Ever See Or Hear Of A Tornado Touching Down On An Entire Continent?

by Jeff Brown

Real Estate Investments Broker

Author website

Yesterday as I was waiting in my satellite office for the ‘other Brown’ to show up for a planning session, I laid my book down, taking advantage of the rare opportunity to sit quietly and think, sans any communications devices invented after 1951. I pondered more deeply what a previous morning conversation had reenforced for me.

Since my firm deals with builders and lenders in several states, I’m often privileged to hear what local market experts have to say. Much of the time it falls under the heading of, ‘What the hell?!’, but sometimes you find builders/lenders who’ve really drilled down into their corner of the real estate world. They ignore everything but empirically documented facts. Then with careful, objective analysis, they search for any opportunities hiding behind all the LameStream media’s ongoing fertilizer convention.

The phone call.

One of the builders I especially like and trust, had just hung up with a local lender he both trusted and respected. I’ll cut to the chase here. The lender knows what my firm’s been doing in his state. (For the time being, the lender, builder, and state must remain anonymous, by their request.) We’ve been tearin’ it up. They wanna go off the grid so to speak, setting aside a few boatloads of capital to lend to our clients, (not exclusively) without the constraints of Fannie and Freddie.

The builder? He’s no small fish, but his net worth doesn’t require three commas yet. 🙂 His product has been sellin’ itself during this correction. It still is. His biggest problem today? He can’t find enough land — or when he does, a bigger fish plays hardball and shoves him out the door. Most recently he walked away after being under contract. Now that’s hardball.

Also, this builder told me the recent builder surveys in the region as a whole, showed their confidence as an industry had risen almost 20%. Go figure. The lender is willing to revert to classic Old School lending by opting out of the secondary market and keeping these loans. What a concept. This will enable them to loan on a virtually unlimited amount of small investment properties per investor. Why is that such a big deal? Fannie/Freddie have so constricted the real estate investment market, the limit now is a couple properties more than a used Snicker’s Bar. Many are now counting the borrower’s own residence as a mortgage against his limit.

Now my clients will be able to borrow on as many properties in this region as they can prudently qualify for. Define prudent? Sure. Old School underwriting. Fixed rates. Full documentation triple checked from all angles. Up to $5 million per investor. We often have clients able to buy half a dozen properties at a whack. In other words, this is a good thing.

The point is, apparently this incredibly destructive tornado has failed to touch down on the entire continent. It’s local, just like real estate. You can scream ‘cliche’ ’till your voice fails, but it won’t change the facts. There are pockets around the country this tornado has left untouched, relatively speaking.

BawldGuy Axiom: Lenders lend.

BawldGuy Corollary: Old School lenders live to lend another day.

Builders? Again, Old School is the only reason any local/regional builder lasts over three decades and thrives. We do short term business with those suffering from bad judgment. However, they’re in great areas, offering solid product, just bad timing — for them. But it’s the Old School guys with whom we develop long term relationships. There’s a scoop.

I invite you to read my thoughts on this subject. Read the comments, as there are some real nuggets there, from some very smart folks. Turns out we’re all not gonna die after all. The tornado didn’t touch down everywhere.

It never does.