though is that none of my investors realized an interest distribution disruption, nor did I lose a penny of investor capital. So, but back to some stress and some not sleepless nights because now we’re conditioned for it. But you know, this— this business is not without those, man. It’s not without those times for sure. And you know, I— I joke and say, “How do you get the big muscles? You go to the gym and you put in the reps.” And sometimes you tear muscles and you have some aches, and that’s what those times are.

Issa Hanna (12:14)
Definitely. And you— you— you know, the way you were able to craft that plan, I always say you— you never go to war without a war plan, right? So you went to war with your debt, and you defeated it in eighteen months. and I can definitely attest, and I know a lot of our viewers can, the weight of debt on you is a physical thing. So I can definitely relate to that, Shaun, and— and I applaud you for being able to cut some properties loose that maybe you didn’t want to, but the plan worked, and definitely wanna applaud your wife because she— she saw that you were in debt and did not freak out and said, “I love you. I wanna be with you still.” So shout out to her, man.

Shaun Magner (12:59)
I would— I would challenge she probably did freak out a little bit, but she at least stuck with me, right? I’ll tell you just to give a little more context for that, that eighteen-month turnaround, man, it was— I was still working the W-2 job. I was speaking for an investment, a real estate investment education company on the weekends, traveling to speak for them, coaching for that company during the evenings, and doing active deals, all in an effort to get out of that debt. So I mean, I was working around the clock. It was non-stop. But I knew it would be worth it. I had to get out of it. But and I, you know, to say I would change that time— of course, who wants to go into that debt and deal with that stress, put that stress on my family? Nobody wants to, but I think I’m a better entrepreneur as a result.

Issa Hanna (13:41)
Definitely. I mean, when you’ve been through something like that, you know, not a lot of people have been there. So when you get out of it and you know the exit strategy for it, it definitely helps. and it also goes to back to your, you know, you are the owner operator of your lending institution. You’re a direct lender, you are the guy. So you’re not these big box guys that, you know, like you said, the fraud case in— in Maryland and you know, a lot of people pulled out. None of your people were affected and that goes to show a lot of times the— the boutique lender or the guy that, you know, the— the— the guy that owns and operates the lending institution will do a lot more for you and will care a lot more for you than somebody who’s who— who’s just, you know, a loan officer with a big box bank. So just a little bit of word of advice for that. And I’m sure you would agree with that, Shaun, right?

Shaun Magner (14:27)
Right, absolutely. Yeah. No doubt about it.

Issa Hanna (14:34)
What does the future hold for you, Shaun?

Shaun Magner (14:37)
Future’s bright and I’m excited. I’m also a little scared like many with r— with AI because it’s above my head. I’m trying to learn it and embrace it and use it everywhere that I can. But what does the future look like specifically? We’ve got some growth goals for the fund, for our hard money business. but I’ll tell you this: after about three to four years now, if we hit our goal, I don’t plan to go bigger. I’ll— I’ll work on systems and— and processes and adding horsepower and such along the way, but I like the idea of maintaining a little bit of a lifestyle business. I’m not one of these that— that thinks— that believes in the— the f— the fallacy that there’s a work-life balance. I don’t believe that. I frankly don’t. I am my business, my business is me. I wouldn’t have it any other way, in fact. I’m proud of it, I love it, I’m proud that it’s a part of my identity. There was a time I probably wouldn’t have said that about a corporate job, right? I don’t want to be identified as some sales guy. That just wasn’t my thing. but we’re growing and I wanna get to the point that when we scale and we run our funds to the— we hit the number that we’re targeting, I don’t want to go much bigger. That will allow me to reinvest back into the business a sizable enough money to hit my retirement goals and still eat well along the way for both me and all the members of my team, and still run a l— you know, not— not have to work around the clock. So, you know, I don’t have grant— I haven’t bought any real estate in a few years. I might get back to buying real estate, but right now my focus is on gr— the growth of the— of the hard money lending business and the fund that supports it. but that’s really what— what the future holds.

Issa Hanna (16:48)
And you know, I wanted to ask people about the— I wanted to ask people about the hard money lending fund that you’re the 506(c) that you’re trying to raise money for, raise capital for. Can you go and do shed some light on that?

Shaun Magner (17:04)
Yeah, happy to, and thanks for asking because there’s two different ways. I’m in a— I’m in a local— not local, it’s a nationwide, but a couple of my local buddies started a hard money mastermind. And it’s kind of unique because there’s not a lot of these, right? There’s not many. Like, I mean, the American Association of Private Lenders is probably the biggest, but it’s not necessarily a small boutique mastermind full of direct private lenders. there’s two main ways to collateralize investor capital, so capital investors that invest in my business, two main ways to collateralize those. One is often called a co-lender or a direct placement, whereby I assign some interest in an outstanding loan, the note, the deed, over to one of my capital investors. So both my promissory note and that is their collateral. But my loans pay off in an average of 145 days. So I’m reassigning paper often, and that’s a pain. So back in September, I started the— the— the arduous process, the grueling process of five months back and forth with an SEC attorney, and I learned a lot along the way, and I enjoy learning, and so it was really a cool experience. But I decided to— to shift to the other of the two primary ways to— to collateralize investor capital, and that is through a fund. the fund is nice for a few reasons. Number one, my capital investors are collateralized not only against one loan, but against every loan in the portfolio, because they are technically an owner of the fund. so that is— it’s a bigger, wider, safer, I think, net for them. also it allows me, since I chose to do— there’s two different ways to do an a Regulation D, an SEC Reg D fund, 506(b) and (c). B allows some non-accredited investors into the fund, but doesn’t allow me to publicly advertise and solicit the offering, you know, to the open public. I chose 506(c), whereby I have to work with— exclusively with accredited investors. I can explain that if need be, but accredited investors only, but allows me to advertise. And so I like the idea of— we’re doing some paid ads on Meta and Google and LinkedIn, and we’re doing some creative things there that I wasn’t able to do before. So that’s kind of fun for me, frankly. And I also like working with accredited because they tend to ask and challenge me in unique and different ways, which is really cool. but so the— the fund is— is that— the fund is structured in a way that our capital investors can earn greater return than they would have otherwise been. So the non-fund investor way, they’re— there I was capped at what I paid. Now we have a tier that we offer. We can also offer a direct reinvestment. So that means just compounding instead of taking monthly distributions. and by the way, oftentimes these types of funds— this is an evergreen debt fund, right? It’s just like a multifamily syndication, but that’s a single-family asset syndication or fund that has an— a start and end date. We’re evergreen. We don’t close. And so we are compared sometimes to a multifamily syndication. We’re only a— we only require a 12-month lockup, not a three-year, a five-year, or a seven-year lock-in. So we only require a 12-month lock-in from our investors. and we offer monthly distributions where these— a lot of these guys are getting a quarterly pref. And if you’ve been following the multifamily market, those prefs haven’t been paid lately, right? I mean, I’ve got a few investors that have come over from the multifamily space for that reason. and so I— I think the 506(c)— listen, I’m a private guy. I’m a real estate investor. We don’t like regulations and big big— you know, having somebody overlooking us. And here I just open the door to the SEC to invite them in. But everything we do is above board. to give you some context for that, my North Star is eighty-year-old front porch rocking chair Shaun. And when I meet that old man, I want him to stand up and say, “Attaboy, you did everything above board in the right way.” And and something else I’ll share with you is I value— aside from my loved ones, there’s nothing in life that I value more than my time and my sleep. And I don’t do dumb stuff at work to jeopardize any of them. So we— we just— we’re allowed— we can bring regs in the door because we do everything above board. There’s no issues there and there’s no hiding. So the fund is— is really— it’s relatively new. We only launched in February. We’re in the process of migrating our existing investors into the fund while also in— you know, bringing new investors on board in the fund. So it’s been a fun process, really.

Issa Hanna (21:08)
No, definitely. And what are the— regulations? How can you become considered an— an accredited investor?

Shaun Magner (21:17)
Sure thing. So the SEC defines an accredited investor in a few different ways. One, you know, putting together the— the thesis that says, “Hey, this one, the upside is, you know, maybe, maybe it’s forty percent rented right now.” And the market has a vacancy factor of seven percent. So what do I gotta do to take it from, you know, forty percent vacant to seven percent vacant, right? And— and— and looking at that, what it w— what— what would it take and how are we positioned? Where w— what’s the rent look like? Right. So that— that gets comfortable with what else is going on, right? If, you know, it’s— it’s the proverbial, “Hey, if this is the worst house in the neighborhood, can I fix it up and bring it up to par, right?” So— so I— I like those kind of deals. if it’s, you know, maybe they’ve just been a bad manager and so it needs better operations. Maybe that— that paint and clean it up a little bit, you know, putting a slurry coat on the parking lot, put— putting a face and make it look a little more like, you know, 2026 as opposed to 1997. Maybe, maybe that’ll do it. Maybe that’ll let me, you know, get higher rents and— and get there. So it— it’s whatever that is, Cody. And that— that’s the hard part is figuring out, “Hey, what’s the deal story?” And I’d look at it from a perspective of on how do I mitigate risk and I’m gonna go to my investors and say, “Hey, this is what we’re going to do there.” And the going to do, I like to put a little bit of— of conservative spin in there. So one of the— one of the projects we just bought was an industrial project in Indiana. And basically we looked at it and said, “Hey, we’ve got these four tenants that their leases are going to come due over the next five or six years. And right now we believe market rents is this number, 40% higher than what they’re currently paying.” So looking at it and saying, “Hey, if in five years we take the rents to what it is today, can— can— can we get, you know, is that conservative enough?” So we even said, “Can we make this work at ninety percent of what today’s number is in five years? And can we get comfortable telling our investors that’s the game plan?”

Issa Hanna (22:37)
So if anybody’s listening at home, if you’re checking some of those boxes, give Shaun a call, right? And then if you don’t check those boxes, the B works for them, correct? 506(b). Okay, perfect. So I think we got a good grasp on that. Hopefully the viewers at home do too. You’ve been able to build such a unique business in your own image. You’ve been able to foster tons of business relationships and and and and grow your network.

Shaun Magner (22:47)
That’s right. It does.

Issa Hanna (23:07)
For people just starting out and getting some inspiration from your story, can you give us some advice on how to grow your network?

Shaun Magner (23:15)
I’d love to. That’s where it started for me. I would tell you this. I think a lot of people do this. A lot of folks start by going to local meetups and REIA events where there’s a group of like-minded individuals that are doing some of the same things in the real estate investment space, whether it’s, you know, whatever they’re doing, right? They could be a title company, a flipper, a wholesaler, or, you know, whatever their— their— their— their, you know, path is, but their stra— their strategy is. But going to those rooms can be intimidating. Right. I remember in the beginning when I did, I w— back in the day, the Baltimore— a local shoutout to the Baltimore, they would fill a room with two or three hundred people on their monthly main event. Man, it was impressive, but guy, it was intimidating. When I was new, it seemed like everybody in that room knew more than me and they all knew each other and I didn’t know where I fit in. So I would do my own time a disservice by attending, sitting on the sidelines, listening to some speaker talk about insurance or something, getting a snack and sneaking out of there because I was just— didn’t— it was over my head. But what I learned was, and I— I was given this advice, your goal when you attend these meetings should be to add one person to your team, bite-sized. Just add one person, walk up to one person, whether you need them or not. I did that. I saw a guy, his name was Scott, and I walked up and introduced myself. And he was a hard money lender. I didn’t have a deal yet. I didn’t have a contractor. I didn’t have a realtor. I was brand new, but I established a relationship with him. We did one deal together over the course of the last 12 years, but we were still very good buddies. This is my office a few weeks ago here. So we’re still very good friends. When you attend those events, do your time a service by just taking the overwhelm away by challenging yourself to add one person to your team that night. The other thing I would say is this: if you were to challenge yourself to sit down with a realtor or a wholesaler— this is somebody that’s wanting to do it to become a real estate investor— challenge yourself to sit down with a realtor or a wholesaler once a week for the next quarter. By the end of the— the 12 months or 12 weeks, you’re gonna have 12 new sources of lead flow. More leads equals more offers equals more deals equals more money. It’s a very simple formula. But you’ve got to fill that funnel, right? Fill the top of that funnel with every way— everything you can. And not everybody starts out with a lot of disposable income to be able to go out and do paid advertising, paid marketing. So these networking events are free. Go to them, spend some time going to these things and taking action like that. The other thing I would do is every bandit sign I see in town, if you see them up on the, you know, “We Buy Houses” around town, take a picture of all of them and then set your calendar every Monday to call them all. Introduce yourself as a buyer and ask them to add you to your buyer’s list. Very simple, but you need to fill the funnel. You’ve got to be writing offers. So if you can sit down with a new person every week, you’re gonna have 12 new people sending you leads at the end of the quarter. That’s gonna produce more flow. It just is. So I would say don’t— don’t think you need to do everything all at once. This doesn’t happen. This is a result of compounding over time and— and effort. So, you know, you said— you mentioned something earlier that I want to come back to, that the— the— as it relates to the boutique experience, most people that have construction background do well in this— in this. You mentioned that. I find that most hard money lenders come from one of two backgrounds: either successful operational real estate or mortgage broker, mortgage banking, right? They come from that space. Those that of us that came from the operational real estate piece, we’re doing exactly what our investor, our borrowers are— we’ve done what our borrowers are doing. There’s no magic formula. This is real estate. It’s get rich, not get rich quick. You got to put in the reps and take the time. So take the overwhelm away. Just take baby steps. It can be done. So that— those are the— the tips that I would give.

Issa Hanna (26:41)
Definitely great tips. Don’t be shy. You go to these events, don’t sit on the sideline. You’re never gonna get playing time if you just sit on the bench, y’all. So definitely some great advice, Shaun. Now, if people are excited about what they just heard from you and want to get involved, maybe want, you know, they’re in Maryland, they to loan from you, how could they get a hold of you?

Shaun Magner (27:02)
Thank you for asking. So we’re kind of all over the socials. We’re pretty active on social. We don’t have a huge following, but pretty active on Facebook, Instagram, LinkedIn primarily. But monumentcitycapital.com at Shaun Magner or at Monument City Capital on all three of those— all the— all the platforms, actually. monumentcitycapital.com is our website. You can learn more about the loan programs and us there. And if you’re interested in investing, investwithmcc.com is our funnel for learning more about the fund. So that’s really it. The all the socials at Shaun Magner or at Monument City Capital, and then monumentcitycapital.com or investwithmcc.com.

Issa Hanna (27:41)
Definitely. And if you guys want a great lending experience, if you guys want somebody who knows the game, who’s been in your shoes before, make sure to call Shaun. He’s a guy that knows what he’s doing. Shaun, I’d like to thank for— or thank you for having— or thank you for coming on my show. And if people enjoyed this conversation with me and Shaun, make sure to like and subscribe. I talk to people every day from every aspect of the real estate industry, and you can gain a lot of knowledge from watching this show. Until next time, the real estate pros are out.