What I’m reading: The End of the World is Just the Beginning: Mapping the Collapse of Globalization by Peter Zeihan.
In January 2020 I closed on two real estate deals. A small apartment building and a mobile home park. When COVID hit it was like a bell had been rung. I was done buying real estate this cycle and would focus on hard money lending going forward. Initially, I lacked deal flow and relationships. I hadn’t made a private money loan in a number of years.
So I made whatever low LTV non-owner occupied loans secured by good collateral that I could find in creditor-friendly states. But over time, I’ve doubled down on one MSA.
There are several advantages to lending a lot in one MSA.
Relationships compound after reaching critical mass. As more real estate investors, more escrow officers, and more mortgage brokers think of us as closers, deal flow follows. As they see us perform, they talk with others and still more deal flow follows.
Informational advantages accrue. Your book of loans (both outstanding and past), informs how you quote new loan requests. The larger your loan book in any one city, the more information you have about how quickly properties are going under contract, where property values are trending, how many showings and offers sellers are seeing, etc. This is doubly true in nondisclosure states.
These informational advantages become an especially important resource that we can offer to our lower-volume borrowers, who buy a house or two a year.