My mother always taught me to be a leader, not to follow the pack, to be out in front and be different. That works well when you are the head of an organization but it doesn’t work so well in other areas.One of the areas that this sort of thinking doesn’t work well in is lending. This type of thinking can be especially troublesome when trying to borrow money from a lender.
I see a lot of investors, developers and contractors that attempt to bend the lender to their will instead of understanding what lenders have to offer and then developing a strategy that fits within those parameters.
What ends up happening when individuals or companies expect lenders to flex instead of being willing to flex themselves is that lenders choose not to do business. That’s right, no soup for you!
When it comes to obtaining a loan it makes since to shift gears. Instead of having a leader of the pack mentality, change to a ‘Go with the flow’ way of thinking.
Going with the flow means learning what is required and conforming to what is desired. Once understanding is achieved then a business plan to adhere to the constraints of the lender can be established.
Think about all the loans that are out there… There are literally too many to mention, but the rules say that these loans are inflexible. Lenders are unwilling to adjust their guidelines because this creates immense risk to their financial stability.
Opportunity exists everywhere in today’s real estate market but real estate investors are missing out on this opportunity because of their desire to have things as they were. The problem is that ‘things as they were’ was a very bad business plan and the collapse caused by lending problems is exactly what created the opportunity we see in the market today.
Everything in the real estate business is a give and take. This truism definitely applies to lending. How much opportunity are real estate investors and developers loosing by not playing by the rules of today’s lending market place?
Think about this, while investors bemoan the cost of a hard money loan, a blanket loan or a bridge loan, the projects they could be working on are being snapped up by other investors that are playing by the rules.
Sure, there is a cost of opportunity and that cost is easily calculated and can be worked into the transaction to make sure that the numbers work. However, there is also a cost of inaction. I refer to this as the Cost of Lost Opportunity.
What is the cost to the real estate investor, developer and contractor that loses a deal because they would not operate within the confines of current lending standards? What is the cost of allowing a competitor’s business to grow while one’s own business languishes and stalls? Think about it…
