Bozo the Banker

The relentless drumbeat of downer Real Estate News continues going on and on and on....

Hey, I'm as tired of it as you are AND we are most likely at only the start of a sustained down market in Residential Real Estate.

Notice I said, RESIDENTIAL REAL ESTATE.

Don't let the Press convince you that ALL Real Estate is poison these days.

That's the main problem with the news media. Just like politicians they always push to make everything Simple and Sensational. "Real Estate used to be GREAT and now it is part of the Evil Empire"

Well, you and I know there is no such thing as a single, monolithic Real Estate Market.

Every niche in every area is different... especially in Commercial Properties. Apartments in Texas are very different than Office in Portland or Retail in Boise.

The problem is Bankers who used to lend on everything, now have trouble spending a quarter on a gumball.

Bozo the Banker

This week it got personal for me.

If you wondered how the banking/lending crisis might affect your investing ... read on and I only hope this does not happen to you.

We are building a four station home office in a big barn on our property. I applied for a $50K unsecured business loan at my local bank to allow me a couple years to pay off the construction costs.

I have $210K in deposits in various accounts at this bank, a fat net worth and a credit rating well north of 700.

They flat out turned me down.

When I asked why, my local bank officer said that the bank's underwriting office - which is several states away - "Does not lend on your Business Category any more"

Here was my mistake.

When the loan application asked what kind of business I am in, I wrote, "Real Estate" Bozo the Banker nixes my loan this week, thinking,"Real Estate Bad".

Now let's remember...

That Same Banker would have lent me $250K on my first house - NO money down, with NO documentation of income and a credit rating of 550 just two short years ago. What a Bozo.

No matter what the press (or Bozo)says... remember this.....

The next 18 months will continue to deliver tremendous opportunities in Commercial Real Estate in certain markets and in certain niches. The niche most likely to benefit widely is Multifamily.

Millions of people will unfortunately lose their homes. New lending practices mean very few will be able to buy again any time soon. Population growth continues and everyone needs a place to live. This should produce a rapid increase in the size and quality of the renter pool nationwide.

Now you will probably have to keep Bozo (the banker that is) happy with a little more money down and show a little more financial strength than you are used to.

Just factor a 25% down payment into your proforma and shout to your Broker friends and other lead generators, "Damn the Bozo's, Full Speed Ahead"

P.S.

1) If anyone asks you what your "business category" is, tell them you have an "Investment Company".

2) I got the loan from another bank ... the new offices look fantastic!

3) The picture of Bozo is an actual cover of Business Week last week.