Beauty of Little Banks NOW (long)

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Posted by Jimmy on November 06, 2009 at 09:23:56:

I've been MIA for 2-3 months, fighting wolves, vultures, etc. [note: I'm the lawyer-turned REI with a bunch of rental props in a little corner of TX]

some observations:

1. I'm wounded, but not slain.

2. Leverage is your best friend on the way up and your worst enemy on the way down. well, no $hit.

2.5. its a great time to be buying, if you have cash/credit or a rceptive seller to seller-financing.

3. Highly leveraged investors in my particular market have been slaughtered. there are no cash buyers (i.e, cash or their own financing) now. they started disappearing in 2007. values are hard to peg, because there's nothing moving.

3.5 situation is aggravated by a poor rental market. this is the first time I've seen this harmonic convergence of dead resale market and bad rental market------at the same time, in the same place, and across a region.

4. I'm sitting tight. I am alive and well precisely because my LTV across my portfolio is something in the 55% range. Had I been at 80% in mid-2000, I would be writing a very different post today.

5. For years, I had been working with a regional bank, which was recently acquired by Capital One. C-1 was over-exposed to loss in investment properties. But they already had me and my portfolio. So what did they do? I had a number of cross-collateralized loans with them, each with 5-year balloon features. The first balloon popped last December. and over the next 3-4 years, all of the balloons would pop. So did C-1 tell me to go away. well...not exactly. but to renew into another 5-year balloon, they were going to bump the interest rate by 3 POINTS !!!! So what did I do? Freak out? yes, at first.

6. LITTE BANK TO RESCUE. Little bank liked me. and they took ALL of my C-1 blanket loans, and issued a single blanket on the entire portfolio. with an interest-only feature for the first 6 months. that was 7 mohths ago.

7. The I-only deal was great, but now I'm fully amortized and its a burden. So I called them, explained what was going on. we're gonna re-set the terms in some way that will allow me to get through this painful time. All I had to do was ask.


8. If I was doing biz with a national bank, there would have been silence on the other end of the line.

9. Conclusion. lots of lessons out there.

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