Working as a syndicator is an incredibly fulfilling career path for many; you’re constantly learning, connecting with diverse groups of people and helping them meet their needs, and networking with others who can continuously help you to grow.
But sometimes, uncontrollable external factors in the economy can lead to potential losses and stressful times in the real estate industry. We saw an extreme example of that in 2008, and there are conflicting opinions about whether we’re facing similar extremities in 2022, even though the markets are fundamentally different. However, current interest and mortgage rates are still jarring, and real estate investors could face potential losses in the next few years.
Joe Blackbourn of Everest Holdings clued us in on how to overcome failure while facing strenuous economic situations based on his experience during the market crash in 2008. He focuses on the importance of persistence as a team to overcome challenges and embracing dynamism, which will lead you to success.
The Housing Crash in 2008 Versus The Current Market
First, some background: a housing bubble arises when home prices become artificially inflated. In 2008, many borrowers were being placed into mortgages they could not afford, so when that bubble burst, it “triggered a foreclosure crisis among homeowners and a credit crisis among the investors who owned bonds backed by these underwater mortgages.”
These crises triggered a global recession. Currently, the problem is that housing supply is unable to meet demand, which has increased the cost of housing to a new high. Another potential reason the cost of housing is increasing is because buyers are purchasing homes out of fear of missing out, rather than based on the property’s fundamental value. Additionally, the Federal interest rate and mortgage rates are also increasing. Considering these factors, while the circumstances leading up to 2008 are different than today, there is concern that the housing bubble will similarly crash.
Overcoming Losses and Failures
The crash in 2008 left real estate investors facing losses and failures; however, there are ways to prevent those losses and overcome failures, especially as we face similar circumstances today. Joe Blackbourn founded Everest Holdings in 2002 and persevered through the 2008 market crash; he gave us some insight on how he worked through those challenging times and overcame failures through persistence.
“You have to be prepared to take a punch,” Blackbourn states. “If you can't get up after taking a punch, you shouldn't be in this business. You know, things happen, leases fall apart, deals fall apart. And it feels like you've been gut punched, and you just have to get up the next day and start again. So persistence is just extremely important.” Blackbourn continues by stating that as a company, Everest didn’t give up: they doubled down, and they climbed out of the failures and losses to eventually greet success.
The “doubling down” is what differentiates Blackbourn’s success from others: psychologists Duckworth, et al conducted research titled “Grit: Perseverance and passion for long term goals,” which supports that the achievement of difficult goals, such as perseverance through economically challenging times, entails not only talent but also the sustained and focused application of talent over time. Blackbourn’s experience is one example of how even during challenging times, persistence through taking punches will lead you to success.
As real estate investors, flexibility is an important quality to keep up with the ever changing economic landscape and market trends. For example, the current rising mortgage and interest rates may put a damper on real estate sales and increase overhead costs of building materials, energy, and utilities; however, keeping these trends in mind, real estate investors can focus their energies on rentals that will remain strong during in this market and continue to make their investments profitable.
Research has shown that single and multifamily rentals will remain strong in 2022, which is a trend that would be important for investors to keep in mind. Joe Blackbourn validates the importance of flexibility in real estate; for example, he states that “if it's not the right time to be out buying hotels, we'd be doing something else, apartments or whatever it is. And so we've continued to try to keep it dynamic.” Blackbourn’s insight on flexibility is especially important to consider in 2022, as real estate investors should focus on the dynamism of the market and working with current trends, such as the strength in single and multifamily investments, rather than hyperfocusing on one form of investment.
Moving Forward in 2022
Real estate investors may have hesitations about making moves as we progress through 2022 due to market fluctuations and jarring mortgage and interest rates, but Joe Blackbourn and supporting research highlights the importance of persistence and flexibility during economically challenging times. If you compile a hard-working team willing to double down and work with the changes and fluctuations, you will likely greet success down the road.