The majority of associates and brokers I know weren't around when mortgage interest rates peaked at 18%. It was the worst of times and the best of times. I began my real estate endeavors in an 8% mortgage environment which crept up to double digits within 5 years and reached their apogee 3 to 4 years later. That early introduction to volatile financial markets brought out a lot of creativity from agents. The saying "when the World gives you lemons, make lemonade" was all too appropriate for the Real Estate industry.
The transition from residential to investment real estate was how we not only survived but thrived in that initial decade. After enduring a decade of three percent rates recently the thrill of those early days have all but vanished. Each sale used to be the difference between an off the rack suit and fine tailored hand stitched custom clothing. Two factors were at work in the mortgage market, rates and availability. We became loan hunters and once that source would dry up we became the ultimate predators once again. Comparing the 3.3% of recent closings to a 17% rate that could have been the margin amount you might be able to obtain for a customer if you had enough clout with your lender. Beg, borrow & steal was the mantra.
We had a mixed use listing, a 4 bay automotive repair shop and a residence which included retail at its raised basement level on a sloping lot which faced a great high traffic thoroughfare. The owners were now older and wanted to retire. Kids are now grown and Dad was still tinkering in his shop while Mom sold a variety of crafts from the store. This was a unique property and suited only a handful of potential Buyers. The problem was financing the thing. If it had been either or and not mixed there would not have been a problem.
In attempts to make it through this financial hump of the 80's the ideas flowed. I remember sitting at the couple's kitchen table discussing options. The arms were being twisted to their max leaning towards offering owner financing which we kindly referred to as a PMM, the purchase money mortgage. Dad reluctantly agreed and Mom was a little bit scared but the alternative to continue working was wearing thin also. It took about a month and I had our Buyers. Two brothers with a decent down payment structured their deal. The term hammering it out was so, so true on both sides. Without more potential Buyers coming into the field we finally came to terms after weeks of negotiation. A substantial down payment and terms which any lender would accept on their notes. The fairness with which each party resolved discrepancies was amazing and almost miraculous to watch unfold. Congress could and should have taken lessons from the give & take demonstrated here.
We closed and the two young men immediately set up shop. I didn't get involved in their business structure but the youngest moved his family into the house and store while the eldest ran his repair business for many years to come. I passed it almost every day and they appeared to thrive just as the previous owners had.
Mom & Dad stayed local and I had found them a downsized ranch home which suited them perfectly. Money in the bank, social security and a decent return from that note gave them flexibility they hadn't dreamed of. Travel was now their passion and a small motor-home was their vehicle. It could not have been any better until I received THE CALL!
Apparently, the Buyers, after four years of paying their 14% mortgage promptly every month to the once reluctant Sellers were able to refinance into the single digit realm. They weren't the only ones refinancing. All of our clients began that process. We ALL survived and with expenses dropping the property values soared and those customers that latched on to what we were selling in those dark times finally understood what we were telling them all along. This too shall pass! Most of them, I'd like to think, became millionaires through real estate almost overnight, however, it did take slightly longer. A million bucks is chump change when compared to today but was everyone happy when that cloud lifted? YOU BET YOUR BIPPIES!
Uh Oh, I almost forgot about Mom & Dad. After all that time convincing them to provide owner financing they wanted me to stop the Boys from handing over that lump sum. The taxes would have buried them so I understood why they were upset. They wouldn't stop crying, yelling, crying some more, sighing, moaning and yelling again. It took a while for it to sink in but do YOU KNOW how we solved it? By having them BUY MORE REAL ESTATE. Away they rode into another successful sunset in their beautiful Winnebago!
This is the best business in the whole World
if you simply take the time to THINK