How Ira Zlotowitz Is Disrupting Commercial Lending with Flat Fees, AI, and GParency

Steven M Weinstock: [00:00:00] Hi everyone, and welcome to the Wealth Clock with Winestock podcast. I'm Steven Winestock. I've been investing in real estate for over 20 years, from single family homes to multi-family syndications, to launching my own real estate investment fund. But this show isn't about me. It's about operators or founders and deal makers who are building real results. My guest today is Ira Zlotowitz, founder of GParency, a former co-founder of Eastern Union, and one of the most influential names in commercial mortgage lending. We're gonna be doing this a little differently today. I've got a list of powerful targeted questions covering everything from AI to financing strategy, to building a brokerage today. If you're an investor, a founder, or a broker. This episode is going to give you real tactical insight. Ira, thanks for joining me. I'm gonna jump right in. Ira Zlotowitz: Thank you for having me. Steven M Weinstock: Ira, what was your first real break in commercial lending? Ira Zlotowitz: That's the curve roll. I try to really look back and it wasn't so much like a first break, like I found was like a bunch of like singles, like little moves that God sent and it takes it to where you are. I definitely think a major part of it is when I started out the career, I started my career at Meridian Capital and then there's, before the technology, before this data play, there's nothing going on. Then you're talking about those public records, like people actually went down to the public records to get the notes and read it to see what, when loans are coming due and things like that. And that was just when the internet was starting and just when people were doing email and marketing and banks were starting to talk about merging together and the laws were changing, and I came, I guess that, I guess the break was joining at that time, and when I came in and being able to start, I think the biggest change was when I started, you know, I realized that the business was becoming a commodity back then. The level of commodity then and now is a whole different world. Steven M Weinstock: I remember back then, I started buying in 2001 and about two years later, I started buying private notes, private second mortgages. And I used to go to the county clerk's office in Trenton, New Jersey, and different parts of Central Jersey. And literally look for who has a note. You know, most of it was, you know, Bank of America or Countrywide back then. And then every once in a while I would see a John Smith and I would make an offer, 60, 70 cents on a dollar, and try to buy it. Yes, I definitely remember pre-technology. Ira Zlotowitz: Yeah. But that was your competitive advantage that you went out to those places. Now every person just picks up their phone, Chat GPT, and they're done. You know, they get the same info. Steven M Weinstock: You recently launched GParency and I guess we'll dive into that. What's the biggest myth you think investors believe about brokers? Ira Zlotowitz: So it's important. I'm gonna give the answer, but it's well-founded. Why this myth existed, it's just that it no longer exists. What's the biggest myth that people think today, but no longer exists? Actually, I'll give you two answers. One was always, and one no longer exists. One that no longer exists is that the broker can guarantee you certainty of execution at the closing table. A fly by night mom and pop brokerage deals have issues before closing and some deals blow before closing. At the end of the day, it's about the credit of the deal. If a deal makes sense and the credit is right, the deal's gonna close. Can people massage things, work it over, talk to the bank, tell a story? 1000%. Ultimately credit makes the decision. 10 years ago, if a mortgage broker did a lot of volumes with a specific lender, walked into the lender and said, listen, Mr. Lender, let's say Steven, it was your deal. You're not gonna close with Steven. We're never showing you another deal. You know what happened an hour later? No problem. We're gonna close. That same broker could be 10 times as big today and not just today. Go back two years ago. What started in 2019, 2020, calls up the bank and says, Hey, Mr. Bank, if you're not gonna close this deal. We're never showing you another deal. You know, the response would be, lose my number. We're not closing this deal and we're not closing any deal from you. That's number one. The second myth, and this is the craziest part, this is the power of brokers. I spent my time training mortgage brokers and like one lender told me, what's amazing to him is that how a broker owns nothing on either side. They don't own the bank, they don't own the client, and yet they're able to create this aura that they're worth whatever fees and they structure to go to. You have actual owners who believe it's an insult if they would ever shop their broker. They're scared of the broker, I'm gonna shop my broker. In the micro, you negotiate your countertops. You don't negotiate the broker. It's the opposite. A broker you should wanna shop. So the myth is you should be shopping every deal. You should never, ever give an exclusive ever. I never signed, took an exclusive and I never advised someone to give an exclusive ever. Steven M Weinstock: Yeah, no, I agree. I feel a little guilty every time another broker calls me up and I entertain their phone call. But I guess that's just natural. Ira Zlotowitz: No, but Steve, I can tell you on that point, it's natural to feel that way when you have a relationship with somebody. But what you should be doing is call back the first broker and tell the first broker, you're my first love. It's your deal to lose. Just wanna let you know I have a fiduciary to my investors. And investors invest in you cause they assume, hey, this guy Steve is gonna shop it around. You have that fiduciary, but at the same time, you need to balance relationships. So go back to that first broker and say, I'm working with you, but carve out the lenders you want. They gotta go somewhere else. Any broker that doesn't let you is a bad broker. Steven M Weinstock: You recently launched GParency. You've been in the commercial mortgage broker business for a long time, and you're very legendary. You are a legend in the business. Tell us a little about GParency in your own words, what's different about it. Ira Zlotowitz: Thanks. So first of all, in the same vein, everything is God sent and God decided that I'm gonna get the messaging out a certain way. I'm venture-backed and the people who invest in the business invest in the business where we believe we can build a Netflix of the industry. Netflix the industry. The mistake that I made, I take full responsibility, is that what I told to the investors, I told to the public when Netflix opened up. They only spoke about, I'll give you a disc in the mail, I'll charge you a subscription. And then they spoke about streaming. They didn't mention streaming at the beginning. My mistake was I came out and at one time I threw everything at the wall at the same time to the clients. So the clients were thinking, is my technology gonna close my deal? Am I telling you don't need a broker? All mixed messaging were flying and the brokers were on the defense and they told their clients, you're crazy. You're gonna go there. You think they're gonna close the deal for the same price I could close? It was a whole hodgepodge of wrong information. Took me a long time to fix it and thank God for living on the other side of the mountain. We're doing this recording here at the end of May. We're doing $250 million a month of business. Got away to 300 million. We found our messaging, we found our problem statement, made a very clear focus. This one problem is one solution. I'm not competition to your brokers. I work together with every broker, with every relationship. So here's what I do. Here's the problem that I solve. I'll start with the problem that I solve. 95% of owners, I truly believe the numbers are a hundred percent, but 95% actually admit that when they go for financing, they're not getting the best financing. They're not getting bad. There's so many moving parts in commercial real estate, there's no Bloomberg terminal, so whether they stay with that lender cause it's close enough or that broker, it's close enough, they have certainty of execution, they have a relationship, so it's good enough they go with. Steven M Weinstock: Ira, I'll tell you, I am very impressed that you're admitting to a marketing mistake that you made. I usually don't hear that from anybody. They just massage and go around it. So it's very interesting to hear you say, we made a marketing mistake. We told them we would be streaming and not just sending red envelopes in the mail. It's very refreshing to hear that from you. Ira Zlotowitz: We call ourselves Mortgage Assurance Brokers. We are the only mortgage brokers that guarantee you the best financing and you could stay with your broker. When forget about technology, I'm a regular mortgage broker with two differences. The first thing I do that's different is that I stop after you sign the term sheet. So I do everything a mortgage broker does from the beginning through the term sheet, exactly the same underwriter deal, set up the deal, work it, shop the same. The second difference is we only charge $4,500. So whether the deal is $300,000 or $300 million, doesn't make a difference. So the process, why does it work? How can I guarantee it? It's a process. There's three ingredients that are required to get the best financing. Ingredient number one is your existing relationship has to be motivated to the hilt, so someone's going direct to the bank or they using a broker. They call up that broker and they tell the broker, hey, Mr. Broker, do you want me to go? I'm going to GParency also. That broker's gonna get off the phone and you tell him you have five banks to pick. He's gonna focus with his team, which five to pick, work those banks to the bone, leave no meat, no fat on the bone. Right after the bat, you made back your money. I shop, I'm doing a quarter of a billion dollars a month. We have, we're tracking 3,000 lenders and we use AI only to identify the next 10 to 20 lenders. We shop it there. The biggest value is no ulterior motive in real estate. As you know from your whole career, everybody has an ulterior motive. Steven M Weinstock: You answered my next question as to why you went flat fee instead of commission. Ira Zlotowitz: That's no ulterior motive, but it's really the example I tell them. It's like falafel. When I opened, there's one point, it was $11,000. I'll be a whole broker. People couldn't resonate. I'll tell you the marketing thing I learned. When I was selling, I could be your broker for $11,000. Once someone couldn't fathom how they just did a deal for $20 million and they paid $200,000, I do that for 11. They sign me up, wouldn't listen to anything I have to say. When I'm coming to, let me just shop it for $4,500. Oh, that makes sense. Oh, you have volume. Makes a lot of sense. 10 hours of work. They understand the story when they couldn't understand the story before. Steven M Weinstock: Yeah, no, definitely. I mean, they're seeing that they could keep their first love with their broker. They could pay a flat fee and they're bringing other lenders to their broker. So the broker might have a relationship with the five lenders. You have relationships or you know, your company could search hundreds of lenders, or thousands of lenders, and you could really help the client to help the broker do their job. It's really amazing. Ira Zlotowitz: I'll tell you an interesting thing, what we found. Most people have the right broker. You're not an idiot. If you had a broker the last 10 years, you weren't doing the wrong thing. You didn't build your business. So most cases, the goal is not to bring them to a new bank. Not an ulterior motive. Normally the second broker is trying to tell them your first broker, your first bank's bad, you need a new bank. No, you don't. Create the competition that your first bank and your broker motivate a little bit more. Steven M Weinstock: You mentioned you're using AI for a lot of this. A lot of people, all they know about AI is Chat GPT if they're lucky. Tell us how you're using AI and how that's helping GParency and the client. Ira Zlotowitz: I will say an interesting thing that someone just told me over the weekend. As a real estate investor and you still have Chat GPT, don't diminish it. Just how they use Chat GPT. This person now is an LP, says now he gets real estate deal from a syndicator. He types in the Chat GPT only once cause it remembers you for the next time. It says, I like to invest in multifamily value add and tertiary markets, whatever. He writes with the return. And then he uploads the deal and he goes, does this match my criteria? If yes, yes. No, no. So at least it's a starting point. It gives them like a starting point as a level. But I'll tell you an interesting thing, how we use it. The main point we use is it helps us identify the next lenders. So this is the part that's really fascinating. It really makes a difference in the business. Every mortgage broker, every company, mortgage broker has a database of the lenders they deal with, and they have a few columns after it with a notes field. So column would mention which states they lend in, column two at minimum loan amount, maximum one, interest rate, so on and so forth. What happens when a lender tells them, my minimum loan is $5 million, but if the borrower is very strong, if it's Steve Weinstein, I'll go down to two. Where do they store that note? But if tomorrow they come back and say, I have a $2 million loan, it's not gonna flag. If the guy's strong, he's not gonna flag the way AI stores and absorbs data. It could read those notes. When we have email correspondence with banks on the transaction while they turn a deal down, when they like a deal, all that information is now able to get stored in a way that AI could read it. So when I go into my database, I have a strong borrower with the $2 million loan, it will give me the 12 lenders that lend on that property type, $2 million plus. It would say, if the guys are really strong, you want to consider this lender, because that's what they told us. So it allows us to find the nuances, the subtleties. It gives us that information and that plays a huge difference. Steven M Weinstock: Yeah, I mean, AI is great, especially with the Chat GPT. It all depends on the prompts you give it. The more you give it, the better. Ira Zlotowitz: The way AI stores and absorbs data, it could read those notes. That's where the value is. Steven M Weinstock: Let's talk about first time investors or early investors. A lot of people who are gonna be watching this podcast are people who haven't invested yet and they're looking to get into it. How should investors vet a lender or a debt broker today? Ira Zlotowitz: As a starting point, getting references. And I find that you want to get the references from who they're gonna send you and ask the tougher questions. What issues did you have in the problem? When you did have a problem, how did they work it through? If I wanna talk to a few of the lenders they did business with, did the lenders like them? Sometimes the lender says, I hate that guy, have no choice to do his business. But lemme tell you something, when I have a chance, you want to get the census. I would take your research on the references and on the lenders that do business with and you're asking questions cause everyone has ulterior motives. Steven M Weinstock: What's the most overlooked part of the capital stack or the financing stack for first time investors in your opinion? Ira Zlotowitz: So I think that the most overlooked, and this is where I spent millions and millions of dollars building it, we just released it on an app, is that many investors bifurcate their equity and their debt. That's not true. It's one thing. There's a capital stack. Use the word. It's capital stack. It's 100%. You wanna look at every single deal. Ultimately you're playing for the most part to an IRR. Whatever your metric is, that's what you wanna look at it. So when someone comes to me and says, I want the maximum loan I could get, I don't care if I'm paying a higher rate. And I'm talking to this person on the phone, I ask, I'm just curious, by the way, what's your deal with your investors? He says, I just have a split. I says, is there any pref? He says, no, there's no pref. So I said, why do you want the highest loan? If interest rates are for a low leverage deal of 5%, and a full leverage deal is 6%, and if you're getting high leverage, you're gonna pay 7%. Why you paying the extra 2%? It affects your IRR, affects your personal return. Wouldn't you rather get the loan at 5% and the rest of it you're not paying a pref on it anyway? Another person tells me I want to get a loan with the lowest leverage, I want the lowest rate. Why? You're paying a pref of 8% for the difference. You'd rather get higher money at 7%. It's cheaper than your pref. So people don't look at the whole capital stack and there's no real good tool out there. So we built a tool, an underwriting calculator. It's on our website. You can underwrite a deal literally in 2-3 minutes. Plug in what your purchase price is. How your split with your investors are, what your waterfalls are, and that's what you wanna play. You wanna make sure you're playing to your IRR. Don't bifurcate the two things. Steven M Weinstock: Definitely words of wisdom over there. As somebody who's doing this a while, there's so many different aspects and I've changed strategies over time. Ira Zlotowitz: People have to readjust. Don't go with old thinking. When rates are where they are now, and for the most part, the belief is it's gonna stay where it is or go down. Float is not the end of the world. Bridge money is not the end of the world. People have to readjust. Steven M Weinstock: Bridge debt these days is very popular because people are saying, if it pencils in today, the chances of it going up are pretty slim. Is there still room for creativity in financing? Ira Zlotowitz: The creativity was never about the rates and the structure. The creativity is, hey, it might make sense for this deal to take a low leverage from a bank that's willing to give the lowest pricing today when you're going 65% than take a mezzanine loan. And the blended rate works out to blank, which is better for you from the IRR perspective. So that's where the creativity is. The difference is there's less of the options overall, but that concept still applies in a very big way today. You have certain people deciding, hey, it's worth for me to go to a debt fund that will give up to 90% leverage at a blended rate of blank, and based on how much now I have to raise first I can buy this building. Sometimes it's no, based on the structure. If I do it this way and I think I'm selling out the deal within two years from an IRR perspective, this is better. So the creativity is holistic. It starts with fully understanding what you want to get to and also having the math in front of you. Steven M Weinstock: When I started buying smaller assets in New Jersey in 2001, 2002, I was doing a lot of creative financing. My first deal, I was able to put down 10% to get a loan. But I quickly pivoted to a lot of seller financing, a lot of seller seconds, sometimes a seller first. And I took that creativity aspect even to my multifamily. I bought a 102 unit property in Cleveland, Ohio about three years ago, and I was able to get the seller to hold paper. It wasn't traditional with the second lien or anything, but he stayed in the deal. And I used my previous experience by always asking for the seller to stay in the deal somehow. Ira Zlotowitz: Those things you're describing always existed, will always exist. The difference is what level the metric is. Steven M Weinstock: We're gonna end in a minute or so. You've been in the business a while. You've seen a lot of success. You're definitely legendary in our world. What keeps you motivated at this stage of your career? Ira Zlotowitz: The two things that keep me motivated is, one is I have a passion to be able to help and give back. And I see so many people that are not getting the best financing, they think they're getting the best financing. The whole industry is like a revolutionizing of the industry to be able to make it efficient, be able to help people. That's the foundation of GParency's model. The goal is to get to a point where you're not just helping on acquisition. How can I provide you the tools to make sure your eyes are wide open? All the tools you need to make sure you're not gonna be taken advantage of. And if you make a decision, it's because you made a decision, it's worth the risk. Not because someone like you didn't know enough information. We're launching a business in the next couple weeks, a spinoff from GParency. We're gonna allow the placers, calling it GPlacer. We're gonna give all the data and tools for those doing placement. Whether you're a mortgage broker or whether you're the in-house team in charge of placement, giving you all the bank information, all the same data that we're using to do GParency work. If you wanna do it yourself, how can I give you those tools? Steven M Weinstock: Ira, you mentioned GPlacer earlier. Tell me a little about GPlacer. Ira Zlotowitz: GPlacer, as we're going out into the market, is for two types of people that are not being serviced within the GParency brand. When I meet somebody, my vision is I'd like to be able to be involved in every financing in the country. So there's three types of owners. One doesn't normally use a broker. If they don't, they want a full-fledged broker. Like I say, hey, my former company Eastern Union, lemme refer you back there. Number two is GParency. No matter what you're doing, don't you want to guarantee the best deal. Mortgage assurance. Make sure you're getting the best rate. You have higher title insurance, property insurance. That's GParency. Then there's many mortgage brokers out there, thousands of them, that they don't need full help, but they might want some data tools. Just like every good mortgage broker, there's an in-house team that's placing deals. They don't want to go to GParency, they wanna do it themselves. That segment, we are giving out access, selling two products. Steven M Weinstock: How can the audience reach out to you? Ira Zlotowitz: Very easy. Go to gparency.com. Call us. Email us. We're there for everybody. The mission is to help everybody get the best financing, whether you use GParency or not. That's the vision. Steven M Weinstock: Ira, thank you very much for joining me. This was a great conversation. Packed with real tactical advice for everyone listening. If you enjoyed this, please subscribe, share, and tag on social media. This has been The Wealth Clock with Steven Weinstock. Thank you all for listening.