Going Low, Lean, and Liquid
That was the message we heard loud and clear in early March, when we saw our friends in Wall Street go belly up. Capital markets shutting down left and right, not having any faith or confidence in what was going to happen in the real estate markets. We were on the phone with our commercial lenders, when they said “we’re taking a pause” or worse, they didn’t answer their phones, since they were backed by a Wall Street hedge fund that just closed its doors.
COVID-19 was much more than a virus. It became a virus in our minds, keeping people in lockdown, screwing with our businesses, and driving fear and uncertainty into our heads.
We were affected by this, no doubt. We had to halt construction on several projects, municipal boards all canceled their meetings and delayed our mixed-use and commercial projects, and a couple of buyers had to back out of solid deals due to their funding drying up. All in all, it left us in a place where we knew we needed to act.
Our new motto became “Go Low, Get Lean, and Get Liquid.”
“Go Low” meant our buying criteria had to change. Lenders were changing theirs drastically (those that didn’t stop lending altogether), and we had to follow suit, to still be loanable but also to account for an uncertain market. We still needed to do deals to keep our lights on, and there were still sellers who needed our help. But what was potentially a deal on March 18th, was no longer a deal on March 23rd. We modified our buying criteria down to a maximum of 65% of ARV (formerly 75%), to account for these economic circumstances.
“Get Lean” meant we needed to take a hard look at our overhead, and scrutinize every penny going out. Especially tools, and subscription services we had gotten accustomed to. All expenses were on the chopping block – including payroll. That said, we were fortunate enough to have a solid business that was able to keep all of our staff in place through the crisis, and with the added help of the PPP funds and EIDL loans, we could weather the storm for at least 6 months in the worst case, if we had no deals closing. We also made a decision not to upgrade our office space to the 5000 Sq. Ft. facility we were looking at, and instead, wait out to see how the market plays out.
“Get Liquid” – this was the hardest part but a great lesson for us. No deals were “too hot” to not consider letting go of in favor of getting CASH RICH in this crazy market. Single families, development deals, commercial opportunities, everything was looked at as “can we take a quick nickel NOW (or break even) to get the cash to use when the market turns?”
This was our strategy. And while we absolutely felt for the numerous people and their loved ones who had a bout with this disease, we also knew that this was a huge market catalyst – one that was a long time coming.
And in COVID’s wake – we also saw the opportunity. The opportunity to help and impact many residential homeowners, residential landlords, and especially commercial property owners that will ultimately feel the overwhelming burden of tenants not being able to pay their rents. Of their jobs NOT coming back after their unemployment stimulus runs out, and office vacancies no longer being filled as people do not return to work, as companies have now learned how to do more with less (see “Get Lean” above!).
THIS is the reason we’ve been readying our debt negotiation firm, that we’ve had since 2010.
THIS is the reason we are getting as liquid as possible, to have the cash when no one else does, or the capital markets once again fall out due to COVID, politics, or another “event”.
THIS is the reason we have been tweaking and building our team exactly where it needs to be, so we can be in a position of power and ACTION when the time is right.
So – through all the challenges the world is facing (and we continue to face, being in “the gap” of sellers demanding a ton of money, and the pent up demand that is still out there… see “The Gap” article!), we are seeing the LIGHT and what is making our purpose even more clear through this pandemic.
We will be coming out with some big news for our network in the upcoming weeks – we want as many people to not only get out unscathed, but to benefit from the changes in the marketplace, and we feel we have a huge role to play.
Reach out and set up a conversation if you haven’t connected in a while – I’d love to chat with you, even for a 15-minute zoom or phone chat, on what you’re seeing, and your own goals.
For now – stay the course, focus ONLY on what you can control (hint – it’s NOT social media, news, governor’s guidelines, or what your neighbor believes is or is not the case), and REMAIN POSITIVE.
This too shall pass.
Join us as we move into a position of power to help people who need our services, while being in a position to change your and our balance sheets forever.
And if you ever want to see what we are preparing for, take a peek at our AA Real Estate Group Facebook page where we have the recorded webinars that we started hosting for all the self-employed individuals once the new guidelines and changes started coming out hot and heavy.
~ Nick AA