We just returned from a week-long trip in Texas full of all kinds of activities and events and thought you might be interested in learning a few key takeaways we came home with.

On Thursday, while attending Kyle Wilson’s Inner Circle Mastermind, Robert Helms was interviewed and asked to give his input regarding the recent Silicon Valley Bank failure. Because that’s been a popular topic of discussion, I won’t get into all of the details but will give you a few points to ponder:

• To ease the masses, the FDIC not only provided the “guaranteed” $250K to its depositors, but they also made everyone completely whole. A very noble gesture…
• There is $9.4 Trillion in bank accounts with balances under $250K. (This does not include those accounts that have WAY more in them, like SVB)
• The FDIC’s bank balance is roughly $130 B. That’s less than .02% to cover a run on the banks.

Friday and Saturday the Secrets of Successful Syndication event was held by Real Estate Guys, which we regularly attend twice a year. We do this not only because of the fantastic presenters and people that attend but to get answers to what’s REALLY going on in the world of real estate, the market, and the economy.

One of these nuggets came from the author of Magnetic Capital, Victor Menace, and was confirmed by commercial lender Anton Mattli:

• Since 2021, 90% of the loans made for apartment investors were bridge loans issued at an average of 3%. Many of those loans were also made based on proforma numbers.

Let me explain. Bridge loans are short-term loans similar to construction loans that allow an investor/builder to acquire the property and get it stabilized and performing so they can take out permanent financing.  Proforma refers to the performance of the property in a perfect world.   In this case, many loans were based on the notion that rents would keep increasing and interest rates would remain the same. Whoops….

Here's the rub. Permanent financing for these assets is typically running between 6-7% on average, which will not result in a happy ending for many.

Rich Dad Advisor Ken McElroy pointed out that these are challenging times when cap rates, expenses, and interest rates are up while rents have flattened. On the flip side, he also confirmed that this makes home buying more difficult, which is good for existing rental owners who are not in the above situation. He also mentioned that there is still a significant supply shortage in the market. This may continue to push rents higher.

What does this mean? There will likely be an opportunity ahead for those positioned properly in this space.

If any of this sparks your interest in having a further conversation or if you would like to learn more about taking advantage of the possible financial opportunities that may lie ahead, please reach out to us or schedule a call.

If you have questions about any of this or would like to learn more about taking advantage of the possible financial opportunities that lie ahead, please reach out to us or schedule a call.

Investing for Impact,

Randy Hubbs