The noise of banks crashing down is enough to make your head spin….and what’s a poor real estate investor to do amidst all this craziness? Keep in mind, it’s not only the banks in the headlines that are hurting – even those banks not (yet) shut down are under tremendous pressure from their regulators to stop lending.
Yet, real estate investing is capital-intensive – ie, it depends on lending. So, fellow investors….what are we to do?
There is only one thing to do – keep your head fastened on straight, and go deal-hunting, as opportunities are likely to start flowing. Top 5 explanations:
- Does anyone know how do you say “Silicon Valley Bank” in French? – hint: it’s the latest domino to (almost) fall: ok, you guessed it, it’s “Credit Suisse”! This once venerable bank was about to hit the skids…until Papa Suisse came to the rescue. And wouldn’t we all love to have the Swiss government protect us against failure?
- Funding contingencies (aka mortgage contingencies) are increasing, according to yesterday’s Wall St Journal (March 14). These essentially allow the borrower to either cancel their deal outright (if they can’t get a mortgage) or get an extension on the deal IF their mortgage lender goes out of business. These contingencies last got a real airing during the early days of the COVID Pandemic, when wholesale panic set in the homebuying market about ability to get loans.
- While Credit Suisse got lucky, we don’t all have that sort of “Papa Sugar” (that’s “sugar daddy” in French) and a whole bunch of real estate may become available at attractive rates. More opportunities are likely to pop.
- How? Here’s how this script could play out, all to your benefit as deals start flowing:
- Some buyers will lose their acquisition financing, as banks start to slow or freeze their lending.
Deal Impact: These properties will come back onto the market, and disappointed sellers will sell to you.
- At the same time, as banks slow down, some (desperate) sellers will feel compelled to unload their fixer-uppers and/or investment properties, even at a discount price
Deal Impact: These properties will come back onto the market, and desperate sellers will sell to you.
- And, at the same time, deals are going to unwind, as yet other sellers are likely to accept “funding contingencies” in their contracts. Deals are more likely to unwind and, you guessed it….
Deal Impact: These properties will come back onto the market, and hungry sellers will sell to you.
- Vroom, vroom – rev up your financing engines – To take advantage of this opportunistic deal flow, you need to make sure that you a lending partner teed up to let you pounce on those opportunities, as they arise.
And this is where Diggifi comes in – we are a competitive marketplace for financing real estate….and our lenders are still actively lending. Click here to book a meeting with one of our loan officers.
What’s happening to drive this? Credit Suisse, the behemoth bank, is the latest casualty of this week’s smartphone bank runs. And, key to remember, even those banks not shut down are under tremendous pressure. While banks’ complicated investment strategies were always a “black box” to many of their customers….. they’ve reached a whole new level of complicated, as investors are penalizing them for having too many of the wrong kind of investments. Add to that the Fed’s on-again/off-again, whiplash-inducing approach to raising interest rates and…. “what’s a poor real investor to do?”
To summarize – get ready (and get your financing relationship ready) as opportunities start popping.