No more Market Cycle Mirages
A change was coming…
In mid-2008, the market cycle mirage was still in full effect. To say the lending standards were loose would be a dramatic understatement. NINJA loans were more than prevalent. They were normal and underwriting occurred in a matter of days, if not hours or minutes. NINJA, which was short for no income, job, or asset verification, ensured that everyone was able to get high with increased supply continuously coming on the market.
We barely noticed any change in the weather. Macro trends weren’t relevant. We were just trying to figure out how to flip homes and keep the train rolling. I’ve tried to think back to those days in search of any defining moment of a market cycle shift. But news and market trends took a while to reach Augusta.
In Augusta, the market cycle change was more of an ease than a shift. I think a lot about the line from Ernest Hemingway’s novel, The Sun Also Rises, where the character Mike describes bankruptcy as gradual and then sudden. The market was always going in one direction: up. Until, suddenly, it wasn’t.
Augusta never had a dramatic run-up in price appreciation, so we didn’t have a precipitous fall. Suddenly, everything just seemed a lot harder. I remember it materializing first in our owner-occupant buyers. Underwriting, which was previously instantaneous, began to take longer. In 2009, 2010, and 2011, trying to close a loan for an entry-level buyer reached points of absurdity. If you were using a big bank, you could expect it would take 60-120 days to close, in what previously took 30 days. Your only hope was using local banks who didn’t need 9 people to “touch” the file to reduce the likelihood of default.
Between the fall of 2008 and 2009, I began to understand we had to shift course. Homes weren’t only taking longer to sell, they simply weren’t selling. It became clear that I would have to prioritize the rental portion of our business. I didn’t know anything about being a landlord other than I didn’t want to do it and didn’t think my career was in a position to not have large infusions of cash from home sales.
A change was coming and luckily we were somewhat aware. I initially tried to use some local property managers but got very frustrated with the results. Homes weren’t renting, signs weren’t put in the yards, and calls didn’t get returned. The SFR property management realm at that time was a haven for agents who struggled to sell and a means to an end for brokerages to get more sales listings.
I thought there had to be a better way, and—even clueless—I could do better just by calling people back. I knew enough to know I needed help. I was awful at admin activities which did not present challenges and the ability to be creative.
So, I posted an ad on Craigslist.
I don’t remember all of the activity, but I interviewed several candidates at my makeshift office which was a single family home in Martinez, GA. The final two applicants were a guy who I enjoyed discussing music with and a much more qualified woman named Natalie who had recently relocated to Augusta.
Natalie, new to town and job searches, had notified her fiancé at the time of the precise coordinates of her interview with me, in case I turned out to be “some sketchy Craigslist guy.” I was pretending to be a lot of things in those days, but I was not a sketchy Craigslist guy. I was a real estate investor in need of help.
I made one of the best professional decisions of my life, offering Natalie the position. She agreed, and her first day was figuring out what we could work on together. Always looking at the big picture, Natalie and I made a filing system for the 3 or 4 properties we managed. I ran out of items for Natalie to do around 2 o’clock and asked her to go get the drycleaning for the nice shirts I had to wear to bank meetings to beg for money.
Even with our auspicious start, Natalie turned out to be a truly significant link in the creation of Auben. She was the yin to my yang. Everything I loved to do, she hated. Everything I hated doing, she loved. Where I was a head-in-the-clouds dreamer, Natalie was a practical penny-pincher. It was the first time I ever experienced this complementary dichotomy in a partnership, and it was liberating. We didn’t always see the world in the same way but we got sh#! done and began to create the building blocks of an investor-focused brokerage who acted in the best interest of our investors all the time.
Check back next week for the first entry on the beginnings of Auben Realty, and subscribe below to receive a weekly email update directly to your inbox!