It is management of your real estate and mortgage note portfolio that really makes ALL the difference in its true performance.
Right now, it appears that there is a good chance tenant and borrower performance could be tested as they face new forms of financial strain in the near future. Millions more renters and mortgage borrowers could fall late on their payments.
Managing this, minimizing risk, and maximizing net gain takes both great understanding of the full math and science involved, as well as a good deal of creativity in knowing how to engage.
At NNG, we’ve been proud of our incredible workout rates from helping those no one else would help in the wake of the Great Recession, through COVID, and today. It has enabled us to create value, a lot of good will and loyalty, and to outperform the market.
Still, it can be a minefield of threats and misconceptions for those who haven’t done this thousands of times before.
As you encounter these situations, or evaluate your processes, property management and loan servicers, here are some fundamental questions to think about.
How Would You Like To Be Treated?
If you’ve ever had a mortgage lender or a landlord, how would you like them to treat you if you ran into an issue? What bothered you the most? How would you like to have been treated?
It may seem unimaginable that you’d ever be late on a bill in your life. Yet, crazy things happen. Like pandemics and banks going bankrupt.
These are opportunities to win great loyalty, or to destroy your name for generations.
The Pros & Cons Of Being Too Nice & Too Tough
You should remain professional, objective, and consistent in your dealing with all your tenants and borrowers. Remember this is a business situation. Like Warren Buffett says “investment is best when it is most businesslike.”
Still, there are cons of being too nice, and too hard on these customers. If you are too nice, many will abuse it. If you are too tough, you’ll end up causing yourself a lot more stress and expense than needed.
Stay Focused On Your Goals
Don’t let emotion side track you. What is your big ultimate goal? What is the optimal outcome for the situation at hand? Is it really ending that relationship, or just getting them to re-performing status?
How Do You Differentiate Between The Genuinely Hurting, Versus Con Artists?
Everyone has a story and reason for being late on their payments. At what point will you decide that they are just stringing you along, versus genuinely facing an unlucky, one off issue which they really want to cure?
Know Your Math On Evictions & Foreclosures
Before you rush to evict or foreclose, or allow your property managers or loan servicers to, make sure you understand the real math.
How much will it really cost you to sever the relationship by the time you are done? Not only in legal fees, but lack of income, damage to the asset, and loss of good will? Compare that to any deals you can afford to workout. Even if it means giving them a pass for a couple months or modifying their loan or lease. Remember, there is never any guarantee the next tenant or borrower will perform better.
Also understand your financial limitations in these situations, and what you can really afford to do at scale, and long term as well.
At NNG we like to go the extra mile to help everyone stay in their properties, and catch up on their financial obligations. Most want to. Many need help occasionally. There are many, many options for solving performance with tenants and borrowers if you want to. Though, there are times when you need to help them move on, for their own sake, and yours.
Find out more about investing in secured debt and real estate, go to NNG Capital Fund.