EP NNA 59 – Commercial Real Estate Chaos: What’s Going On Out There And How Can You Survive?

NNA 59 | Commercial Real Estate

NNA 59 | Commercial Real Estate


As the economic shutdown continues, commercial real estate reels back in the biggest drop it has seen for decades. How are the biggest players in the industry faring? What does this chaos mean for smaller companies and investors? What can they do to survive the fallout? These are just some of the questions Scott Carson addresses in this episode. He breaks down the losses in the commercial real estate mortgage markets and gives tips for smaller players on how to survive the crisis. There might be an opportunity in this crisis, but you have to work really hard for that to materialize.

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EP NNA 58 – Commercial Real Estate Chaos: What’s Going On Out There And How Can You Survive?

Hopefully you’re healthy, safe, and calm in this chaotic world. I want to thank you for joining me. You’re going to want to take some notes. If anything, make sure to take some notes on some of the things we’re going to share with you guys. Anyway, I’m honored to have you all here. If this is your first time to join us here on Note Night in America, welcome. You can go to all our videos at WeCloseNotes.tv. It will take you directly to our YouTube channel. Make sure to subscribe. I’ve got some great interviews on the Note Closers Show Podcast. You can always get your videos and all the stuff that we love there. Make sure you subscribe.

The Big Short Part Deux

Anyway, hit me on that. I want to dive straight into the content. I don’t know about you guys but I’m interested. I get an email forwarded to me from a buddy of mine, a coaching student. It was also right about the same time and he asked me of what he thought the market was going to do. I said, “I don’t have a crystal ball. Who knows what’s going to happen with the election? Maybe a pandemic will come in.” Sure enough, we’ve seen a lot of craziness happen. This is one thing I’ve been talking about. The partial markets have been over leveraged for years, overpriced for the most part. I don’t believe we’ll see it. I know we’re going to see things like what happened years ago in 2008. Let’s dive into it.

I don’t know about you guys but this was the article that was sent to me, After $50 Billion of Losses, No One Comes to Save the Mortgage Market. This was an article in Bloomberg. It came out on a Friday, April 12, 2020 at 12:12 PM Central Standard Time. I started reading and I was like, “Oh my gosh.” I spent the weekend going through this article and pulling up the different companies that talk about it. Worst losses in the commercial mortgage-backed security market out there wiped out decades of profit. Here’s a look at the numbers. This is taken from a market group, which tracks that stuff. It goes up a little bit in 2014. The commercial dropped down and they dropped down again. It began in the first quarter of 2016 and it has been back but it’s been building up. It dropped dramatically down a ton out there.

If you think about what’s going on here, so much stuff are being closed and many people are not paying their rent. When you look at big companies like Subway, Mattress and others, they’re like, “We’re not going to pay the rent. We’ve got to stay in business and we’ve got something that can help out. We don’t know what’s going to happen in the market.” The first thing with them talking about, “Let’s go ahead. Everybody qualifies for 90-day forbearance.” That’s great. As I’ve said before, we’ve got a long-term issue for a short-term problem. This is going to go throughout 2020. This stuff is not going to happen overnight. The biggest thing that I want on these calls is, hopefully, to better prepare all of you that are reading so that you can see the opportunities and you can act on those opportunities.

The money is maybe up or down market whether it’s a bull market or a bear market, there is opportunity being made. What are you going to do with that information? Are you going to sit around and say, “I wish it was 2000. I wish I had gone back to the future, come back in time and buy a whole lot more.” Now is the opportunity here in 2020. Some people will say 2020 will be the crappiest year yet for a lot of people, it’s going to be a positive year if you know exactly how to act on it. Let’s talk about some of that stuff.

This article is the same article there as Bloomberg. They talk about how the biggest players out there are losing value. We’re not talking 5%, 10%, we’re talking huge amounts. It’s losing 88%, 2/3 of CMBS Market wiped out. Nobody is trading anything. I’ve been listening to podcasts. I’ve been talking to people. The mortgage market is at zero. These huge billion-dollar players are losing 88%, 86%, 84%, 82%, 81%, 70%, 76%, 74%, 73%, 72%, 71%. Those represent billions in the market. Billions of the portfolios that are worth $0.10 on the dollar. Their stuffs are wiped out in value. That’s not saying it can’t come back if the government comes in and does a big bailout. Can the government bailout all these people? It’s a mixture.

I went through a lot of these but we could be here going through everything. What I did is I pulled up the annual reports of filings on the three biggest companies on here, AG Mortgage Investment Trust, Exantas Capital, and MFA Financial. I would encourage all of you to do the same thing on more than 1 or 2 of them. Let’s face it, they’ve got credit lines and some relationships on Wall Street that are going to help them out some things but there’s a lot of them too that need to move. There are some players that we’ll get to that and we’ve talked about some things before and what’s going on in the market.

Let’s start first with the biggest loser, a whole different thing, AG Mortgage Investment Trust. I pulled up their Q4 report and this is what they talked about and how they returned. This is what they were pitching in Q3 of 2019. Q4 looked almost exactly the same. It’s still going up, “We’re doing great.” I’m like, “Were you?” That’s what they’re pitching to their investor profile. If you look at their Q4 investment portfolio, residential mortgage-backed security is $2.3 billion which is 52.8% of their fair value. Residential investments in $4.9 billion. Commercial investments are under $600 million.

NNA 59 | Commercial Real Estate

Commercial Real Estate: March has seen the worst losses in commercial mortgage-backed security market, wiping out decades of profit.


You can see the breakdown on some of the things, the residential, the commercial, backed security, agencies, all this stuff. You can see the percentage of stuff is ridiculous. They’ve got so much stuff that’s not worth hardly anything. The same thing here, the residential portfolio details. Most of these companies are investing in big commercial assets and commercial loans. They do have the stuff and I wanted to bring this up. Prime obviously brings up $242 million to the portfolio. The Alt-A/Subprime stuff, 123%, they’ve only got 8% of the portfolio and 16% with Prime. Credit Risk Transfer is 18% of their portfolio. Non-US residential mortgage-backed security is 4%. Thirty-four percent of their portfolio has been in reperforming or nonperforming loans.

Do you think they’re going to have more nonperforming stuff or reperformers that go default? Land related financing makes a small chunk there. That’s what they’ve got and that’s why they’re dropped. A huge portfolio that has got stuff, what do we do? We remove it. They broke it down to a little bit more in the Q4 on stuff like that. You can see commercial real estate makes roughly about 26% of their real estate loans there. Forty-four percent CMBS and their Freddie Mac K-Series is 28.5%. The thing is that 34% of commercial loans are at fixed rates and 2/3 is floating-rate coupons. That’s the thing. They’ve got stuff on the portfolio but it’s going to definitely be nonperforming when bailed out.

The second biggest player in the field is Exantas Capital, down to 86%. It’s the second biggest loss. Here’s how they broke out their portfolio for a little bit. They’re all over the place. You can see multifamily loans. We know a lot of people are hiring multifamily because it’s the hottest thing. If your renters aren’t paying, you’re not at the highest market. 54.7% of portfolios in multifamily loans. Thirty-nine percent by law office, retail is 8.5%, hotels are 12%. The only thing that may not go down is the self-storage market and that’s not quite their lowest thing. You can see Arizona, Nevada are top two. Texas is 17.8% on Exantas Capital. Florida, Georgia, California, South Carolina, and New York, you can tell it spread out there. The multifamily funds have invested heavily in multifamily. If that’s not bailed out, there’s going to be a lot of deals available, especially people that thought they’re going to refinance that on three years. That’s what I’ve been telling people for past years.

You can’t count on the money to be there. When the portfolio is dropping and the margin calls in there, nobody’s going to refinance your asset. You’ve got to come to the table, maybe get refinance and protection. We’re going to see that happen again. Everybody that overpaid for multifamily is going to be hurting here. How many of them have enough cash reserves to float their costs and things? It doesn’t matter if they’re paying the payments. If the market value drops, the margin calls from these companies are going to be huge.

Here’s the thing they talked about. If you invested $100 in January 2019, here’s how we’ve performed. You see Q4 there. That’s not the same thing. They talked about how they move their portfolio in Exantas. In 2016, they were making a conscious effort to get to where they’re at being 3/4 on their commercial loans and then 25% to 35% on their other commercial real estate investments. That could be lending and mezzanine loans, or residential mortgage. Don’t get me wrong. They’re not going to be selling those portfolios off big. At some point they’re going to get busted up, sold off in tranches and things like that. If I remember correctly, Exantas broke down and saved this. They’re showing how the backed securities and how they invest from high to low.

Here’s the third one. MFA Financial, third biggest player to take the biggest crap. Here’s the first press release. They were supposed to be given $0.20 per share payout to them. The company announced that due to the turmoil in financial markets resulting from the global dynamic, the company and its subsidiaries have received an unusually high number of margin calls from financing counterparties and have also experienced higher funding costs in respect of its repurchased agreements. Meaning they have to pay more repurchase agreements because they do more due diligence. At the close of business, the company did not meet its margin calls. Further on, the company notified its financing counterparties that it does not expect to be in a position to fund the anticipated volume of future margin calls under its financing arrangement in the near term as a result of market disruption. The company estimates that the company’s aggregate obligation under its various financing arrangements is approximately $9.5 billion.

There is a lot of stuff that’s going to be hitting the market. A lot of stuff that’s going to take a while to shake out. You should be making hay now. That’s what I’m trying to get at, making hay. That was a press release and I pulled up their quarterly report. I pulled their executive summary. It tells us Q4 review on it. They said, “We’re excited. In the fourth quarter of 2019, our whole loan portfolio growth improvements can drive our financial results. For the fourth quarter of 2019, MFA acquired $1.7 billion of assets including $1.5 billion of whole loans. They bought one big portfolio of $1.5 billion and another $200 million. Our whole loan investment probably increased by more than $2.9 billion in 2019 as our strategy of sourcing from select origination partners continues to generate results. Overall, the portfolio growth exceeded $1 billion for the year 2019.” Whoever they’re buying from, they stopped buying. If we flipped that a little bit further on, their core investment is the highest a year. I’m talking about new investments from the year with $5.3 billion including $4.3 billion of residential home loan. They bought portfolios.

The thing is, I was like, “What’s at number one?” I clicked and looked further down. In the fine print, number one, purchase performing loans are comprised of non-QM loans, fix and flip loans, single-family rental loans and season performing loans. It’s a mixed bag. I don’t necessarily would say performing loans would be following on QM or fix and flip loans or even single-family. Included along with purchased credit-impaired loans, there was sub-prime, credit impaired loans and residential whole loans held at carrying value are consolidated balance sheet. Right there, its billions and they can’t make the margin calls. This is The Big Short part deux.

REI Q&A With Scott

What does that mean for us? You can google those institutions names and it will pop to the website and click on their investor profiles or Q4 earnings report. There’s so much great stuff in all seventeen of those companies. I spent all day working on this. I was like, “I can’t go through every company. It could take forever.” It’s up to you guys to go through that and find opportunities for you. What does a margin call mean? We’ll give an example. Let’s say, you lent me $100,000 on an asset, that’s $100,000. If the value of that asset falls below $100,000, I have to do one thing, I either have to go out and pledge assets for that difference or I’ve got to pay you cash for that.

If the margin calls or says, “The asset is only worth $80,000. You’ve got to bring $20,000 to the table.” Most of these companies don’t have that extra percentage to bring to the table. They’re not going to do it because it’s free fall. These companies are valuing these assets all the time. Most of the time, it’s not a big deal in an increasing market. We’re not having a margin call but when things start hitting, start ticking, start delaying, start going into false, that value drops on immediate basis, especially with mortgage-backed securities. A lot of these institutions are non-bank institutions. They’re not like Chase, they’re not buying. Fannie Mae backed securities isn’t buying. Their bond originated from some other institution. A margin call is like, “The asset is not worth what you lent me. I’ve got to come to the table 20% or I’ve got to move other assets into that place.” It happens all the time.

NNA 59 | Commercial Real Estate

Commercial Real Estate: There is a lot of stuff that is going to hit the market. You should be making hay now.


You’re not going to be able to buy one-offs in those. How would you find? Here’s the thing that I’m trying to get at. The day of the one-off here, you’re going to wait until twelve months before you probably find one-offs. That’s what I’m trying to give everybody. If you’re going to take in what you learn, you’ve got a six-month timeframe to be up and running by the fourth quarter. You’ve got 90 days to see what happens that shakes out to get start going together. There are billions of assets out there that aren’t going to be qualified for bailouts. If somebody comes in, they’re going to be sitting there and you’ve got to do the work.

Do these companies hold these loans, and how do we reach out to them and see if they want to sell? They’re not going to sell one-offs. Most of them are going to be selling in large tranches. We’re talking millions, if not hundreds of millions of dollars. It’s probably outside of your budget but what you have to do is start tracking these players, start tracking where they’re at. See who they purchased a loan. We did a webinar talking about how to track assignments of mortgages in different counties and seeing who’s going up. You better bet your ass, I’m going back into a couple of counties that we pulled and double checking and looking for those institutions or the firms that manage their portfolios for them.

What does that mean for us? Yes, it’s going to get bloody if the government doesn’t step in. A lot of people are like, “Give me 30 days.” Be kind, everybody. Don’t be a jerk. Give everybody 30 days or 60 days to figure this out. That’s why you saw the banks immediately, like, “We’re going to go to forbearance agreements for 90 days.” Someone will automatically go, “Within 90 days if we’re still in a crappy place, we’re going to extend it to 180 days.” What do you have then? Hopefully people are back to work. In some of these agreements, the banks want the bars, “Now that we’ve delayed six months, you’re bringing six months to the table.” A lot of them sure as hell don’t have that. They only have 3 months or 6 months of payment.

What you can do is go to your favorite counties. Pull up in your favorite states and cities that you should be looking at that stuff. What I recommend is starting a vulture fund. I don’t call it a vulture fund. Start talking to the investors. Start talking to people. Start reaching out and find out what’s going on, who they’re going to sell to and pay close attention. It doesn’t make sense to start a fund if we don’t know what’s going to go on. Here’s the thing. I don’t believe that they’re going to get bailed out completely. What’s going to happen is they’re going to incentivize some of these bigger banks and some of these other funds to come in and hopefully buy. That’s why in that article, the secondary market was begging for the Fed to go in and buy car loans, auto loans and house loans. Going and buy them up and insure them fast. It’s not going to happen to all of them.

Commercial loans, we all know that they don’t have the same type of lending agreements. People are going to get evicted of the business. When you look at the big firms like Subway for 20,000 locations is not paying their rent. Mattress Firm, over 2,000 locations, is not paying their rent. I guarantee that all the Macy’s and JC Penney’s aren’t going to be paying the rent because they can’t afford to after a period of time. God forbid your tourist areas too. I’ve got friends that work for Disney and they’re like, “We’re going to pay at the end of the month, pitch in furloughs.” What happen if it goes longer than expected? Are they going to file bankruptcy for protection? If you look at it, the movies, tourism, and the parks are down. What’s going to happen to that mix up? On the residential loans, especially those that have been newly originated and people don’t have the money. Most people can barely get into a house and they have less than one month rent. Ten percent of the market was already roughly close to being a month behind the mortgage. That number is going to skyrocket, especially if we see unemployment rates rise to 10%, 15, 20%, 32%.

You have to start doing your research, looking in your markets, and looking at your top states. It would be a commercial apocalypse. The same thing here is we’ve had the commercial apocalypse happen before in the RTC days. When I first got into the note business in 2008 where that’s all I was focusing on, I was buying primarily commercial loans. I didn’t buy a big $5 million or $10 million, but there are a lot of that smaller crumbs, smaller assets that the banks got one for books, some million. There are some great assets I picked up for less than $1 million, especially below $5 million. Go and look at the 16, 17, 18 firms out there that represent a huge chunk of the market. That still doesn’t mean there are still a tremendous amount of other smaller players out there. What’s going to happen in the oil industry? Companies already started to file bankruptcy in the oil industry, smaller players.

At the end of the year, Rick Perry said, “Would you be surprised if we emerge from this in twelve months and there are 5 or 6 big players out there?” Opportunities to scoop up some assets, but more importantly, start doing research. Don’t sit around and binge Netflix all day long. Don’t sit around and not put a list together. I’ve asked this on different webinars, coaching calls, and podcasts. How often are you emailing your estimators? Have you built those relationships? I’m glad we have stuff that’s automated. I’m not going to send it out this month because it doesn’t do any good to send out this month. They’re still waiting and seeing but next month, if this thing continues, it will be a catastrophe.

I see things and we’re talking about that in the age of the world crisis equals opportunity. That’s exactly right. There’s an opportunity here. Part of what I’m trying to get at here is not to scare you, but shake you awake, try to flip, and smack you upside the head and say, “Here’s some opportunity on the other side.” In 2008, if we started this off again and if you could go back, would you buy more in the past? Start connecting with an asset manager and pull a list. If you have not done that before being through a virtual workshop, you may want to do so. We have a one-day class that you may want to check out.

Here are the biggest issues. The smaller companies and the landlords are going to be hit the hardest. The whole mess with the whole paycheck thing is going on. The SBA and Bank of America are requiring a credit card or a loan for them to approve your application. Those are stalling tactics so that they can work with the people that they already have a portfolio with. It’s a basic thing. Those two things are more valued at banks than just a checking account. Checking accounts seems that they don’t give a rat’s ass at banks about that but if you’re a lender and you’ve got a line of credit with them, that’s why Bank of America’s stalling it. It’s a sucky move compared to Wells Fargo and Chase. A lot of people come in and apply for these SBA loans while I have that relationship but you’ve got to be careful about that.

You want to look at assets purchased in 2018 and 2019. It’s primarily the ones that are hit the most because the market increased quite a bit. Look in the counties, start doing searches on the county clerk for assignments on mortgages, and look for assets that closed in 2018 and 2019. This is why Grant Cardone bid because he bought multifamily assets way above value almost, the peak value. That works as long as your market keeps going up, but I guarantee, the market is not going to value those assets, especially if all the landlords stopped paying. He’s going to come out with a fine. None of those assets are going to probably, I guarantee, be personally accountable for. Just move on. The point I’m trying to get at is to look at those assets of closed, look in at all that stuff, taking out who owns it, who’s the bank on that stuff, and stay close because it gives me some opportunities.

It’s not just on finding assets. It’s going to be marketing. Hopefully, you’ve done that at the time and do what I’ve said. You can sit back, wait, and see, or is it going to be back to the future? It’s back to the future. As I was putting this presentation together, Jamie Dimon came out. He’s the CEO of Chase, the biggest or second-biggest between him and Citibank. They’re going back and forth. He used to be at Citibank back in the day. He expects a bad recession and financial strain close to 2008. They say that Chase is set up fine. They’re going to continue to lend to their small business owners because they’ve got a war chest. He believes that the GPB will be down at least 35% and you will see unemployment peaking right around Christmas. “Here’s your pink slip.”

It’s barely the second quarter, but you’ve got to plan. You’ll plant your seeds to harvest later on. What would you be doing? I’m going to get to something else. Over the last couple of years, I’ve heard plenty of people complain about Goldman Sachs buying all these residential mortgages up from Fannie and Freddie loan stuff and they were overpaying because they were getting a dollar for dollar discount against the fine they got from the SEC. How are they going to come out? I guarantee, a lot of those individuals that the companies that have bought mortgages and those portfolios for Fannie and Freddie loans and the FDIC are sweating through the books and looking at it. “What do we pay for and what can we dump? Can we get rid of these four so we still come out ahead or even?”

NNA 59 | Commercial Real Estate

Commercial Real Estate: The smaller companies and landlords are going to be hit the hardest.


Look at your apartment investors. If their big goal like many apartments was to buy an asset, regentrify, and boost the rents, that just went out the window. “Let’s boost the rents and we’ll get it regentrified in 2 to 3 years and cash out.” Sorry. The music is overfed. Storage investors are going to be good because we saw a boom in 2008 where people moved out, got evicted, and they had to put their stuff somewhere. The same thing, so storage is a smart play. There’s still going to be a lot of stuff that’s undervalued in there too, because they can’t pay their mortgage. If they’re not paying their mortgage, they’re sure as heck not going to pay their cell storage facility. Airbnb or short-term rental vacation owners are going to be hit hard as well. If you know anybody that’s in that neck of the woods, hopefully, they’ve got their books going good, but more than likely, if they have cancellations, they’re going to have to refund that.

I see a lot of people. I’ve talked to some friends in Nashville, one of the hottest markets in the country, and they’re like, “We’re converting to long-term rentals immediately.” “We’ve got a condo project that came on the table for 60 condos. We’re not going to turn it into a condo sale. We’re going to turn into an apartment complex for the time being until we get through this.” Hotel and motels, we saw many of them in 2008 and 2009 because when people don’t travel, they don’t stay. We’re going to see a wave of hotels and motels because people can’t afford to pay their mortgage on that. Commercial office building is going to be the center of the crater. The one going back to work, people working from home, strip malls, and things like that, those are the opportunity, so start looking in your neighborhood. Start looking around you. Maybe go out to the outskirts of where you’re at if you can drive safely without being arrested or anything like that. Look what’s available.

This is not just talking about your backyard. We’re talking every place. Start looking. If you see a company on your assignments, see where they’re at, go to their website, see where they’re lending, and see if they publicize their portfolio. You may be able to pick up mobile assets with one in contact versus just one. I don’t know about you guys, but Stanley Kubrick’s Full Metal Jacket movie said it best. “Joker is a big crap sandwich out there and we’re all going to have to take a bite out of it.” That’s what it is. It is a crap show. The market is all up for us. What happens is we get a huge bailout. I don’t think it’s going to be big enough to stop it. The government is sticking their fingers in the dike like a little Dutch boy.

As things move across the country and things are going weird for me, I wish I had a crystal ball. I should have brought on a psychic friend. We should have brought her on because what she thinks is probably as close to what I think and maybe different than what you think. Markets may not be hit hard. I know Alabama may not be hit hard. New York, Florida, Arizona, and wherever you’re at, be safe. Here’s the thing. If you can’t figure out what to do and you’re like, “This sounds like an opportunity. Where do I go?” You need to learn first and foremost.

We do have an event. It’s our one-day Note Weekend class. It’s an all-day Saturday CliffsNotes version. It gives you a good start. It’s from 9:00 AM to about 4:00 PM or 5:00 PM Central Standard Time. It’s $19. We get the replays with it. If you can’t make it, you can go to NoteWeekend.com and get signed up for it. It’s an eighteen-page manual. We’re turning into an eBook as well, which will be giving that out to everybody. It’s got links to videos. This is me teaching the entire day with a little bit of break here and there. That might be something you need to get your feet wet and want to figure out opportunities where I would recommend you take that. The $19 is worth the one day for you.

When we have our bigger class in May 2020, we’re finalizing dates for that depending on what happens. You can attend that $19 and go towards the cost of those two for you. NoteWeekend.com is the link for you. The $19 is well worth it for you. I think it helps a lot. It does, especially in your bigger markets that are being hit. Get a look at your foreclosure. Here’s the thing, too, that people aren’t talking about. When you have a six-month forbearance agreement or people get delayed and then another six months, then you look at the states. We may have foreclosures start to increase here in Texas. It may be the kickoff in Florida that they’ve got a 9 to 12-month foreclosure timeframe. That’s going to affect the markets for a variety of reasons too on the foreclosure wave. It doesn’t all happen the same way.

Most of the banks are going to give people six months on the residential side. On the commercial side, who knows what’s going to happen with that? It’s going to be interesting here. Go to NoteWeekend.com, get signed up, and you’ll have a Zoom link sent to you, and you’d be good to go there. As I’m going through, I’ll go through a lot of things. You can see the schedule on NoteWeekend.com if you scroll down for all of you there to take a look at it.

We’re going to do our first three-day class of the year, and I’m glad I waited. That’d be a Friday, Saturday, and Sunday event. You can go to We Close Notes to sign up for that or just drop me an email at Scott@WeCloseNotes.com. I can send you a link to sign up for that. You might as well go through We Close Notes, the Note Weekend first, and then go from there. “Government forbearances doesn’t apply to CFDs.” No, they don’t apply this Contract for Deeds. If you get some rental agreement, it all depends on the problem and how the state comes out of it, treat as a rental or treat as a regular note. If it was CFD in Florida and you’ve got to foreclose, you need to justify that as a mortgage bailout. Whereas, if it’s an eviction thing like in Indiana, we’re going to get evicted for fourteen days or other states like Michigan are going to be evicted and maybe no rental agreements. It’s going to play out state by state basis on where it’s at.

Do I feel safe on your personal stuff? Here’s the thing. If you’ve done the things that you need to do like calling your mortgage bank, credit cards, car companies, and student loans, call that stuff there. If you’ve got money in the bank and you’ve got money in retirement accounts to save, if you need to take some money out of your retirement account, we need to do that. I don’t think we’re going to be in too bad shape personally here. We’re going to tighten our belt like everybody else does. Our personal stuff value that we bought the stuff at a big discount when we bought stuff. I haven’t bought much stuff because we were working through our portfolio so I’m not worried about the value to depreciate. Guys can drop on some of those, but we bought it at roughly $0.30 of as-is value and below 40% of what was owed.

NNA 59 | Commercial Real Estate

Commercial Real Estate: Plan what you will do as early as now. Get educated and look at the market around you. Plant your seeds to harvest later on.


We’ve got some things and deals are taking longer to close. I’ve had several deals that are supposed to get closed last week and then got pushed the next week. I’ve had deals that were supposed to close in the first month and got pushed to the end of the month. That’s what you have to keep in mind. There are going to be some delays depending on where that close in second place and what’s going on in the market. Be flexible and try to remain calm. Don’t drink too much. Don’t get too stressed out. Laugh a little bit and go for a walk. If you’ve got to step outside and yell, do it so. You can call me and vent or you can schedule time with TalkWithScottCarson.com. I’ll take a break from my schedule.

The thing is if you’re on the origination side of the business, I’ve seen this happen across the board that I got letter after letter, an email after an email from lenders who have stopped with their origination. They’ve ceased all origination for 30 to 60 days. Let’s figure this out. I’ve seen assets that were supposed to close where we’re going to get traditional lending and they’re like, “We’ve got to wait and reevaluate this. We’ll wait and see what happens at the end of the month.” The biggest thing I can tell you here is don’t wait around for that. Go out and do other things that you need to do.

We did a call with my buddy, Jason Byrd talking about the PPP plan and the disaster emergency grant that we all should do. Self-employed or if you own businesses, go in and file for that $10,000 disaster emergency grant. It takes about 5 to 10 minutes to do if you’ve got to pull your numbers fast. Check into that. If the next stimulus doesn’t include rental property or some agreement for commercial, it’s going to get a whole lot worse. “When is the next Note Camp?” I don’t know yet. I’m waiting to see it. We have been looking at the calendar but who knows? It’s too early to tell. It will be online. I just want to know who I need to have in there because we want to keep it up-to-date so I’m not planning. I have a couple of dates outlined for it loosely on the calendar. I don’t worry about a hotel or anything.

If no one is buying notes, how is the best way to see how things come out and the other one thing get back open? Reach out and talk to people. “What are you selling? What are you buying? What are you selling for? What do you have on your books?” That’s the thing too, Juliana. You are creative. You’ve got your bank to finance your purchase. That might be what you need to do in some cases. Some of the smaller players and institutions are willing to listen. “I’ll take this off your hands but I’m going to need you to finance me.” That’s a powerful statement. All I can take it from nonperforming to now performing like a newly originating one. That’s a valuable thing. Bank takes a little bit of haircut but doesn’t take a huge loss. Especially being worked with the borrowers or the property owners to turn the properties over to you, they cannot.

That’s a strategy we’re going to see. I talked about this that we’re going to see a lot of subject to deals and wraparound mortgages happen as people can sell, but they’re still motivated to sell. Still, people love assets and people always need a roof over their heads. Guys and gals, that’s all I’ve got for you unless there are any other questions out there. Once again, NoteWeekend.com. It’s a one-day class. If you can’t make it, don’t worry. You can watch the replays on Sunday or Monday. It’s only $19. It’s just me teaching all day. I would love to have you be a part of it. Trust me, when it goes to new things, who knows what’s going to happen? That’s the thing. There will be a lot of things happening.

Get signed up for it and we’ll hopefully be rocking along for you, guys. Be safe out there. Stay diligent. You don’t have to leave your house. Don’t leave your house unless you’ve got to do some things, but be safe. That’s all I can say. If you need anything, please don’t hesitate to reach out. We’ll do the best we can, either put you in the right spot or put somebody in touch with you. If you need to vent, please don’t hesitate to drop me a message. It’s good to talk to people. It’s good to connect. I need this as much as some of you guys did, at least getting out and sharing what’s going on, be able to vent, and see what’s going on.

Thank you to all of you for joining us here in Note Night in America. Go and take some action, put some marketing in place, start making some lists, start working on your website, start putting your Mailchimp together, and your email templates together. Don’t wait around. Those things that I’m talking about are valuable. Every day, I get it on LinkedIn. I’ve harvested another 1,500 special asset managers. Trust me, those things are coming in handy as you get closer and we figure out what the heck is going on here, so be safe. We’ll see you at the top, everybody.

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