Operations
Stop Trying to Anticipate the Market INSTEAD, DIVERSIFY YOUR CAPITAL AND DIAL INTO A STABLE VOLUME VS. MARGIN STRATEGY.
ALEX KADDAH
A s Oscar Wilde once said, “expect the unexpected.” This phrase eloquently encapsulates the private real estate market. Striking the right balance between flexibility and rigidity is crucial. A firm foundation of sound business practices ensures successful underwriting, even in the face of market volatility. THE RISK OF RELYING ON A SINGLE CAPITAL SOURCE When building a business, it’s essential not to rely solely on a single capital provider or line of credit. That institution
could decide it has exhausted its funds, leaving all your pending loans, whether five or 500, in jeopardy. Diversifying your funding sources provides the flexibility and adaptability needed to consistently close quality loans, regardless of unforeseen challenges. Your organization must be prepared: Have plans and think through scenarios. There are two fundamental ways to make money in our industry: high volume with low spread or lower volume with higher spread. Not a single company that does high volume with high margins has ever succeeded. Run as far away
as possible if someone ever tells you they do that. In fact, companies that do run on riskier business models have never failed to go under. Why? Because of market volatility. We never truly know when the market will rise and fall; however, we do know it follows a cyclical pattern and is bound to happen. The second the market turns, those companies seemingly go under overnight, stop lending, leaving hundreds unemployed—uncertain about where their capital stands until the market turns right again.
8 | think realty magazine :: march - april 2025
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