PLP-056 How to Lend when Markets Turn Down

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If you are looking for a way to learn how to increase wealth by using time-tested methods in an ever-changing world, then you are in the right place!  Welcome to the Private Lender Podcast, the only podcast whose mission is to teach people how to become private lenders and to create an economy where people just like you and I can confidently invest and build wealth with old-world pragmatism, and without banks or Wall Street.

I want to share with you 3 or 4 of the ways I help keep money protected in a market that has peaked and is trending down.  I know many are probably asking what’s my opinion on the current market? Well, as I record this episode in early January, 2019 I will only say that I believed the market has cooled a bit in my area.  I’m sounding any alarms.  All markets ebb and flow, tides rise and fall, and sometimes there are insane bubbles and crashes – does that sound familiar?  So my answer is this:  I am agnostic on US real estate at the moment – neither hot nor cold – the waves are not massive, fear and doom inducing trends.  But I will certainly start looking more into the national indicators as I do the 4 things I’m about to share with you now.

 

 

1 – Tighten up lending requirements

  • Demand more skin in the game from your borrower
  • More reserves to pay on a loan that goes long
  • quality of borrower’s RE portfolio: High-end vs. Low-end

2 – Scrutinize the comps – utilize a downside price contingency

  • Look for a tight radius on the comps map – no more than ¼ – ½ mile, do not cross any major roads or intersections
  • Are DOM (Days On Market)increasing and prices decreasing?  Notice a lot of price reductions?
  • Age of comp: Last 30 best, 60 manageable, no more than 90 days preferred. More than that is outdated and old, like a rotary phone or my Atari 2600

3 – Lower LTV

4 – Look for longer terms with established landlords/seller financers.  My not pay as much, but Steady payments, ride out the trough and get ready for the next upmarket ride, don’t have to work your money as much.

 

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Thanks for listening, please keep reaching out to me– I greatly appreciate the feedback.  A I wish you all safe and prosperous private lending.  I’ll see ya’ll on the next episode.

-k

About the author, Keith Baker

My ultimate goal is to create an economy for Real Estate (and other) Investors where banks are no longer needed. An economy where every day people look to each other for leverage and support. During the day I am an insurance adjuster for the oil field, where I handle millions of dollars of other people's money (OPM), and by night I invest in Real Estate and host this podcast. I hope you have an excellent experience and find real value within this website and the Private Lender Podcast. Please leave comments or submit your questions on the Contact Page.

I wish you prosperous, safe and happy lending and investing!

Thanks for listening

-k

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