Hi, As our community of readers and investors at Longleaf Lending has grown, I wanted to revisit and share the highlights from an article I wrote at this time last year - the insights are more pertinent than ever in today's real estate landscape. I recently spoke at a Texas real estate event that my company Longleaf sponsored. With the decades-long bull run in real estate showing some cracks, few of our borrowers have experienced the uncertainty of the current market. Despite rising rates, housing seems to be hanging in there in our part of the world. We are busier than we've ever been and we still feel comfortable lending money at conservative LTVs. There are certain behaviors I like to see from borrowers right now, and I offered these 4 tips for surviving and capitalizing in the current market. 1. Change how you underwrite dealsWith market inefficiencies, it's possible to find real estate deals in any market. And in the future, distress may lead to very good opportunities. These are some of the key questions to focus on:
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2. Communicate early with partners and lendersWe've had some difficult conversations with borrowers over the last few months, but each of those situations will have a good result. Speaking early with lenders or equity partners is critical rather than waiting until there is real distress with a particular deal. We can also offer valuable advice and provide honest feedback about a particular approach in this market. These are common situations we like to get out in front of:
3. Act decisively“Live to fight another day” might be a good approach for the current market. We always recommend moving quickly if there are early warning signs of distress. I usually make these recommendations:
4. Stay on top of local market trendsNational headlines aren't always the most helpful source of information for investing in local markets. Investor meet-ups such as the ones we sponsor are great sources of information. As a Texas-based private lender, we also speak to investors every day. Anecdotally, here is what we've been seeing lately.
As we navigate the shifting real estate market, our focus is on guiding our borrowers wisely. This not only ensures their success but also reflects the health and stability of our portfolio. Thanks for reading.
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