March 11, 2025 • 49 mins
In this enlightening episode, we dive deep into the remarkable journey of Mark Pomeranke, a pioneering force in the hotel industry. Starting from a meager $23 credit balance, Mark embarked on an ambitious path in hotel development amidst the tumultuous period of the financial crisis. His innovative approach led to the establishment of a hospitality brand that flourished by focusing on small towns overlooked by larger chains.
Mark reveals how he creatively navigated funding challenges through Tax Increment Financing (TIF) and the significance of building strong relationships with community banks and local stakeholders. This episode encapsulates the essence of resilience and resourcefulness in the face of adversity. Through Mark's story, we explore vital lessons in entrepreneurship, community engagement, and tapping into latent opportunities within your region.
Listeners can expect ample insights on how to leverage local resources effectively while understanding the importance of community investment. This episode encourages aspiring investors to maintain a perspective that goes beyond simple profit margins, aiming to create lasting positive impacts in the communities they serve. If you’re inspired to explore the world of real estate development or want to gain perspectives on overcoming challenges, tune in to this episode filled with actionable advice and insightful narratives. Share your thoughts and experiences with us by reaching out, and as always, subscribe to stay updated on future insights!
To connect with Mark, call 920-312-4444 or email markpomeranke@gmail.com
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Hey everybody, we are here with another episode of
the Wisconsin Investor Podcastand I'm super excited for today.
We've got a very unique guesttoday, I would say at least
unique background, differentfrom anybody we've interviewed
so far, so I'm super excited.
I'll introduce him in a second.
Before I do that, I just wantto do a little commercial for
Wisconsin Discount Properties,who sponsors the show, and I
(00:23):
like to feature a deal of theweek that maybe you're on our
list, maybe you're not, but justto share a little bit about
maybe something you missed outon and maybe it'll motivate you
to get in the game if you're notcurrently.
So the deal I'm going to talkabout today was a property we
had out maybe a month or two agoin Oshkosh.
It's a mobile home, so not thesexiest of properties out there.
No-transcript count maintenanceand CapEx and some of those
(01:08):
other things.
So call it net net 300 bucksafter we factor all that stuff
in, but a nice little one.
Throw it in the portfolio.
We're burying this thing, so wepaid cash.
We're going to fix it up alittle bit, do some things and
then refinance out of it, havean infinite return on our cash
and let that thing spit off 300bucks a month, so we're excited
(01:30):
about that.
If you're looking for dealslike that, or maybe mobile homes
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We have deals every Monday.
Hit your inbox at 6 am Centraltime and offers are due Thursday
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Go towisconsindiscountpropertiescom,
put your info in and startgetting deals sent to you daily.
All right, let's get into theepisode.
I am super excited.
I have Mark Pomeranke.
Did I say that right?
Speaker 2 (01:51):
You said it right.
Speaker 1 (01:53):
Mark joining us from Arizona today.
How's the weather down theretoday, brother?
Speaker 2 (01:57):
Well, you know it's better than Wisconsin.
We're going to be in theseventies today, so it's going
to be fine by the time this airs.
Speaker 1 (02:05):
Hopefully we'll be getting close to that, so
excited for that.
Well, mark, I got a chance tomeet you at the REI success
meeting in green Bay and justfrom having a little bit of
conversation with you, I said,dude, I got to have this guy on.
You're a faith-based guy likemyself, which I appreciate, so
(02:25):
you know.
So I know you come from a greatplace where your heart is when
you're doing business and whatyou're doing, which is important
, I think.
Whether you're faith-based ornot, I think integrity is a huge
thing in this industry andgiving everybody a good name.
But also your background wasreally interesting.
Why don't you tell everybody alittle bit about your background
in real estate and how you gotstarted and what you got started
into?
Speaker 2 (02:41):
Sure, as Corey said, it's certainly a different, a
different topic than you've hadbefore, but I actually started a
, a hotel chain, a localWisconsin based chain.
Cobblestone Hotels was aco-founder of that brand, sold
it, or sold my share, in 2017.
But we our first property wasactually in Clintonville,
(03:02):
wisconsin, yep, and that was weopened in January of 08 was our
first property was actually inClintonville, wisconsin.
We opened in January of 2008was our first property.
So we came up with the idea in2007.
Everything was exciting andmoney was easy at the time and
then the financial crisis hit.
But we basically grew it.
(03:22):
When I sold, we had about 83properties, I believe, and I
mean now they have like 150, 160, something like that.
So it's really growing.
But we started out, my businesspartner and myself.
We actually came up with theidea on an 8 hour car drive and
we're like you know, nobody ishitting little, small little
(03:43):
towns developing new properties.
You have the little mom popproperties, but nothing.
You know nobody is hittinglittle, small little towns
developing new properties.
You have the little mom-popproperties, but nothing like a
major brand.
So we came back to the office,kind of ran some numbers, tried
to figure out gee, can we makesomething make sense?
And I first came up with 20 roomproperties.
Well, 20 didn't make any sense,but once I got to like 30 rooms
(04:11):
or so it started to make somesense when I made it kind of a
public private partnership withtax increment financing and a
variety of local incentives withthe communities.
So, needless to say, we webasically started in
Clintonville and from there itjust kind of zoomed all over the
country.
We got phone calls fromeverywhere and we were building
(04:34):
10 to 15 properties a year.
So it's kind of interesting.
I believe we were the secondlargest hotel builder in the
country for many years and, notknowing a thing about
construction, when I started Ididn't know the difference
between Soffit and Fascia.
I still don't.
Exactly Me neither, but I knowhow to pass the test.
Speaker 1 (04:59):
Or get somebody who knows right knows right.
Speaker 2 (05:05):
Yeah, that's absolutely that's we.
We certainly were blessed with,you know, just a phenomenal uh
group of uh group of subs, aswell as as uh, uh staff and
things like that.
Just awesome, you know, veryblessed.
Speaker 1 (05:13):
That's that's all I can say there are so many ways,
like I already know this, thisone's probably going to go a
little longer, because I have somany things I want to ask you
about.
I want to go back to thefinancial crisis, though,
because I still hear this.
I've been in real estate since2016.
And back then, everybody wasdoom and gloom.
Right, they wanted to be thenext person to predict the next
crash.
Right?
That's what I kept hearing overand over and over again.
(05:34):
Well, you went through a crashand you were building a business
, a startup, from ground up.
What were, like how, what werethe challenges then?
And like, how did you guys getthrough it to continue to grow
with this new business model?
Speaker 2 (05:47):
Well, I tell you, we, we, we looked at each other my
business partner me and said,you know, I think we're done,
we're finished and we're like.
Then, then I'm like, oh, we'renot done.
So we kept at it and, quite,quite frankly, we, we um it it.
In some cases it was a blessingbecause we were able to recruit
just the most phenomenal talent, because they didn't have any
other work, and we, basicallythe key is finding a need and
(06:10):
finding a want.
And well, the bottom line is,all these little small towns all
over the country have a needfor some lodging.
It's just that nobody, you know, projects were too small, the
big players didn't want to playthere, and so so it was.
We were kind of, in a way,recession proof, because there
(06:31):
is so many of these littlemarkets when, when times are
good, people don't want totravel and go to those markets,
but when they're hungry, they'llgo anywhere.
And so so we, we were able totake, take, you know, basically
grow through that adversity.
But I'll tell you how weactually uh, started, or I mean,
I should say we, we first itwas going to be my business
(06:52):
partner about brian and myself.
We were just going to own allthe properties.
We were going to basically gointo town.
We're going to get the, thetiff district or tiff financing,
um, you know, some financialincentive, and then basically
use the local bank there and dothe deal and own them 50-50.
Well, that worked until we gotto Bloomfield Iowa.
(07:14):
We were on property number sixand Bloomfield Iowa is the Davis
County Bank which is now theSuccess Bank.
We were on the way there.
We just received $420,000, uh,upfront TIF, uh financing, and
we were there to sign our, sign,our construction and, you know,
loan.
I was on the way there, I wasprobably about an hour out and I
(07:35):
get a call from the banker andhe's like Mark, I got some bad
news.
I said what's the problem?
He's like, well, we, um, we'rea small bank, as you know, but
we just got two car dealershipsback and we can't do any more
commercial loans.
We, we are, we're toast andwe're like, great, he goes, but
we really want to, you know,have a, have a property in our,
(07:56):
in our, in our town.
And uh, we're.
So we put our thinking caps onand said, well, how can we
accomplish this?
So we kind of worked itbackwards and try to figure out.
Well, you know what, whatamount of money would the bank
be able to lend on?
And just worked it backwardsand and Darren was the was the
(08:17):
banker's name.
And Darren got on the phone.
He's like you know what, I'mgoing to start calling all my
people that are, you know, kindof the heavy hitters in the
county, in the small town there.
Okay, and he just startedcalling and seeing if people
would contribute.
So he kind of put an investmentgroup together.
Okay, I mean, he was callingthe Amish, he was calling
everybody.
It was amazing, wow, andliterally that was the platform
(08:42):
that really catapulted oursuccess throughout the country.
We basically, from there, weput together a little private
partnership.
So every property that wedeveloped was a different
ownership group, a differentbank.
So I literally hadrelationships with 60, 70, 80
banks in my time there and itjust literally took off all over
(09:07):
the country at that point.
Um, at the time is, if yourecall, the AG markets and the
energy markets were fairlystrong.
Well, so we went to NorthDakota and we, we did deals all
throughout North Dakota for bothof the AG areas as well as the
oil areas.
Okay, um, but again down intexas, we, we were all over the
country.
We actually our farthest westwas idaho, farthest south was
(09:31):
texas, farthest north was northdakota and farthest east was
pennsylvania, so any of thosestates in between there we were
doing deals and uh, and todaythey're still doing deals there.
That that's amazing.
But yeah, it was interestingwhat can be accomplished.
You know and I really have togive a lot of the credit, well,
(09:52):
obviously, to my Lord and Savior, I mean, all of it is a
blessing.
But the community banks, I meanthey really, you know, that is
what I would say really helpedour, helped our growth.
It's because, you know, theyweren't the big Wells Fargo's of
the world, they don't care, andthey would, they weren't doing
it.
But the local community banks,they, they care, and that's
(10:16):
that's what I recommend peopleget relationship with your local
community bank, yeah, that'sthat's as I teach.
Speaker 1 (10:23):
I have a course on the birth, on the birth strategy
, and I have a whole section inthere just about building
relationships with communitybanks, because it's so important
and some I didn't realize thisdown in where you are in Phoenix
area right now, currentlythere's not a lot of community
banks down there.
It's very much difficult.
It's very difficult to find.
You have to use a lot ofprivate lenders in that neck of
the woods, right?
So it's very difficult to find.
You have to use a lot ofprivate lenders in that neck of
(10:44):
the woods, right, so it's very.
You know, we're very blessedhere in wisconsin that we have a
very strong community bank.
Uh, culture and environment forpeople who are looking to to
invest whether that's in hotels,development, um, community
projects, like they take a lotof pride in helping develop the
communities and and infusing thecapital that's needed to do
(11:06):
some of those things.
So I love that.
That's how you guys went andthat was your strategy to do
that.
Another thing I heard there,mark, too, is you know, a lot of
times we get hit with adversity, right, like it's like oh man,
(11:27):
you guys could have, huh, maybewe got to think of a different
way to do this, and you justcreatively problem solved and
bam, it was magic sauce.
You needed that bank to denyyou guys.
Right, like to create thiswhole model, which is
fascinating.
So the the two things there whatcould?
What could be viewed from theoutside as oh man, that's a
(11:47):
terrible time to start in thehotel business, which is what I
thought.
I'm like wow, you guys startedin 08.
That's a terrible time.
Actually, it was a blessing foryou.
And then the same thing withthis bank because of 08 and what
was happening.
Another one that would havebeen for a lot of people would
have stopped them in theirtracks or had them fold shop.
One that would have been for alot of people would have stopped
them in their tracks or hadthem fold shop.
You guys took that adversityand just got creative of how to
still make something work.
Speaker 2 (12:08):
It wasn't a question of if it's going to work is how
do we make it?
Work.
Speaker 1 (12:12):
That's outstanding.
I love it.
Well, I've got a milliondifferent ways to go.
I want to go into TIFFs.
Okay, sure, we can go intoTIFFs for a minute.
I think for a lot of people outthere who are newer.
I would love to do adevelopment deal just because
let's do one together.
Speaker 2 (12:29):
There we go, it sounds, it sounds exciting and
it sounds like fun and I knowTiff.
Speaker 1 (12:34):
I've been in now and around enough of these that I
understand what Tiff is.
Can you explain to people whatis Tiff?
How do you go about getting it?
What's the?
What do you look for If you'relooking to do a development
project like?
Talk a little bit about that.
Speaker 2 (12:45):
Certainly.
Well, tif is basically a taxincrement finance district or
it's a TID, the tax incrementdistrict, or whatever.
Every state's a little bitdifferent.
Tif is in, I believe, 48 states.
Now in Arizona they don't allowTIFs.
That's one state, so I've neverdone one here because they
(13:07):
don't have it.
But in Wisconsin I meanthroughout the Midwest, they're.
You know, they're in moststates and that's how things get
done and basically how it worksis they freeze.
They set up a district and theyfreeze the tax that is
currently being produced in thatarea and anything that, the
growth of the tax.
(13:28):
So if you create new structuresand things like that, then you
can basically utilize thatincrement in revenue.
So let's say, a whole areacreated $100,000 in property tax
, but after you put in newbuildings it's 200,000.
Well, the 100,000 differencebetween the 100 to 200 can be
utilized as financial incentives.
Basically.
(13:48):
And the nice thing about it isthere's two ways you can do
TIFFs.
One is a pay-go-TIFF it'scalled, where basically they
don't give you the money upfront but what they do is they
give you all that increment backevery year as you pay your
property tax.
So it's a little.
I guess cities say it's lessrisk to them because I guess
(14:12):
they don't have to pay orwhatever.
They don't have any obligationsout there.
The other way is where the citywill go and say well, gee,
we're going to have this extrahundred grand coming in for the
next forever.
They can go use their muni,bonds or financing sources which
they're able to get money a lotcheaper than a private
developer can, and basicallytake the revenue from that to
(14:37):
pay off the bonds as you pay thetaxes.
The nice thing about the taxesis, as you know, taxes are in
first position on top offinancing, so they're before a
bank loan.
If you don't pay the bank, thetaxes are still going to be on
there, and if the bankforeclosed on you, they have to
pay that property tax back.
So it's really it's kind of arisk-free deal for the city.
It gets a lot of debate or alot of what do you call it
(15:00):
heated conversation over well,gee, you're giving these
developers all this money.
Well, yes and no, it's howthings are created and, quite
honestly, that's literally howwe started our company.
The little backstory here is Iwas working as a hotel manager
for many years and I'm like youknow, I really want to do my own
(15:24):
thing and I had saved a littlebit of money not a lot, but then
I also had built up about twoyears, I think about 70 grand of
credit cards and I said youknow what?
I'm not working for a paycheck,I am going to go make this
happen.
I was literally down to my last$23 of available credit on my
credit card before we hit ourfirst deal, and so the whole
(15:45):
company I mean, which I created,hundreds of millions of dollars
worth of stuff, started with mybusiness partner Head, a Heloc,
I think, the land we bought inClintonville.
Now again, I may be off by a fewnumbers here, but in
Clintonville we bought our firstsite just under $47,000.
And that's what we used hismoney for two weeks.
(16:08):
Two weeks is what we used hismoney for before we got the
money from the city to pay himback.
That's literally what startedthe whole company.
That is so cool.
Well, again, all glory to God.
I mean.
There's no way that we couldpull this off without his
blessing.
Speaker 1 (16:25):
That's amazing.
So that first Clintonville deal.
Let's break this down for asecond.
Sure, so you have 47 000.
You already had the wheels inmotion.
I imagine how long was theprocess that you guys had to go
through to get the tiff moneyand like start this whole thing
and and go through that beforeyou had that injection of
capital there to pay back thathelac you know it took about.
Speaker 2 (16:45):
Uh, let's see here we we came up with the idea, if I
remember right, in january,january of 07 or February 07.
I think that was when our tripwe went and met with the city
Interesting story with the city.
I actually the first city, Iwas actually Brilliant,
wisconsin.
We met with Brilliant.
When I came back to the officelike the next day, we called
(17:05):
Brilliant up and met with themayor and the city manager and
and explained what we were gonnado and at a time they had, I
know they had been searching fora you know a 60, 70 room
property and it's just like, notreally it's not big enough to
support that and but if theycould get it, good for them,
yeah.
Uh.
So we explained it to them.
They just seem like, oh, Ithink we're gonna hold out until
(17:26):
we get one of those propertiesand I kind of saying, well,
between me and you, they'regoing to be holding out for a
while, but no problem.
The next day I called Lisa, thecity manager up at Clintonville.
I went up to meet her and kindof explained to Lisa what our
intentions were.
And it's so funny, she gets up,she goes and closes her door to
(17:48):
the meeting room.
She says, okay, this stays inthis room Because if the mayor
finds out that we had hoteldevelopers in my office and you
don't build a hotel inClintonville, it's going to
break his heart.
That's been his whole oh youhit the jackpot there.
It was like literally, it waskind of a joke, it's like that
was the thing, wow.
(18:08):
So basically we had suchsupport.
It was the most amazing timeand shout out to Lisa she was
just, she was awesome, going tohelp and get through the process
with the council and everything.
We, we, we actually met withthe council.
We got, I remember right backthen I think it was like
$240,000 of upfront and I thinkwe got a hundred thousand dollar
(18:34):
like a revolving loan fund typeof thing, and they approved it.
They gave us a standing ovation.
It was the most amazing thing.
We walked out of that room.
I looked at my business partner, Brian.
I said did you see what justhappened there?
We just went, they gave us ourdown payment and we got a
(18:55):
standing ovation.
I said I love rural America.
Speaker 1 (18:59):
I love small town America.
They're giving you $300 andsome grand and they're clapping
for you as you walk out the door.
That's incredible.
Speaker 2 (19:05):
And they were just so full of joy and just blessed
that we would come and dosomething in their community.
That's awesome, and it's justendless stories like this
throughout the country.
I mean I've got.
Speaker 1 (19:17):
I grew up in Pulaski.
Is there one in Pulaski?
Speaker 2 (19:19):
Yeah, there is one in Pulaski, I think.
Speaker 1 (19:21):
I know some people that invested in that one.
Speaker 2 (19:23):
So yeah, I think Al Al Moran was.
Al was one of the leaders inthat deal, okay in the gas
station convenience store.
There's some other stuff aroundthere.
Okay, very cool, but uh, yeah,so.
Speaker 1 (19:35):
So the financing piece of this then.
So you get this, let's call it300 000.
You got some of it revolving,some of the cash up front, so
then does the bank count thattowards down payment?
Speaker 2 (19:44):
yes, they do.
Yep, they do.
Yeah, actually, and it wasfunny is because in, uh, in
clintonville, the project at thetime I think the total was $1.6
million was the build and stufflike that.
So you know they contributed,you know 300 and some thousand,
but we originally got approvedby.
(20:05):
It was a dairyman's bank, if Iremember, right back in
Clintonville, which they're notthere anymore.
It's changed hands a few timesnow I think it's actually being
first or something like that,but so it was a great bank.
They allowed it.
It was back in the easy times.
That was the good news rightbefore the financial crisis
there Handing out like candy ina branch?
Speaker 1 (20:23):
Absolutely yes.
Speaker 2 (20:25):
Because, basically, once we developed it, we got an
appraisal.
Once we developed it, we got anappraisal.
It was appraised I don't knowover 2 million bucks.
And so so they they actuallythey said well, we'll do this
deal, we'll get you an SBA loan,we'll do the TIF, you know
whatever, and we'll make ithappen.
And, quite honestly, at the endwe didn't even do the SBA loan
on that property because theywere like well, the appraisal
(20:45):
came good enough, we can doconventional, even though I had
nothing.
I mean literally no money.
Speaker 1 (20:51):
You guys had no money into this deal and so they gave
you, so 1.6 was going to be thecost, right?
Yeah, matthew 20 of that isabout 3.2 320 yeah, three or
three, three, twenty three so Ihad enough of that.
That was all tiff money,correct?
Yep, so you guys are buryinghotels we were burying hotels.
Speaker 2 (21:11):
Brand new build hotels.
Speaker 1 (21:12):
We were adding value.
Speaker 2 (21:13):
That's what we're doing.
Speaker 1 (21:15):
Man is that now, for I know you're out of the, you've
sold out and all that stuff,but I imagine you're probably
still keep up with the hotelindustry.
If I had to guess a littleabsolutely still.
Is that still a viable optionfor somebody out there, or is
that?
Is that ship kind of sailed now?
Speaker 2 (21:28):
well, it depends.
The key is to having the.
The municipality really wantsyour property, okay, project,
that's, that's the thing.
They, they, they have some whatdo you call it?
Some flexibility.
If it's something that reallyis on their list, okay.
And and a hotel provides a lotof economic impact for a
community.
Okay, I mean back in the daywhen I first started, every
(21:52):
guest that you had stay in yourtown instead of going down the
road and staying at a differentcommunity.
You generate about $160 a nightin revenue between the hotel
stay them, going out to eat attheir local restaurant, buying a
t-shirt, buying some gas,whatever.
There was an economic impactthat was quite substantial.
(22:13):
And the reality is we didn't,we weren't a strain on like the
school systems or anything likethat, because we didn't, you
know, it wasn't like we wereadding housing and that had to,
or whatever you know, so itwasn't.
Speaker 1 (22:25):
So the services, even though the tax, they weren't
going to be recognizing that taxincrease for many years.
Speaker 2 (22:37):
It was whenever they did know.
Speaker 1 (22:38):
It's kind of like gravy on top for them.
There's an additional, yeah, awhole lot of servicing they have
to do.
So that makes a lot of sense,yeah, and that makes me wonder I
wonder why so manymunicipalities are so anti
Airbnb.
You know I get it from likeyour, your housing perspective
thing, but it seems like withany any economic impact.
Plus, they're getting hotel taxin a lot of these towns now too
, true, based on those stays youwould think they'd be more
receptive to that, but there's alot of lobbyists in the hotel
(23:00):
industry probably going out.
Speaker 2 (23:02):
Well, I've been.
I've been to some of these townboard meetings.
Speaker 1 (23:05):
Arguments against that are just you know you get a
couple loud people and just youknow, if the Airbnb owners
don't show up, nobody else isthere to hear them.
So that, what are theseplanning commissions going to do
?
You know they're going to keepthe thing.
So wow, okay.
So that helps me completelyunderstand the tax initiative.
So somebody out there, let'ssay they wanted to do a single
family development, or maybethey wanted to do multifamily
(23:27):
development, or they want to do,you know, a strip mall or
something like that youmentioned having the town really
want that project.
How does somebody go aboutfinding that information?
Like Clintonville, how did youknow to go to Clintonville?
Like, what was your research onthat?
Or how did you?
Speaker 2 (23:41):
figure that out.
It was interesting.
So when I came up with the idea, I'm like I'm going to hit
towns that have some populationto them, they have a good
industrial base or you know,good room demand generators, um,
but they're not big enoughwhere they're going to get a big
hotel.
So that's, that was kind of my,my market study.
That's how I I looked at, orlooked at, towns originally, and
(24:05):
obviously cobblestone is nowbuilt in the big cities and
things like that.
But but when we started that'swhat we were.
We were rural, america, smalltown, and actually if, if you
remember and I don't know, doyou remember like the elko
stores, elko duckwell, um, likethey were kind of like the
pomida, that type of thing.
Okay, we really followed them.
I looked at their, their um, uh, their what, what they
(24:27):
basically looked to to figureout what store, what location to
put stores is usually countyseats and it usually was with a
trade area less than 16 000people, because at 16 000
walmart came in is what it was.
So they kind of filled thatniche and we kind of were the
same thing, really that's yeahyeah, so.
So I mean, our, our typicalcompetition was ma and pa, you
(24:50):
know, little up, you know 10, 20room, little drive up type of
motel thing, that's literally inmost of the towns.
That's what these propertieswere.
So we filled an inch.
I mean, we basically, when wecame up with this idea, we went
to all the big hotel brands andthey're like like, no, we're not
interested, we, we don't want a30 room property or you know,
(25:13):
40 room property, we want 70, 80rooms, that type of thing.
Yeah, they scale it.
So what we basically did is wetook all the good elements from
all the big brands and put in asmall box.
That's what we did.
And uh, so, and so we ended upeventually franchising.
And uh, so, so we, weintegrated because I'm like well
(25:34):
, how do I make a living?
Why I do that?
Build my brand, I need to makea living.
Well, construction.
So that's what we did.
We became the GCs anddevelopers of them.
That gave us our today money soas we could build the long-term
brand as well as ownership allover the country.
Speaker 1 (25:52):
That is so cool.
There's a lot we could go intothere as well Franchising and
all that stuff too.
Talk about the.
I want to go back to that.
I'm still curious on somebodyout there because we've had some
land that we've put out to thebuyers list, right, we think
it's a great developmentopportunity just from what we
can see.
But we're learning there's alot more that goes into, you
(26:14):
know, getting things approvedand just the processes and
wetlands and all that kind ofstuff.
So like, where does somebodystart?
They got a, they got a friendor family member who's got you
know 30, 40 acres they want tosell.
And you know a little ruralAmerica town.
How do they go about figuringout?
Like, what does this town wantor do they could just call?
Is it as simple as just callthe city it?
Speaker 2 (26:36):
is there.
Yeah, actually the the the bestthing is to contact, like, the
city manager and the economicdevelopment person either they
have one in the city or in thecounty or that type of thing um,
kind of gives you an idea ofwhat they're looking for.
A lot of times they'll do amarket study the city will like
for housing study and what theirfuture like, a future plan of
(26:59):
how the city is going to look orsomething like that.
And I believe I actually I maybe right, I may be wrong on this
one, but I think the citieshave to like create their master
plan every so many years ofwhat the land use is and all
that stuff.
So it's getting in line withthere.
And here's another little tidbitthat I found over the
(27:23):
communities I've dealt with Inmany cases locals have a hard
time doing it because there's alot of politics and a lot of
like what should I say?
Just just a different mindsetof people where they're like
well, we don't want to, uh, wedon't want john johnny to get
that, that incentive to do this,because I didn't like johnny
(27:45):
john was mean at me in highschool or whatever like right or
or I dated his wife, orwhatever you know.
There's things like that where Icould come in from the outside
negotiate the deal.
Johnny may come in and be aninvestor with me it was like it
was, it was, it was the craziestthing.
Oh, I bet that makes a lot ofsense again.
Speaker 1 (28:01):
I grew up in pulaski 3 000 people, I get it.
There's a lot of small townpolitics and everybody knows
everybody and everybody knowseverybody's dirty laundry from
30, 40 years ago, so I get thatWell that that helps a lot more,
cause I think that's one thingwe, you know, we've struggled
with is just understanding whatdoes the town want.
Now, is the TIF part of that?
(28:21):
Like, if you call them up,they'll say, yeah, we have TIF
money for X, y, z or how doesthat?
Is that something they then goapply to get TIF money from
somewhere?
Speaker 2 (28:30):
Yes, and no, some districts are already
established so you can kind oflike join in there.
Otherwise, if they havecapacity, they may be able to
create a new district.
Now there is a limitation, andagain my mind's not with it
anymore.
There's a certain amount of taxbase that you can have in a TIF
(28:52):
district.
I mean, you can't put the wholecity in a TIF district because
they obviously need to operatethe city.
But state law and things likethat Okay.
Speaker 1 (29:02):
And then they'll designate hey, we want to see
XYZ type of development here, sowe're going to hold out our TIF
money until we get likeBrilliant's case they're 60 or
70 unit hotel or whatever thecase is Okay.
Speaker 2 (29:14):
Yeah, just so you know, brilliant was property
number three.
Speaker 1 (29:17):
Was there really?
You had a building there, ohthat's awesome.
Speaker 2 (29:20):
They literally, after they saw us, they came back to
us and we built there.
Speaker 1 (29:25):
That's hilarious.
Oh, I love it.
Speaker 2 (29:27):
Mark, they're great people over there.
They were awesome to deal with.
But but again they they intheir eye.
They thought of a water parkthey were gonna have and all
this other stuff and we're likeit doesn't make sense I like the
vision.
Speaker 1 (29:37):
I like the vision, though I mean great visionaries.
They're brilliant.
It sounds like they have someaspirations, so that's great
they're.
Speaker 2 (29:44):
They're progressive brilliance and great town.
I mean there's all.
There's more, if I recall.
I think there's more jobs inthat town than there is people
just with like errands and allthese other, all the different
industries that are in there.
Yeah, that's great.
Speaker 1 (29:57):
We've wholesaled a few deals there and in fact this
week whoever's on our buyerslist won't get this until
several weeks later.
But we have a really nice bighouse in Brilliant that is out
to the list and I'm always a bigfan.
I'm like our properties.
Whoever ends up buying themfrom us ends up doing really
well there.
They sell really quick ifyou're flipping, because people
need housing there to work aterrands and all these other
places, and it's a good locationbetween Appleton and Green Bay.
(30:20):
You know centrally located alittle bit there.
So let's talk about banks.
So you've dealt with 60 to 70community banks dealt with 60 to
70 community banks?
Yeah, absolutely yeah.
What are some of the things?
So somebody out here right nowthey're listening to this
they've maybe done a few deals,maybe they've never used a
community bank before.
What are the things thatsomebody should do to set
themselves up for successworking with community banks and
(30:42):
what are some things theyshould be looking for out of
their bank?
Speaker 2 (30:44):
Yeah, Well, I guess first of all I actually go and I
research the banks before I goto the town to get an idea if
they actually have the capacityto do the project and how you
can do.
That is a real quick rule ofthumb.
On it.
They can basically usually lendabout 10 to 15 percent of their
(31:07):
equity.
Is what they can do.
So if you look in the banks,say it's a $200 million bank of
deposits and they have $30million in equity, their lending
limit is probably about $3million.
Is what they are.
And again, I may be off alittle bit, but it's a general
rule.
You don't want to go to a bankwhere, if you're trying to get a
$3 million loan and theirdeposits are $ million in there
(31:29):
and their uh capital is 6million, they're not going to be
able to do that because they'regoing to be able to about 10 to
15%, you said, of there.
Yeah, yep, roughly is what theyuh, and just for the audience,
so they understand the legallending limit.
Speaker 1 (31:43):
Can you talk a little bit about what that means?
Just for in in third grade cramforever.
Speaker 2 (31:47):
Sure Uh.
Their legal lending limit isthe amount, the maximum amount
they can can have to oneborrower.
So it can be you know one bigproject, or it could be you know
20 different homes, or whatever.
There's a certain level wherethe bank's like you have too
much money with one one borrower.
Speaker 1 (32:04):
That's how it works and they can participate with
other banks, if you go, they canright, so they can kind of like
I don't know works Right.
But they can join up and kindof pass that over to somebody
else and I don't know how theywork it.
Speaker 2 (32:15):
But yeah, it's just kind of like a fractional, like
we do in private lending, but weput a few people together and
you know you own 25% of thatloan or whatever that type of
thing.
They do it on the bank side butwith the FDIC and the whole
regulations, that's the only waya small bank does loans.
Now there's another way a smallbank can do loans and that's if
(32:37):
you get an SBA loan or if youget a USDA loan, which USDA is
another popular option,especially in the smaller
markets.
Usually, if you have a town ofless than well, ideally less
than 25,000 people, usda isusually an option.
Sometimes they'll go up to50,000.
And I really like it's a.
(32:59):
It's a longer process, but it'sit's a, it's a good program to
get things done.
Speaker 1 (33:03):
So that's 90% of Wisconsin Exactly.
Speaker 2 (33:06):
Yeah, yeah, no, absolutely, you know you're not.
You're not going to do it inaon or in Green Bay or in the
town, but again, in small townsof less than 25,000, it's
potentially an option to do theUSDA, especially for hotels,
because they have the businessand industry portion of the USDA
(33:28):
Tourism what it is, and tourismis one of the industries.
Speaker 1 (33:31):
Okay, and what's the benefit of the?
Speaker 2 (33:33):
USDA loan for a borrower, it's to be able to go
to a bank that's a small bankand actually be able to do the
loan, because all they have todo is like a USDA up to $5
million.
They guarantee the bank thatthey'll cover 80% of the loss oh
, if there's loss on it.
So the bank only needs to.
Actually, when they're doing a$5 million loan that's backed by
(33:55):
USDA, it's really they're onlydoing a million dollar loan, so
it opens up so many more banksto be able to do your deal.
Speaker 1 (34:02):
The risk is so much less Correct.
Yeah, otherwise it's theopposite.
Otherwise, they're normally upto 80%.
Yeah, yeah, yeah, yeah, yep.
Speaker 2 (34:09):
Yep, yeah, so so it's a.
It's a great great deal for asmall bank to be able to kind of
play with the bigger boys.
This is what it is.
So on the residential side, doyou have people use the USDA for
their a hundred percent loanfor buying a home?
Speaker 1 (34:26):
We don't deal a lot with retail buyers.
You work with a lot of agents,though that probably do, but we
deal more so with investors whoare going to end up flipping it
or whatever the case is.
So we have bought a couple.
We had a multifamily propertythat we wholesaled to somebody
else and the process was overtwo years to get it through the
(34:49):
USDA's red tape.
So I'm a little leery aboutUSDA for that reason.
There was a lot of you know, you, you might get the better
financing with some of these,but they sink your teeth in with
some other stuff.
As far as trying to offloadthis thing, he had to get these
voucher.
The owner had to get vouchersfrom the tenants and had to go
through this whole make sure heyou know he didn't discriminate,
and there was just all this redtape that had to go on in order
(35:10):
to act, for him to be able tosell his own property you know
which was.
He couldn't even just pay himoff.
I mean, I think the loan on itfrom USDA was only down.
It was down to like $7,000 orsomething so small and he, like
he, could have easily juststroked a check and said I'll
pay you off.
But in order to get a payoff heoff, he had to go through this
whole process and it literallytook us two years for him to
finally be able to sell hiseight unit property.
(35:32):
So it was.
I learned quite a few thingsabout USDA at that point, as far
as on the backside of it, soI'm not as familiar with on the
front end as far as borrowingfrom them, but I, you know, I
probably would tend to try tofind other options for that
reason if there's a lot of redtape on the back end but I can
see what what you're sayingwhere if you're in development
(35:52):
and your plans are just todevelop this thing and continue
to keep it for the foreseeablefuture, you know it's a great
option to open you up to a lotof other lenders.
If you're running into somebrick walls is that kind of
similar with SBA, then Is thatwhat they typically do as well
Is?
Speaker 2 (36:05):
it.
Yeah, s sba.
There's really two differentways that they have the 7a
program, which is basically adirect loan, so you can go to
you know any, practically anybank um, and they can do the
loan and usda back, or sba backsit.
You know um, and they'll backwhat is up to 90 on some of
those loans.
So so it's a.
It's a good deal um.
Then there's another thing whereyou use the uh cdc, the
(36:28):
community developmentcorporations like wbd is a big
one in Wisconsin, wisconsinbusiness development where
basically how it works is, let'ssay, you're going to do a
project that's we'll call it amillion dollars.
So a million dollars, whatyou'll do is you'll find a bank
that will lend 500,000 in thefirst mortgage, hundred thousand
(36:52):
in the first mortgage.
Then you'll, then you'll uh dothe sba 504 portion for the, for
the regular, you know, betweenthree to four hundred thousand
that you get from them and thenthe equity is the.
It's the difference, um is howit works.
So it it gives you the abilityto have, you know, 20, 20 year
fixed money on the sba portionportion which is because they
basically sell the bonds is whatthey do and people buy them and
(37:13):
things like that.
Wow.
Speaker 1 (37:15):
So then are you locked in?
Are there some pretty bigprepayment penalties if you were
to refinance at a certain point, and that kind of thing.
Speaker 2 (37:20):
Yeah, and an SBA.
It's basically it's a slidingscale, so you have a penalty if
you do it.
It's basically it goes down by10 each year.
So so if your interest let'ssay was was a hundred grand
worth of interest, you're, ifyou paid them off right away,
you're gonna pay a hundredthousand dollar penalty.
Okay, the next year you'regonna pay 90.
(37:42):
The next year you're gonna pay80, 70, 60.
So after 10 years that therewon't be one.
But it's the sunsets, yeah,yeah, okay cool.
Speaker 1 (37:49):
Well, that's awesome.
I mean, this is I'm learning somuch right now, mark, because
these have always been like darkspots in my brain of like how
do people do these bigdevelopments and get this money
and then they're into it with nomoney and then you're actually
creating money that you didn'thave by the equity that you
create when you do a new project, if you do it right and you
don't overrun costs and things.
So it's's a great way.
Plus you're getting cashflow.
(38:10):
There's just so many things.
My brain is just going crazyright now.
So many ideas, so many ideasgoing back to.
I just want to circle back andthen we'll we'll start to wrap
this mark.
Going back to you, we kind ofgot off on some of these other
loan programs, which is great,but what are some of the keys
you found to building successfulrelationships with these local
(38:32):
banks?
Like what was your approach tomaking sure you know you were
able to get, you know financingor you know, keep the
relationship with them for forthe projects again, I go back to
the cities, the city managers,the economic development,
basically when I would come intoor in, the mayors and things
like that I would.
Speaker 2 (38:49):
When I go into a town , they basically those three
people or whatever, would invitethe local lenders or the local
bankers to the meeting.
We get them all excited andfigure out which one wants to,
you know, be the lead on thisthing, play ball, and then they
direct me through all the peoplebasically it's depositors or
(39:10):
people, their clients, aspartners in the deal.
So then, so we really that's Iliterally have in my my, you
know, until I sold, I think Iprobably have about 800 partners
, uh, that are basicallyaccredited partners throughout
the country wow, that's amazing.
Speaker 1 (39:27):
and what was there?
What their?
I guess you know if you can'ttalk about this stuff because of
confidentiality, please justlet me know.
But, like, when you're goingout and you had these private
folks right, what was?
What was the allure for them?
I mean, was there a certaininterest rate you were able to
offer?
Was it an equity percentage,like what was the?
What was the offer to theseprivate folks?
Speaker 2 (39:53):
the.
What was the offer to theseprivate folks?
Well, basically they wereequity um members, so we didn't.
We didn't offer them anything.
They, they literally did itbecause they wanted for their
community, they wanted to um.
You know, basically it helpstheir community when they have
family and friends coming totown they want to have a place
to stay, or if they have localbusinesses or industry, they
want to build house theirvisitors that way.
And the other thing is just oneof those.
A lot of my investors were thesame people that would give
(40:15):
money to, like a communitycenter, things like that, where
they really they did it fortheir community and they want to
be able to drive by and telltheir friends yeah, I own, you
know, 10% of that, or I ownwhatever that type of thing.
So it's kind of a pride, ego,pride, whatever type of thing.
So it's, it's kind of a pride,ego, pride, whatever type of
thing.
And they're just proud.
They just love, you know, theylove their community.
They think their community isthe best.
(40:37):
When I go into a town I say Idon't know if this thing's going
to work or not, but I'll tellyou how I know it's going to
work is if we raise enough moneyhere to make it happen, then
then it's, it's going to work.
And what we did do is figuredout that that our properties
performed so much better when wehad that local investment group
, because there's so manysalespeople out there that say,
hey, you need to stay at myhotel, you know whatever.
(40:57):
And so we, we position yourselfreally well, you know, with
each community.
Speaker 1 (41:05):
That makes a lot of sense.
You got a lot of.
Then you got a lot of brandadvocates out there, constantly,
word of mouth and all over theplace.
That's amazing, and I'm justthinking about that right now.
I live in Door County and Iknow there's a project up here.
One of our friends is trying toget done and she had approached
us about investing in it andstuff like that and it's just
for us at the time it's justprobably not a great fit, but
that's kind of where I wassteering her too.
(41:26):
I think you're going to need totarget people who are more
interested in and really notnecessarily the return on
capital or any kind of interestrate percentage, but maybe just
a percent ownership of it thatwant to see this project get
developed and want to say thatthey were a part of it and be
able to do it that way, which is, I think, the approach she's
taking, which is going to besuper cool.
She can get it to go through it, but but no, that's good,
(41:49):
that's awesome, mark.
Well, man, I, I have so manymore things.
We could probably sit here forhours and hours and hours
talking all this stuff, and so Iappreciate all of your time
Mark.
We always end with a funquestion Now, favorite Wisconsin
tradition or place to visit.
Speaker 2 (42:13):
I actually have two, two of them all right.
Uh well, the fish fries and andthe supper clubs.
That's what I, that's what Ilove about wisconsin that I miss
out when I'm out here inarizona.
I split my time between arizonaand and appleton, so it's uh,
you get your fill when you comeinto town oh yeah, I go to the
beehive off of uh highway 76 outI don't know if you know where
that's at.
I do Like, okay.
I like to be high for my fishfry, okay, and I like the Black
(42:36):
Otter Supper Club in Hortonvilleoh, I've heard, I've never been
.
I've never been.
Speaker 1 (42:41):
I've heard there you go, folks listening to this, if
you're coming into town for thedraft or something.
Maybe you're not from aroundhere.
You got to go check out thesetwo spots Mark's mentioning and
if you're flying in Appleton,boom.
Easy enough, right.
You bet Mark are you going tobe coming to the draft?
Speaker 2 (43:03):
I am actually going to be in Arizona.
That time I was just looking atmy calendar.
I'm like you know I don't thinkI'm going to be there.
I have all my trips planned outnow through May because I fly
back and forth all the time, butthose particular days I'm
actually in Arizona.
Speaker 1 (43:22):
We'll miss you, you'll be with us in spirit,
Mark, Okay, If somebody wants topick your brain more about this
stuff or I know you also dosome lending too maybe before we
wrap here, Do you want to justtalk a little bit about you
don't have to get into specifics, but anything you want to
mention about what you'relooking for out of a borrower as
far as anybody who would needfunds.
Speaker 2 (43:43):
Yeah, again, it's all relationship.
I lend to people.
I know that type of thing.
So it's not.
I don't usually just takerandom.
We develop a relationship,first I have to know you, but
then it's.
We're pretty flexible dependingon what it is.
If we're just we're part equityand part, you know, part debt,
(44:04):
or we're all debt, or if theother thing I like doing is
actually like some transactionaluh funding or double closings,
um, okay, those are nice andagain, in many cases I'll do 100
of what we need for that uh,because it's literally only for
the day.
Yeah, um, but, uh, but otherthan that, most of my, I like to
(44:25):
uh get to know more uh fix andflippers or people that are
looking for the the shorter termmoney things like six months.
Speaker 1 (44:32):
About a six month, yeah, typically what you're
looking for maximum typically.
Speaker 2 (44:35):
I mean obviously we can, we can look at the deal and
figure it out, but uh, exceptfor my development project.
Speaker 1 (44:41):
I'm bringing in more, then we're gonna have a little
longer deal there.
We'll have to figure that outwell there, cory.
Speaker 2 (44:46):
Well, I'll help you out.
I'll show you how to go throughthose steps.
Awesome, perfect, it's fun.
What I really like to do isthat, as well as help and try to
go through the millions andmillions of dollars worth of
mistakes that I've made, that Ican eliminate, we'll have you
back on for another episode ofjust how many millions of
(45:09):
dollars you've lost over theyears of mistakes.
Speaker 1 (45:11):
Correct Mistakes yeah for sure.
Speaker 2 (45:13):
Literally.
That's why how I started somany companies is just because
of I'm like well gee, I startedan import company because I lost
like a hundred and somethousand dollars on an order of
granite.
No-transcript.
Speaker 1 (45:33):
There's so much wealth of information, Mark.
So, mark, if somebody wants toget some more info from you,
what's the best way for them toget ahold of you?
Speaker 2 (45:42):
Well, I know I'm old, but I'm not on social media at
this point.
Everybody's been trying to tellme to get on social media,
don't do it.
Speaker 1 (45:49):
Everybody's getting off social media.
Now Realize it's bad for thebrain.
Speaker 2 (45:54):
The best thing is to call me actually 920-312-4444.
920-312-4444.
Or you can just send me anemail, too, about markpomeranke
at gmailcom.
It's M-A-R--k and then my lastname p-o-m-e-r-e-n-k-e at
gmailcom, and if you want tomeet we can know.
(46:17):
When I'm in in, uh, inwisconsin, we can sit out and
see how we can help you outthings like that or anywhere in
the country actually.
So yeah, it sounds like you getaround or if you're in arizona
again, I spend half the yearhere.
Speaker 1 (46:30):
Go meet at a cobblestone somewhere and then
it's over and off, right.
Well, this is great, and ifanybody missed his information,
if you have my contact, you canhit me up on.
I'm on Facebook.
I don't go on it very often,but I'm on there so you can
Facebook message me, or you canreach out to us at
wisconsindiscountpropertiescom.
Feel free to contact us andjust say, hey, listen to your
(46:52):
Mark episode.
We want to get his contact info.
We'll ship that over to you.
That being said, if anybody outthere is listening to this and
you're out of state and you wantto invest in Wisconsin, or
you're in Wisconsin and you wantto start your real estate
investing journey, we would loveto have that conversation with
you.
Again, go to the websitewisconsindiscountpropertiescom,
put your info in and myself,reese Connor, somebody from our
team, will reach out to you andtry to see if we can help you
(47:14):
get started in your journey herein this great state we love was
called Wisconsin.
So, mark, any final, any finalwords for the audience before we
depart here today.
Speaker 2 (47:25):
Just don't think small, think big.
That's my thing, it's there'sno, if you're going to think,
you might as well think big.
I love that.
That's my.
Speaker 1 (47:32):
I see you did that.
It went from $23 on your creditcard to a hotel franchise.
So you know you know most.
Speaker 2 (47:38):
Most people start out with a, you know, a small
little fix and flip or somethinglike that.
I said why don't I just build ahotel?
Just go right to Before we dowrap.
Speaker 1 (47:46):
I think this is the best ending we've ever had, mark
, because anybody who's stickingaround I think that's the best
advice I could hear.
It's like sometimes people'sfaces are like, oh, I got to do
this little, you know.
I hear like, hey, what's yourbuy box?
And I'm like, oh, I want tostart at like something around a
hundred thousand or whatever.
Just rip the bandaid, just getsomething that's going to make
money and go for it.
Speaker 2 (48:06):
Right, yes.
Speaker 1 (48:07):
Awesome, mark.
Well, thanks again, man, foryour time and your expertise,
and I would love to have youback on here again in the future
, so I know you brought a lot ofvalue today.
I know this was a completelydifferent topic, but I know
there's a lot of stuff peopleare going to take away from this
episode, so I got a feelingthis will be one of the top
downloaded episodes as we goforward here.
So again, appreciate you, mark,and appreciate all you guys for
listening.
Please share the show to getsome value out of this.
Hey everybody, we are here with another episode of
the Wisconsin Investor Podcastand I'm super excited for today.
We've got a very unique guesttoday, I would say at least
unique background, differentfrom anybody we've interviewed
so far, so I'm super excited.
I'll introduce him in a second.
Before I do that, I just wantto do a little commercial for
Wisconsin Discount Properties,who sponsors the show, and I
(00:23):
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(01:08):
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All right, let's get into theepisode.
I am super excited.
I have Mark Pomeranke.
Did I say that right?
Speaker 2 (01:51):
You said it right.
Speaker 1 (01:53):
Mark joining us from Arizona today.
How's the weather down theretoday, brother?
Speaker 2 (01:57):
Well, you know it's better than Wisconsin.
We're going to be in theseventies today, so it's going
to be fine by the time this airs.
Speaker 1 (02:05):
Hopefully we'll be getting close to that, so
excited for that.
Well, mark, I got a chance tomeet you at the REI success
meeting in green Bay and justfrom having a little bit of
conversation with you, I said,dude, I got to have this guy on.
You're a faith-based guy likemyself, which I appreciate, so
(02:25):
you know.
So I know you come from a greatplace where your heart is when
you're doing business and whatyou're doing, which is important
, I think.
Whether you're faith-based ornot, I think integrity is a huge
thing in this industry andgiving everybody a good name.
But also your background wasreally interesting.
Why don't you tell everybody alittle bit about your background
in real estate and how you gotstarted and what you got started
into?
Speaker 2 (02:41):
Sure, as Corey said, it's certainly a different, a
different topic than you've hadbefore, but I actually started a
, a hotel chain, a localWisconsin based chain.
Cobblestone Hotels was aco-founder of that brand, sold
it, or sold my share, in 2017.
But we our first property wasactually in Clintonville,
(03:02):
wisconsin, yep, and that was weopened in January of 08 was our
first property was actually inClintonville, wisconsin.
We opened in January of 2008was our first property.
So we came up with the idea in2007.
Everything was exciting andmoney was easy at the time and
then the financial crisis hit.
But we basically grew it.
(03:22):
When I sold, we had about 83properties, I believe, and I
mean now they have like 150, 160, something like that.
So it's really growing.
But we started out, my businesspartner and myself.
We actually came up with theidea on an 8 hour car drive and
we're like you know, nobody ishitting little, small little
(03:43):
towns developing new properties.
You have the little mom popproperties, but nothing.
You know nobody is hittinglittle, small little towns
developing new properties.
You have the little mom-popproperties, but nothing like a
major brand.
So we came back to the office,kind of ran some numbers, tried
to figure out gee, can we makesomething make sense?
And I first came up with 20 roomproperties.
Well, 20 didn't make any sense,but once I got to like 30 rooms
(04:11):
or so it started to make somesense when I made it kind of a
public private partnership withtax increment financing and a
variety of local incentives withthe communities.
So, needless to say, we webasically started in
Clintonville and from there itjust kind of zoomed all over the
country.
We got phone calls fromeverywhere and we were building
(04:34):
10 to 15 properties a year.
So it's kind of interesting.
I believe we were the secondlargest hotel builder in the
country for many years and, notknowing a thing about
construction, when I started Ididn't know the difference
between Soffit and Fascia.
I still don't.
Exactly Me neither, but I knowhow to pass the test.
Speaker 1 (04:59):
Or get somebody who knows right knows right.
Speaker 2 (05:05):
Yeah, that's absolutely that's we.
We certainly were blessed with,you know, just a phenomenal uh
group of uh group of subs, aswell as as uh, uh staff and
things like that.
Just awesome, you know, veryblessed.
Speaker 1 (05:13):
That's that's all I can say there are so many ways,
like I already know this, thisone's probably going to go a
little longer, because I have somany things I want to ask you
about.
I want to go back to thefinancial crisis, though,
because I still hear this.
I've been in real estate since2016.
And back then, everybody wasdoom and gloom.
Right, they wanted to be thenext person to predict the next
crash.
Right?
That's what I kept hearing overand over and over again.
(05:34):
Well, you went through a crashand you were building a business
, a startup, from ground up.
What were, like how, what werethe challenges then?
And like, how did you guys getthrough it to continue to grow
with this new business model?
Speaker 2 (05:47):
Well, I tell you, we, we, we looked at each other my
business partner me and said,you know, I think we're done,
we're finished and we're like.
Then, then I'm like, oh, we'renot done.
So we kept at it and, quite,quite frankly, we, we um it it.
In some cases it was a blessingbecause we were able to recruit
just the most phenomenal talent, because they didn't have any
other work, and we, basicallythe key is finding a need and
(06:10):
finding a want.
And well, the bottom line is,all these little small towns all
over the country have a needfor some lodging.
It's just that nobody, you know, projects were too small, the
big players didn't want to playthere, and so so it was.
We were kind of, in a way,recession proof, because there
(06:31):
is so many of these littlemarkets when, when times are
good, people don't want totravel and go to those markets,
but when they're hungry, they'llgo anywhere.
And so so we, we were able totake, take, you know, basically
grow through that adversity.
But I'll tell you how weactually uh, started, or I mean,
I should say we, we first itwas going to be my business
(06:52):
partner about brian and myself.
We were just going to own allthe properties.
We were going to basically gointo town.
We're going to get the, thetiff district or tiff financing,
um, you know, some financialincentive, and then basically
use the local bank there and dothe deal and own them 50-50.
Well, that worked until we gotto Bloomfield Iowa.
(07:14):
We were on property number sixand Bloomfield Iowa is the Davis
County Bank which is now theSuccess Bank.
We were on the way there.
We just received $420,000, uh,upfront TIF, uh financing, and
we were there to sign our, sign,our construction and, you know,
loan.
I was on the way there, I wasprobably about an hour out and I
(07:35):
get a call from the banker andhe's like Mark, I got some bad
news.
I said what's the problem?
He's like, well, we, um, we'rea small bank, as you know, but
we just got two car dealershipsback and we can't do any more
commercial loans.
We, we are, we're toast andwe're like, great, he goes, but
we really want to, you know,have a, have a property in our,
(07:56):
in our, in our town.
And uh, we're.
So we put our thinking caps onand said, well, how can we
accomplish this?
So we kind of worked itbackwards and try to figure out.
Well, you know what, whatamount of money would the bank
be able to lend on?
And just worked it backwardsand and Darren was the was the
(08:17):
banker's name.
And Darren got on the phone.
He's like you know what, I'mgoing to start calling all my
people that are, you know, kindof the heavy hitters in the
county, in the small town there.
Okay, and he just startedcalling and seeing if people
would contribute.
So he kind of put an investmentgroup together.
Okay, I mean, he was callingthe Amish, he was calling
everybody.
It was amazing, wow, andliterally that was the platform
(08:42):
that really catapulted oursuccess throughout the country.
We basically, from there, weput together a little private
partnership.
So every property that wedeveloped was a different
ownership group, a differentbank.
So I literally hadrelationships with 60, 70, 80
banks in my time there and itjust literally took off all over
(09:07):
the country at that point.
Um, at the time is, if yourecall, the AG markets and the
energy markets were fairlystrong.
Well, so we went to NorthDakota and we, we did deals all
throughout North Dakota for bothof the AG areas as well as the
oil areas.
Okay, um, but again down intexas, we, we were all over the
country.
We actually our farthest westwas idaho, farthest south was
(09:31):
texas, farthest north was northdakota and farthest east was
pennsylvania, so any of thosestates in between there we were
doing deals and uh, and todaythey're still doing deals there.
That that's amazing.
But yeah, it was interestingwhat can be accomplished.
You know and I really have togive a lot of the credit, well,
(09:52):
obviously, to my Lord and Savior, I mean, all of it is a
blessing.
But the community banks, I meanthey really, you know, that is
what I would say really helpedour, helped our growth.
It's because, you know, theyweren't the big Wells Fargo's of
the world, they don't care, andthey would, they weren't doing
it.
But the local community banks,they, they care, and that's
(10:16):
that's what I recommend peopleget relationship with your local
community bank, yeah, that'sthat's as I teach.
Speaker 1 (10:23):
I have a course on the birth, on the birth strategy
, and I have a whole section inthere just about building
relationships with communitybanks, because it's so important
and some I didn't realize thisdown in where you are in Phoenix
area right now, currentlythere's not a lot of community
banks down there.
It's very much difficult.
It's very difficult to find.
You have to use a lot ofprivate lenders in that neck of
the woods, right?
So it's very difficult to find.
You have to use a lot ofprivate lenders in that neck of
(10:44):
the woods, right, so it's very.
You know, we're very blessedhere in wisconsin that we have a
very strong community bank.
Uh, culture and environment forpeople who are looking to to
invest whether that's in hotels,development, um, community
projects, like they take a lotof pride in helping develop the
communities and and infusing thecapital that's needed to do
(11:06):
some of those things.
So I love that.
That's how you guys went andthat was your strategy to do
that.
Another thing I heard there,mark, too, is you know, a lot of
times we get hit with adversity, right, like it's like oh man,
(11:27):
you guys could have, huh, maybewe got to think of a different
way to do this, and you justcreatively problem solved and
bam, it was magic sauce.
You needed that bank to denyyou guys.
Right, like to create thiswhole model, which is
fascinating.
So the the two things there whatcould?
What could be viewed from theoutside as oh man, that's a
(11:47):
terrible time to start in thehotel business, which is what I
thought.
I'm like wow, you guys startedin 08.
That's a terrible time.
Actually, it was a blessing foryou.
And then the same thing withthis bank because of 08 and what
was happening.
Another one that would havebeen for a lot of people would
have stopped them in theirtracks or had them fold shop.
One that would have been for alot of people would have stopped
them in their tracks or hadthem fold shop.
You guys took that adversityand just got creative of how to
still make something work.
Speaker 2 (12:08):
It wasn't a question of if it's going to work is how
do we make it?
Work.
Speaker 1 (12:12):
That's outstanding.
I love it.
Well, I've got a milliondifferent ways to go.
I want to go into TIFFs.
Okay, sure, we can go intoTIFFs for a minute.
I think for a lot of people outthere who are newer.
I would love to do adevelopment deal just because
let's do one together.
Speaker 2 (12:29):
There we go, it sounds, it sounds exciting and
it sounds like fun and I knowTiff.
Speaker 1 (12:34):
I've been in now and around enough of these that I
understand what Tiff is.
Can you explain to people whatis Tiff?
How do you go about getting it?
What's the?
What do you look for If you'relooking to do a development
project like?
Talk a little bit about that.
Speaker 2 (12:45):
Certainly.
Well, tif is basically a taxincrement finance district or
it's a TID, the tax incrementdistrict, or whatever.
Every state's a little bitdifferent.
Tif is in, I believe, 48 states.
Now in Arizona they don't allowTIFs.
That's one state, so I've neverdone one here because they
(13:07):
don't have it.
But in Wisconsin I meanthroughout the Midwest, they're.
You know, they're in moststates and that's how things get
done and basically how it worksis they freeze.
They set up a district and theyfreeze the tax that is
currently being produced in thatarea and anything that, the
growth of the tax.
(13:28):
So if you create new structuresand things like that, then you
can basically utilize thatincrement in revenue.
So let's say, a whole areacreated $100,000 in property tax
, but after you put in newbuildings it's 200,000.
Well, the 100,000 differencebetween the 100 to 200 can be
utilized as financial incentives.
Basically.
(13:48):
And the nice thing about it isthere's two ways you can do
TIFFs.
One is a pay-go-TIFF it'scalled, where basically they
don't give you the money upfront but what they do is they
give you all that increment backevery year as you pay your
property tax.
So it's a little.
I guess cities say it's lessrisk to them because I guess
(14:12):
they don't have to pay orwhatever.
They don't have any obligationsout there.
The other way is where the citywill go and say well, gee,
we're going to have this extrahundred grand coming in for the
next forever.
They can go use their muni,bonds or financing sources which
they're able to get money a lotcheaper than a private
developer can, and basicallytake the revenue from that to
(14:37):
pay off the bonds as you pay thetaxes.
The nice thing about the taxesis, as you know, taxes are in
first position on top offinancing, so they're before a
bank loan.
If you don't pay the bank, thetaxes are still going to be on
there, and if the bankforeclosed on you, they have to
pay that property tax back.
So it's really it's kind of arisk-free deal for the city.
It gets a lot of debate or alot of what do you call it
(15:00):
heated conversation over well,gee, you're giving these
developers all this money.
Well, yes and no, it's howthings are created and, quite
honestly, that's literally howwe started our company.
The little backstory here is Iwas working as a hotel manager
for many years and I'm like youknow, I really want to do my own
(15:24):
thing and I had saved a littlebit of money not a lot, but then
I also had built up about twoyears, I think about 70 grand of
credit cards and I said youknow what?
I'm not working for a paycheck,I am going to go make this
happen.
I was literally down to my last$23 of available credit on my
credit card before we hit ourfirst deal, and so the whole
(15:45):
company I mean, which I created,hundreds of millions of dollars
worth of stuff, started with mybusiness partner Head, a Heloc,
I think, the land we bought inClintonville.
Now again, I may be off by a fewnumbers here, but in
Clintonville we bought our firstsite just under $47,000.
And that's what we used hismoney for two weeks.
(16:08):
Two weeks is what we used hismoney for before we got the
money from the city to pay himback.
That's literally what startedthe whole company.
That is so cool.
Well, again, all glory to God.
I mean.
There's no way that we couldpull this off without his
blessing.
Speaker 1 (16:25):
That's amazing.
So that first Clintonville deal.
Let's break this down for asecond.
Sure, so you have 47 000.
You already had the wheels inmotion.
I imagine how long was theprocess that you guys had to go
through to get the tiff moneyand like start this whole thing
and and go through that beforeyou had that injection of
capital there to pay back thathelac you know it took about.
Speaker 2 (16:45):
Uh, let's see here we we came up with the idea, if I
remember right, in january,january of 07 or February 07.
I think that was when our tripwe went and met with the city
Interesting story with the city.
I actually the first city, Iwas actually Brilliant,
wisconsin.
We met with Brilliant.
When I came back to the officelike the next day, we called
(17:05):
Brilliant up and met with themayor and the city manager and
and explained what we were gonnado and at a time they had, I
know they had been searching fora you know a 60, 70 room
property and it's just like, notreally it's not big enough to
support that and but if theycould get it, good for them,
yeah.
Uh.
So we explained it to them.
They just seem like, oh, Ithink we're gonna hold out until
(17:26):
we get one of those propertiesand I kind of saying, well,
between me and you, they'regoing to be holding out for a
while, but no problem.
The next day I called Lisa, thecity manager up at Clintonville.
I went up to meet her and kindof explained to Lisa what our
intentions were.
And it's so funny, she gets up,she goes and closes her door to
(17:48):
the meeting room.
She says, okay, this stays inthis room Because if the mayor
finds out that we had hoteldevelopers in my office and you
don't build a hotel inClintonville, it's going to
break his heart.
That's been his whole oh youhit the jackpot there.
It was like literally, it waskind of a joke, it's like that
was the thing, wow.
(18:08):
So basically we had suchsupport.
It was the most amazing timeand shout out to Lisa she was
just, she was awesome, going tohelp and get through the process
with the council and everything.
We, we, we actually met withthe council.
We got, I remember right backthen I think it was like
$240,000 of upfront and I thinkwe got a hundred thousand dollar
(18:34):
like a revolving loan fund typeof thing, and they approved it.
They gave us a standing ovation.
It was the most amazing thing.
We walked out of that room.
I looked at my business partner, Brian.
I said did you see what justhappened there?
We just went, they gave us ourdown payment and we got a
(18:55):
standing ovation.
I said I love rural America.
Speaker 1 (18:59):
I love small town America.
They're giving you $300 andsome grand and they're clapping
for you as you walk out the door.
That's incredible.
Speaker 2 (19:05):
And they were just so full of joy and just blessed
that we would come and dosomething in their community.
That's awesome, and it's justendless stories like this
throughout the country.
I mean I've got.
Speaker 1 (19:17):
I grew up in Pulaski.
Is there one in Pulaski?
Speaker 2 (19:19):
Yeah, there is one in Pulaski, I think.
Speaker 1 (19:21):
I know some people that invested in that one.
Speaker 2 (19:23):
So yeah, I think Al Al Moran was.
Al was one of the leaders inthat deal, okay in the gas
station convenience store.
There's some other stuff aroundthere.
Okay, very cool, but uh, yeah,so.
Speaker 1 (19:35):
So the financing piece of this then.
So you get this, let's call it300 000.
You got some of it revolving,some of the cash up front, so
then does the bank count thattowards down payment?
Speaker 2 (19:44):
yes, they do.
Yep, they do.
Yeah, actually, and it wasfunny is because in, uh, in
clintonville, the project at thetime I think the total was $1.6
million was the build and stufflike that.
So you know they contributed,you know 300 and some thousand,
but we originally got approvedby.
(20:05):
It was a dairyman's bank, if Iremember, right back in
Clintonville, which they're notthere anymore.
It's changed hands a few timesnow I think it's actually being
first or something like that,but so it was a great bank.
They allowed it.
It was back in the easy times.
That was the good news rightbefore the financial crisis
there Handing out like candy ina branch?
Speaker 1 (20:23):
Absolutely yes.
Speaker 2 (20:25):
Because, basically, once we developed it, we got an
appraisal.
Once we developed it, we got anappraisal.
It was appraised I don't knowover 2 million bucks.
And so so they they actuallythey said well, we'll do this
deal, we'll get you an SBA loan,we'll do the TIF, you know
whatever, and we'll make ithappen.
And, quite honestly, at the endwe didn't even do the SBA loan
on that property because theywere like well, the appraisal
(20:45):
came good enough, we can doconventional, even though I had
nothing.
I mean literally no money.
Speaker 1 (20:51):
You guys had no money into this deal and so they gave
you, so 1.6 was going to be thecost, right?
Yeah, matthew 20 of that isabout 3.2 320 yeah, three or
three, three, twenty three so Ihad enough of that.
That was all tiff money,correct?
Yep, so you guys are buryinghotels we were burying hotels.
Speaker 2 (21:11):
Brand new build hotels.
Speaker 1 (21:12):
We were adding value.
Speaker 2 (21:13):
That's what we're doing.
Speaker 1 (21:15):
Man is that now, for I know you're out of the, you've
sold out and all that stuff,but I imagine you're probably
still keep up with the hotelindustry.
If I had to guess a littleabsolutely still.
Is that still a viable optionfor somebody out there, or is
that?
Is that ship kind of sailed now?
Speaker 2 (21:28):
well, it depends.
The key is to having the.
The municipality really wantsyour property, okay, project,
that's, that's the thing.
They, they, they have some whatdo you call it?
Some flexibility.
If it's something that reallyis on their list, okay.
And and a hotel provides a lotof economic impact for a
community.
Okay, I mean back in the daywhen I first started, every
(21:52):
guest that you had stay in yourtown instead of going down the
road and staying at a differentcommunity.
You generate about $160 a nightin revenue between the hotel
stay them, going out to eat attheir local restaurant, buying a
t-shirt, buying some gas,whatever.
There was an economic impactthat was quite substantial.
(22:13):
And the reality is we didn't,we weren't a strain on like the
school systems or anything likethat, because we didn't, you
know, it wasn't like we wereadding housing and that had to,
or whatever you know, so itwasn't.
Speaker 1 (22:25):
So the services, even though the tax, they weren't
going to be recognizing that taxincrease for many years.
Speaker 2 (22:37):
It was whenever they did know.
Speaker 1 (22:38):
It's kind of like gravy on top for them.
There's an additional, yeah, awhole lot of servicing they have
to do.
So that makes a lot of sense,yeah, and that makes me wonder I
wonder why so manymunicipalities are so anti
Airbnb.
You know I get it from likeyour, your housing perspective
thing, but it seems like withany any economic impact.
Plus, they're getting hotel taxin a lot of these towns now too
, true, based on those stays youwould think they'd be more
receptive to that, but there's alot of lobbyists in the hotel
(23:00):
industry probably going out.
Speaker 2 (23:02):
Well, I've been.
I've been to some of these townboard meetings.
Speaker 1 (23:05):
Arguments against that are just you know you get a
couple loud people and just youknow, if the Airbnb owners
don't show up, nobody else isthere to hear them.
So that, what are theseplanning commissions going to do
?
You know they're going to keepthe thing.
So wow, okay.
So that helps me completelyunderstand the tax initiative.
So somebody out there, let'ssay they wanted to do a single
family development, or maybethey wanted to do multifamily
(23:27):
development, or they want to do,you know, a strip mall or
something like that youmentioned having the town really
want that project.
How does somebody go aboutfinding that information?
Like Clintonville, how did youknow to go to Clintonville?
Like, what was your research onthat?
Or how did you?
Speaker 2 (23:41):
figure that out.
It was interesting.
So when I came up with the idea, I'm like I'm going to hit
towns that have some populationto them, they have a good
industrial base or you know,good room demand generators, um,
but they're not big enoughwhere they're going to get a big
hotel.
So that's, that was kind of my,my market study.
That's how I I looked at, orlooked at, towns originally, and
(24:05):
obviously cobblestone is nowbuilt in the big cities and
things like that.
But but when we started that'swhat we were.
We were rural, america, smalltown, and actually if, if you
remember and I don't know, doyou remember like the elko
stores, elko duckwell, um, likethey were kind of like the
pomida, that type of thing.
Okay, we really followed them.
I looked at their, their um, uh, their what, what they
(24:27):
basically looked to to figureout what store, what location to
put stores is usually countyseats and it usually was with a
trade area less than 16 000people, because at 16 000
walmart came in is what it was.
So they kind of filled thatniche and we kind of were the
same thing, really that's yeahyeah, so.
So I mean, our, our typicalcompetition was ma and pa, you
(24:50):
know, little up, you know 10, 20room, little drive up type of
motel thing, that's literally inmost of the towns.
That's what these propertieswere.
So we filled an inch.
I mean, we basically, when wecame up with this idea, we went
to all the big hotel brands andthey're like like, no, we're not
interested, we, we don't want a30 room property or you know,
(25:13):
40 room property, we want 70, 80rooms, that type of thing.
Yeah, they scale it.
So what we basically did is wetook all the good elements from
all the big brands and put in asmall box.
That's what we did.
And uh, so, and so we ended upeventually franchising.
And uh, so, so we, weintegrated because I'm like well
(25:34):
, how do I make a living?
Why I do that?
Build my brand, I need to makea living.
Well, construction.
So that's what we did.
We became the GCs anddevelopers of them.
That gave us our today money soas we could build the long-term
brand as well as ownership allover the country.
Speaker 1 (25:52):
That is so cool.
There's a lot we could go intothere as well Franchising and
all that stuff too.
Talk about the.
I want to go back to that.
I'm still curious on somebodyout there because we've had some
land that we've put out to thebuyers list, right, we think
it's a great developmentopportunity just from what we
can see.
But we're learning there's alot more that goes into, you
(26:14):
know, getting things approvedand just the processes and
wetlands and all that kind ofstuff.
So like, where does somebodystart?
They got a, they got a friendor family member who's got you
know 30, 40 acres they want tosell.
And you know a little ruralAmerica town.
How do they go about figuringout?
Like, what does this town wantor do they could just call?
Is it as simple as just callthe city it?
Speaker 2 (26:36):
is there.
Yeah, actually the the the bestthing is to contact, like, the
city manager and the economicdevelopment person either they
have one in the city or in thecounty or that type of thing um,
kind of gives you an idea ofwhat they're looking for.
A lot of times they'll do amarket study the city will like
for housing study and what theirfuture like, a future plan of
(26:59):
how the city is going to look orsomething like that.
And I believe I actually I maybe right, I may be wrong on this
one, but I think the citieshave to like create their master
plan every so many years ofwhat the land use is and all
that stuff.
So it's getting in line withthere.
And here's another little tidbitthat I found over the
(27:23):
communities I've dealt with Inmany cases locals have a hard
time doing it because there's alot of politics and a lot of
like what should I say?
Just just a different mindsetof people where they're like
well, we don't want to, uh, wedon't want john johnny to get
that, that incentive to do this,because I didn't like johnny
(27:45):
john was mean at me in highschool or whatever like right or
or I dated his wife, orwhatever you know.
There's things like that where Icould come in from the outside
negotiate the deal.
Johnny may come in and be aninvestor with me it was like it
was, it was, it was the craziestthing.
Oh, I bet that makes a lot ofsense again.
Speaker 1 (28:01):
I grew up in pulaski 3 000 people, I get it.
There's a lot of small townpolitics and everybody knows
everybody and everybody knowseverybody's dirty laundry from
30, 40 years ago, so I get thatWell that that helps a lot more,
cause I think that's one thingwe, you know, we've struggled
with is just understanding whatdoes the town want.
Now, is the TIF part of that?
(28:21):
Like, if you call them up,they'll say, yeah, we have TIF
money for X, y, z or how doesthat?
Is that something they then goapply to get TIF money from
somewhere?
Speaker 2 (28:30):
Yes, and no, some districts are already
established so you can kind oflike join in there.
Otherwise, if they havecapacity, they may be able to
create a new district.
Now there is a limitation, andagain my mind's not with it
anymore.
There's a certain amount of taxbase that you can have in a TIF
(28:52):
district.
I mean, you can't put the wholecity in a TIF district because
they obviously need to operatethe city.
But state law and things likethat Okay.
Speaker 1 (29:02):
And then they'll designate hey, we want to see
XYZ type of development here, sowe're going to hold out our TIF
money until we get likeBrilliant's case they're 60 or
70 unit hotel or whatever thecase is Okay.
Speaker 2 (29:14):
Yeah, just so you know, brilliant was property
number three.
Speaker 1 (29:17):
Was there really?
You had a building there, ohthat's awesome.
Speaker 2 (29:20):
They literally, after they saw us, they came back to
us and we built there.
Speaker 1 (29:25):
That's hilarious.
Oh, I love it.
Speaker 2 (29:27):
Mark, they're great people over there.
They were awesome to deal with.
But but again they they intheir eye.
They thought of a water parkthey were gonna have and all
this other stuff and we're likeit doesn't make sense I like the
vision.
Speaker 1 (29:37):
I like the vision, though I mean great visionaries.
They're brilliant.
It sounds like they have someaspirations, so that's great
they're.
Speaker 2 (29:44):
They're progressive brilliance and great town.
I mean there's all.
There's more, if I recall.
I think there's more jobs inthat town than there is people
just with like errands and allthese other, all the different
industries that are in there.
Yeah, that's great.
Speaker 1 (29:57):
We've wholesaled a few deals there and in fact this
week whoever's on our buyerslist won't get this until
several weeks later.
But we have a really nice bighouse in Brilliant that is out
to the list and I'm always a bigfan.
I'm like our properties.
Whoever ends up buying themfrom us ends up doing really
well there.
They sell really quick ifyou're flipping, because people
need housing there to work aterrands and all these other
places, and it's a good locationbetween Appleton and Green Bay.
(30:20):
You know centrally located alittle bit there.
So let's talk about banks.
So you've dealt with 60 to 70community banks dealt with 60 to
70 community banks?
Yeah, absolutely yeah.
What are some of the things?
So somebody out here right nowthey're listening to this
they've maybe done a few deals,maybe they've never used a
community bank before.
What are the things thatsomebody should do to set
themselves up for successworking with community banks and
(30:42):
what are some things theyshould be looking for out of
their bank?
Speaker 2 (30:44):
Yeah, Well, I guess first of all I actually go and I
research the banks before I goto the town to get an idea if
they actually have the capacityto do the project and how you
can do.
That is a real quick rule ofthumb.
On it.
They can basically usually lendabout 10 to 15 percent of their
(31:07):
equity.
Is what they can do.
So if you look in the banks,say it's a $200 million bank of
deposits and they have $30million in equity, their lending
limit is probably about $3million.
Is what they are.
And again, I may be off alittle bit, but it's a general
rule.
You don't want to go to a bankwhere, if you're trying to get a
$3 million loan and theirdeposits are $ million in there
(31:29):
and their uh capital is 6million, they're not going to be
able to do that because they'regoing to be able to about 10 to
15%, you said, of there.
Yeah, yep, roughly is what theyuh, and just for the audience,
so they understand the legallending limit.
Speaker 1 (31:43):
Can you talk a little bit about what that means?
Just for in in third grade cramforever.
Speaker 2 (31:47):
Sure Uh.
Their legal lending limit isthe amount, the maximum amount
they can can have to oneborrower.
So it can be you know one bigproject, or it could be you know
20 different homes, or whatever.
There's a certain level wherethe bank's like you have too
much money with one one borrower.
Speaker 1 (32:04):
That's how it works and they can participate with
other banks, if you go, they canright, so they can kind of like
I don't know works Right.
But they can join up and kindof pass that over to somebody
else and I don't know how theywork it.
Speaker 2 (32:15):
But yeah, it's just kind of like a fractional, like
we do in private lending, but weput a few people together and
you know you own 25% of thatloan or whatever that type of
thing.
They do it on the bank side butwith the FDIC and the whole
regulations, that's the only waya small bank does loans.
Now there's another way a smallbank can do loans and that's if
(32:37):
you get an SBA loan or if youget a USDA loan, which USDA is
another popular option,especially in the smaller
markets.
Usually, if you have a town ofless than well, ideally less
than 25,000 people, usda isusually an option.
Sometimes they'll go up to50,000.
And I really like it's a.
(32:59):
It's a longer process, but it'sit's a, it's a good program to
get things done.
Speaker 1 (33:03):
So that's 90% of Wisconsin Exactly.
Speaker 2 (33:06):
Yeah, yeah, no, absolutely, you know you're not.
You're not going to do it inaon or in Green Bay or in the
town, but again, in small townsof less than 25,000, it's
potentially an option to do theUSDA, especially for hotels,
because they have the businessand industry portion of the USDA
(33:28):
Tourism what it is, and tourismis one of the industries.
Speaker 1 (33:31):
Okay, and what's the benefit of the?
Speaker 2 (33:33):
USDA loan for a borrower, it's to be able to go
to a bank that's a small bankand actually be able to do the
loan, because all they have todo is like a USDA up to $5
million.
They guarantee the bank thatthey'll cover 80% of the loss oh
, if there's loss on it.
So the bank only needs to.
Actually, when they're doing a$5 million loan that's backed by
(33:55):
USDA, it's really they're onlydoing a million dollar loan, so
it opens up so many more banksto be able to do your deal.
Speaker 1 (34:02):
The risk is so much less Correct.
Yeah, otherwise it's theopposite.
Otherwise, they're normally upto 80%.
Yeah, yeah, yeah, yeah, yep.
Speaker 2 (34:09):
Yep, yeah, so so it's a.
It's a great great deal for asmall bank to be able to kind of
play with the bigger boys.
This is what it is.
So on the residential side, doyou have people use the USDA for
their a hundred percent loanfor buying a home?
Speaker 1 (34:26):
We don't deal a lot with retail buyers.
You work with a lot of agents,though that probably do, but we
deal more so with investors whoare going to end up flipping it
or whatever the case is.
So we have bought a couple.
We had a multifamily propertythat we wholesaled to somebody
else and the process was overtwo years to get it through the
(34:49):
USDA's red tape.
So I'm a little leery aboutUSDA for that reason.
There was a lot of you know, you, you might get the better
financing with some of these,but they sink your teeth in with
some other stuff.
As far as trying to offloadthis thing, he had to get these
voucher.
The owner had to get vouchersfrom the tenants and had to go
through this whole make sure heyou know he didn't discriminate,
and there was just all this redtape that had to go on in order
(35:10):
to act, for him to be able tosell his own property you know
which was.
He couldn't even just pay himoff.
I mean, I think the loan on itfrom USDA was only down.
It was down to like $7,000 orsomething so small and he, like
he, could have easily juststroked a check and said I'll
pay you off.
But in order to get a payoff heoff, he had to go through this
whole process and it literallytook us two years for him to
finally be able to sell hiseight unit property.
(35:32):
So it was.
I learned quite a few thingsabout USDA at that point, as far
as on the backside of it, soI'm not as familiar with on the
front end as far as borrowingfrom them, but I, you know, I
probably would tend to try tofind other options for that
reason if there's a lot of redtape on the back end but I can
see what what you're sayingwhere if you're in development
(35:52):
and your plans are just todevelop this thing and continue
to keep it for the foreseeablefuture, you know it's a great
option to open you up to a lotof other lenders.
If you're running into somebrick walls is that kind of
similar with SBA, then Is thatwhat they typically do as well
Is?
Speaker 2 (36:05):
it.
Yeah, s sba.
There's really two differentways that they have the 7a
program, which is basically adirect loan, so you can go to
you know any, practically anybank um, and they can do the
loan and usda back, or sba backsit.
You know um, and they'll backwhat is up to 90 on some of
those loans.
So so it's a.
It's a good deal um.
Then there's another thing whereyou use the uh cdc, the
(36:28):
community developmentcorporations like wbd is a big
one in Wisconsin, wisconsinbusiness development where
basically how it works is, let'ssay, you're going to do a
project that's we'll call it amillion dollars.
So a million dollars, whatyou'll do is you'll find a bank
that will lend 500,000 in thefirst mortgage, hundred thousand
(36:52):
in the first mortgage.
Then you'll, then you'll uh dothe sba 504 portion for the, for
the regular, you know, betweenthree to four hundred thousand
that you get from them and thenthe equity is the.
It's the difference, um is howit works.
So it it gives you the abilityto have, you know, 20, 20 year
fixed money on the sba portionportion which is because they
basically sell the bonds is whatthey do and people buy them and
(37:13):
things like that.
Wow.
Speaker 1 (37:15):
So then are you locked in?
Are there some pretty bigprepayment penalties if you were
to refinance at a certain point, and that kind of thing.
Speaker 2 (37:20):
Yeah, and an SBA.
It's basically it's a slidingscale, so you have a penalty if
you do it.
It's basically it goes down by10 each year.
So so if your interest let'ssay was was a hundred grand
worth of interest, you're, ifyou paid them off right away,
you're gonna pay a hundredthousand dollar penalty.
Okay, the next year you'regonna pay 90.
(37:42):
The next year you're gonna pay80, 70, 60.
So after 10 years that therewon't be one.
But it's the sunsets, yeah,yeah, okay cool.
Speaker 1 (37:49):
Well, that's awesome.
I mean, this is I'm learning somuch right now, mark, because
these have always been like darkspots in my brain of like how
do people do these bigdevelopments and get this money
and then they're into it with nomoney and then you're actually
creating money that you didn'thave by the equity that you
create when you do a new project, if you do it right and you
don't overrun costs and things.
So it's's a great way.
Plus you're getting cashflow.
(38:10):
There's just so many things.
My brain is just going crazyright now.
So many ideas, so many ideasgoing back to.
I just want to circle back andthen we'll we'll start to wrap
this mark.
Going back to you, we kind ofgot off on some of these other
loan programs, which is great,but what are some of the keys
you found to building successfulrelationships with these local
(38:32):
banks?
Like what was your approach tomaking sure you know you were
able to get, you know financingor you know, keep the
relationship with them for forthe projects again, I go back to
the cities, the city managers,the economic development,
basically when I would come intoor in, the mayors and things
like that I would.
Speaker 2 (38:49):
When I go into a town , they basically those three
people or whatever, would invitethe local lenders or the local
bankers to the meeting.
We get them all excited andfigure out which one wants to,
you know, be the lead on thisthing, play ball, and then they
direct me through all the peoplebasically it's depositors or
(39:10):
people, their clients, aspartners in the deal.
So then, so we really that's Iliterally have in my my, you
know, until I sold, I think Iprobably have about 800 partners
, uh, that are basicallyaccredited partners throughout
the country wow, that's amazing.
Speaker 1 (39:27):
and what was there?
What their?
I guess you know if you can'ttalk about this stuff because of
confidentiality, please justlet me know.
But, like, when you're goingout and you had these private
folks right, what was?
What was the allure for them?
I mean, was there a certaininterest rate you were able to
offer?
Was it an equity percentage,like what was the?
What was the offer to theseprivate folks?
Speaker 2 (39:53):
the.
What was the offer to theseprivate folks?
Well, basically they wereequity um members, so we didn't.
We didn't offer them anything.
They, they literally did itbecause they wanted for their
community, they wanted to um.
You know, basically it helpstheir community when they have
family and friends coming totown they want to have a place
to stay, or if they have localbusinesses or industry, they
want to build house theirvisitors that way.
And the other thing is just oneof those.
A lot of my investors were thesame people that would give
(40:15):
money to, like a communitycenter, things like that, where
they really they did it fortheir community and they want to
be able to drive by and telltheir friends yeah, I own, you
know, 10% of that, or I ownwhatever that type of thing.
So it's kind of a pride, ego,pride, whatever type of thing.
So it's, it's kind of a pride,ego, pride, whatever type of
thing.
And they're just proud.
They just love, you know, theylove their community.
They think their community isthe best.
(40:37):
When I go into a town I say Idon't know if this thing's going
to work or not, but I'll tellyou how I know it's going to
work is if we raise enough moneyhere to make it happen, then
then it's, it's going to work.
And what we did do is figuredout that that our properties
performed so much better when wehad that local investment group
, because there's so manysalespeople out there that say,
hey, you need to stay at myhotel, you know whatever.
(40:57):
And so we, we position yourselfreally well, you know, with
each community.
Speaker 1 (41:05):
That makes a lot of sense.
You got a lot of.
Then you got a lot of brandadvocates out there, constantly,
word of mouth and all over theplace.
That's amazing, and I'm justthinking about that right now.
I live in Door County and Iknow there's a project up here.
One of our friends is trying toget done and she had approached
us about investing in it andstuff like that and it's just
for us at the time it's justprobably not a great fit, but
that's kind of where I wassteering her too.
(41:26):
I think you're going to need totarget people who are more
interested in and really notnecessarily the return on
capital or any kind of interestrate percentage, but maybe just
a percent ownership of it thatwant to see this project get
developed and want to say thatthey were a part of it and be
able to do it that way, which is, I think, the approach she's
taking, which is going to besuper cool.
She can get it to go through it, but but no, that's good,
(41:49):
that's awesome, mark.
Well, man, I, I have so manymore things.
We could probably sit here forhours and hours and hours
talking all this stuff, and so Iappreciate all of your time
Mark.
We always end with a funquestion Now, favorite Wisconsin
tradition or place to visit.
Speaker 2 (42:13):
I actually have two, two of them all right.
Uh well, the fish fries and andthe supper clubs.
That's what I, that's what Ilove about wisconsin that I miss
out when I'm out here inarizona.
I split my time between arizonaand and appleton, so it's uh,
you get your fill when you comeinto town oh yeah, I go to the
beehive off of uh highway 76 outI don't know if you know where
that's at.
I do Like, okay.
I like to be high for my fishfry, okay, and I like the Black
(42:36):
Otter Supper Club in Hortonvilleoh, I've heard, I've never been
.
I've never been.
Speaker 1 (42:41):
I've heard there you go, folks listening to this, if
you're coming into town for thedraft or something.
Maybe you're not from aroundhere.
You got to go check out thesetwo spots Mark's mentioning and
if you're flying in Appleton,boom.
Easy enough, right.
You bet Mark are you going tobe coming to the draft?
Speaker 2 (43:03):
I am actually going to be in Arizona.
That time I was just looking atmy calendar.
I'm like you know I don't thinkI'm going to be there.
I have all my trips planned outnow through May because I fly
back and forth all the time, butthose particular days I'm
actually in Arizona.
Speaker 1 (43:22):
We'll miss you, you'll be with us in spirit,
Mark, Okay, If somebody wants topick your brain more about this
stuff or I know you also dosome lending too maybe before we
wrap here, Do you want to justtalk a little bit about you
don't have to get into specifics, but anything you want to
mention about what you'relooking for out of a borrower as
far as anybody who would needfunds.
Speaker 2 (43:43):
Yeah, again, it's all relationship.
I lend to people.
I know that type of thing.
So it's not.
I don't usually just takerandom.
We develop a relationship,first I have to know you, but
then it's.
We're pretty flexible dependingon what it is.
If we're just we're part equityand part, you know, part debt,
(44:04):
or we're all debt, or if theother thing I like doing is
actually like some transactionaluh funding or double closings,
um, okay, those are nice andagain, in many cases I'll do 100
of what we need for that uh,because it's literally only for
the day.
Yeah, um, but, uh, but otherthan that, most of my, I like to
(44:25):
uh get to know more uh fix andflippers or people that are
looking for the the shorter termmoney things like six months.
Speaker 1 (44:32):
About a six month, yeah, typically what you're
looking for maximum typically.
Speaker 2 (44:35):
I mean obviously we can, we can look at the deal and
figure it out, but uh, exceptfor my development project.
Speaker 1 (44:41):
I'm bringing in more, then we're gonna have a little
longer deal there.
We'll have to figure that outwell there, cory.
Speaker 2 (44:46):
Well, I'll help you out.
I'll show you how to go throughthose steps.
Awesome, perfect, it's fun.
What I really like to do isthat, as well as help and try to
go through the millions andmillions of dollars worth of
mistakes that I've made, that Ican eliminate, we'll have you
back on for another episode ofjust how many millions of
(45:09):
dollars you've lost over theyears of mistakes.
Speaker 1 (45:11):
Correct Mistakes yeah for sure.
Speaker 2 (45:13):
Literally.
That's why how I started somany companies is just because
of I'm like well gee, I startedan import company because I lost
like a hundred and somethousand dollars on an order of
granite.
No-transcript.
Speaker 1 (45:33):
There's so much wealth of information, Mark.
So, mark, if somebody wants toget some more info from you,
what's the best way for them toget ahold of you?
Speaker 2 (45:42):
Well, I know I'm old, but I'm not on social media at
this point.
Everybody's been trying to tellme to get on social media,
don't do it.
Speaker 1 (45:49):
Everybody's getting off social media.
Now Realize it's bad for thebrain.
Speaker 2 (45:54):
The best thing is to call me actually 920-312-4444.
920-312-4444.
Or you can just send me anemail, too, about markpomeranke
at gmailcom.
It's M-A-R--k and then my lastname p-o-m-e-r-e-n-k-e at
gmailcom, and if you want tomeet we can know.
(46:17):
When I'm in in, uh, inwisconsin, we can sit out and
see how we can help you outthings like that or anywhere in
the country actually.
So yeah, it sounds like you getaround or if you're in arizona
again, I spend half the yearhere.
Speaker 1 (46:30):
Go meet at a cobblestone somewhere and then
it's over and off, right.
Well, this is great, and ifanybody missed his information,
if you have my contact, you canhit me up on.
I'm on Facebook.
I don't go on it very often,but I'm on there so you can
Facebook message me, or you canreach out to us at
wisconsindiscountpropertiescom.
Feel free to contact us andjust say, hey, listen to your
(46:52):
Mark episode.
We want to get his contact info.
We'll ship that over to you.
That being said, if anybody outthere is listening to this and
you're out of state and you wantto invest in Wisconsin, or
you're in Wisconsin and you wantto start your real estate
investing journey, we would loveto have that conversation with
you.
Again, go to the websitewisconsindiscountpropertiescom,
put your info in and myself,reese Connor, somebody from our
team, will reach out to you andtry to see if we can help you
(47:14):
get started in your journey herein this great state we love was
called Wisconsin.
So, mark, any final, any finalwords for the audience before we
depart here today.
Speaker 2 (47:25):
Just don't think small, think big.
That's my thing, it's there'sno, if you're going to think,
you might as well think big.
I love that.
That's my.
Speaker 1 (47:32):
I see you did that.
It went from $23 on your creditcard to a hotel franchise.
So you know you know most.
Speaker 2 (47:38):
Most people start out with a, you know, a small
little fix and flip or somethinglike that.
I said why don't I just build ahotel?
Just go right to Before we dowrap.
Speaker 1 (47:46):
I think this is the best ending we've ever had, mark
, because anybody who's stickingaround I think that's the best
advice I could hear.
It's like sometimes people'sfaces are like, oh, I got to do
this little, you know.
I hear like, hey, what's yourbuy box?
And I'm like, oh, I want tostart at like something around a
hundred thousand or whatever.
Just rip the bandaid, just getsomething that's going to make
money and go for it.
Speaker 2 (48:06):
Right, yes.
Speaker 1 (48:07):
Awesome, mark.
Well, thanks again, man, foryour time and your expertise,
and I would love to have youback on here again in the future
, so I know you brought a lot ofvalue today.
I know this was a completelydifferent topic, but I know
there's a lot of stuff peopleare going to take away from this
episode, so I got a feelingthis will be one of the top
downloaded episodes as we goforward here.
So again, appreciate you, mark,and appreciate all you guys for
listening.
Please share the show to getsome value out of this.
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