Here's The Easiest Way To Recession-Proof Your Growth Strategy
Have you ever seen the movie, Jerry McGuire?
In that movie, Jerry is overwhelmed by all the greed in the sports agency business. So, in a fit of conscience, he writes a mission statement that takes a stand against all the corruption, and how the industry needed to change.
Then, exhausted from his emotional outpouring, at 2:00am he sends out an email with his new mission statement...to the entire company.
Instantly, upon reading it, everyone recognizes and feels the power of the truth Jerry wrote, and they give him a standing ovation as he enters the office the following day.
Then, without warning, he’s immediately fired!
It’s a great story of how everyone resonates with truth...
...yet, only a few are strong enough to stand up for it.
That's where we are today...
This last year has been brutal, and as a builder, you are in a battle.
The real value of your business “relationships” are being tested right now. And at the risk of sounding harsh...it's time to be brutally honest about all your important business relationships.
Back in early 2022, before a conference in Nashville we published an article about broad-based systemic risks – and no one wanted to hear it.
We suggested that when the entire crowd is ZIGGING...you generally want to ZAG!
Well, we were like the lone voice at a real estate rock concert. No one could hear us...or wanted to.
They looked at us like we had lost our minds!
Well, fast forward and voilà – enter the Fed reckoning.
Demand is intentionally being destroyed at a faster pace than ever before in history.
The biggest challenge is even those who thought they prepared well may have been too optimistic.
When capital is thrown at you in obscene amounts, it’s flowing so fast and freely that it's almost intoxicating. That's where we were in early 2022, and most of the players were not even considering, let alone planning for, when the capital firehose might get shut off.
Worse yet, some builders currently have projects 3... 6... even 9 months in that are based on old unrealistic numbers, and they’re lucky if their lenders are only tightening up their standards.
Many builders are falling victim to lenders not funding on time, or funding at all. Others are facing draw delays, or lenders simply shutting down draws, with subs walking off job sites – never to return.
...Which Can Be Fatal
If you've got subs walking off job sites it’s devastating!
What's the upside? Where is the silver lining?
Unfortunately, for some there is no silver lining.
Some builders are being smashed against the rocks, forced to burn all their excess cash – or worse, filing bankruptcy.
However, for those who have kept some of their powder dry and have weathered these kinds of storms in the past, it’s their time to shine and gain market share.
How to Grow Safely in a Recession
The key to safe scalable growth for your business right now is simple. Not easy - but simple. It's having realistic expectations while developing multiple exit strategies.
See, like I spoke about at a recent conference in Las Vegas, we are actually even more bullish on things like BTR and SFR right now...than we were in early 2022.
Even with higher mortgage rates, today the numbers are far more realistic and can be penciled for long-term success. Q1 of 2022 everyone seemed to be wearing nothing but rose-colored glasses.
Thankfully, today rose-colored glasses have been traded in for a more accurate lens on the market.
It’s always best to deal with the truth – not hopeful assumptions (that are a two-edged sword ready to slice in the opposite direction...)
So, again the cure comes in two forms.
Realistic expectations and multiple exit strategies.
With realistic expectations you can push back on bloated land prices and subs acting like they own you. Plus, suppliers are also upping their game, fearing market pullback. So, you’re seeing lower prices, better service, and an environment where, if you’re ready to capitalize, the wind is at your back!
The key to actually being able to execute with confidence is having trustworthy relationships.
And Yes...We Are Still Lending
While many big lenders and banks are pulling back or stopping, one might wonder how we can still be lending. Well, we are some of the most conservative real estate investors and financial analysts you will find anywhere.
In fact, that is precisely why you can trust and count on us, and we can continue lending. We actually lend our own money, and we are not leveraged. We’re not at the mercy of Wall Street…or a hedge fund that’s levered 10-to-1.
Yes, we have capital partners too. But they are just like us, very conservative, non-leveraged, and can weather almost any economic environment.
That’s why we lend only - to the best builders – builders like you. And we don’t let market fears drive our underwriting decisions.
That doesn’t mean we don’t pay close attention to market trends - we weigh all those factors very carefully.
However, our lending process in built on six core principles – a model that was forged in the blast furnace of the Great Recession and has served us and our clients almost flawlessly.
So, your reassurance is we’ve already navigated more precarious waters than the current market, even with the Fed doing everything they can to destroy demand and crush real estate.
That said, we take nothing for granted and…
We Put Our Money Where Our Mouth Is
So, if you have any doubts as to whether you would qualify with us – you probably don’t.
…and if you already know you qualify – we should probably talk.
Our average client has 234 successful exits and is very bankable.
So, why would they use us?
Lots of reasons.
First, we typically provide greater leverage.
Second, because we’re private we don’t have any regulatory constraints, or pre-sale requirements.
Third, speed of execution.
Fourth, when considering the entire capital stack, your total cost of funds is often lower with us.
Fifth, we have never missed a draw – ever – not even during COVID.
So, in closing I'll end with this...
Little Hinges Swing Big Doors
A conversation with us just might be that "little hinge" that swings open more doors for you.
That said, we are looking to expand relationships with the best mid-size builders. We work with experienced builders like you who want better leverage, fewer banking rules, and the ability to rapidly scale the right opportunities. To do that...
...you need true partners, not just people mouthing the words to grab a piece of your business.
You need partners who will stand by you through thick and thin – who perform.
You need to know when your partner says it, they’ll do it.
No more BS.
No more easy money.
It’s time for hard work, trusted partners, and recession-proofing your business.
Our clients often tell us that we make great partners, and at the very least, we could be a solid backup plan for you. We're a lender who actually does what we say we’re going to do.
So give us a call or stop by one of our office and let's talk.
David Huey, CEO
PS This Fed-Crushing-Demand Crisis has put many into a tailspin. So, let's partner to take advantage of the opportunities and gain quality market share together.
Our Relationships Speak
The reputation of our clients speaks volumes, with our top clients averaging 587 builds, and many over 2,500 builds to their credit. They can get funds anywhere. Yet, they choose us again and again because you can trust us.