As published in Scotsman Guide's Commercial Edition, December 2008.
The state of real estate finance is exceptionally precarious, hard to comprehend and difficult to navigate. There are fewer lenders in the market. Those that are still active have tightened the screws on their programs, with fewer deals fitting "in the box." Further, borrowers largely have had a difficult time accepting the new realities of interest rates, loan-to-value ratios and the lack of value for unentitled land.
Nevertheless, in 10 years or so, we likely will look back at the current environment and see it as a time of enormous opportunity in real estate.
Riding out this cycle successfully will take tremendous effort, perseverance, a positive attitude and a focus on fundamentals. There are four areas in particular on which successful brokers should focus. Doing so, you can close more deals now and position yourself and your company for a rewarding future.
1. Build and strengthen relationships
It is a cliché, but success in business largely is based on relationships. Regardless of your industry or your profession, your interaction with others plays a huge role in your success.
Now is the perfect time to get out there and build your brand by working your existing connections with peers and potential business sources. Discuss industry trends, pricing, property types and success strategies. Listen to what others say and collaborate to find solutions to problems or inefficiencies in the real estate market.
By focusing your efforts on your relationships, you will gain a deeper knowledge of the marketplace, raise your visibility within the market and position yourself to leverage those connections to close more deals.
2. Know your lenders
As a broker, it is imperative that you understand who is doing what loan and how. Many lenders not only have changed their underwriting criteria, but they also may have pulled out of certain asset classes altogether. Other lenders are adding lending platforms or modifying existing ones to capitalize on market idiosyncrasies.
Although it might be harder to find, there is still capital out there -- albeit with fewer available lenders. The world of private lending can be an especially fruitful place to secure capital in the current market environment.
Study and research the lenders that supply capital for the types of transactions you originate. Get on the phone and make cold calls; go to seminars and conferences; and talk with your peers.
Above all, be visible and ask questions.
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