Lessons learned from past economic downturns will continue to be relevant in the future.
As one of our preferred lenders, we’re big fans of the team at Stronghill. In his latest blog post, Jack Cohen, Chief Innovation Officer, provides his reflection as a real estate industry veteran on his experiences with past economic downturns and the lessons learned from them. Jack provides six key takeaways from his experiences, which he believes remain relevant for the industry in the future. We’ve summarized Jack’s post below and included a link to the original page.
The first lesson is that the real estate business is cyclical and is subject to three main cycles: capital markets, property markets, and the US and global economies. Jack argues that opportunity arises when these cycles converge, while risk increases when they diverge. The second lesson is that liquidity is crucial, both for users and providers of capital. Jack emphasizes that access to readily available cash can make a significant difference in weathering economic downturns.
The third lesson is that the survivors in the industry are those who are willing to give up their mental memory of the future. This means letting go of expectations that things will return to the way they were in the past, and instead, focusing on adapting to the new reality. The fourth lesson is that winners in the industry proactively create transactions and opportunities, regardless of the circumstances. This is seen as a key way to create real wealth.
The fifth lesson is that asset and liabilities should be optimally matched on balance sheets. Jack cautions against "borrowing short and lending long" and stresses that this strategy has always ended poorly for those who try it. Finally, the sixth lesson is that leverage is a double-edged sword. Positive leverage is desirable, but negative leverage only works for properties that are appreciating in value.
Over all, Jack remains bullish on the real estate industry, despite the challenges of the past year. He argues that the lessons he has learned from past economic downturns will continue to be relevant in the future. The post is well-written and provides insightful advice for those in the industry. It could be of particular interest to real estate professionals who are navigating the current economic landscape and looking for guidance on how to thrive in challenging times.
Original post: https://stronghill.com/jackchat-april-2023