In this compelling episode of the "Institute of Higher Earning" podcast, T.J., Nick, Tony and their guest, Kristin Gerst, delve into the complexities of the multifamily real estate market and the broader commercial sector, especially focusing on the current challenges surrounding commercial non-performing paper. With over $1.2 trillion in commercial paper facing rate resets, they discuss the immense pressure building in the market as interest rates double, potentially leading to significant financial distress for property owners.

Kristin highlights the intriguing investment opportunities emerging from these conditions, particularly in acquiring undervalued loans secured against commercial properties. Additionally, they tackle the critical issue of liquidity problems in the real estate market. As banks face the reality of resetting interest rates on loans, the tightening credit conditions could lead to a liquidity squeeze, making it harder for investors to refinance or acquire new properties under favorable terms.

This episode is crucial for understanding how to navigate these turbulent waters in commercial real estate, recognizing both the risks and opportunities that come with liquidity constraints and non-performing loans. Whether you’re an investor, a real estate professional, or just keen on the dynamics of the market, this conversation offers vital insights into surviving and thriving amid potentially the next real estate crash.

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Chapters:

0:00 - Kristin Gerst, Mortgage Note Investor

2:30 - Difference Between Now & 2008

6:30 - Bad Commercial Operators or Bridge Loan Risk

7:35 - "Value Add"

8:15 - Protecting Commercial Assets in a Rising Interest Environment

11:15 - Liquidity During a Crash

13:50 - Non-Performing Notes

16:15 - Dodd-Frank and Modern Banking Regulations

17:15 - Notes vs. Short Sales

18:40 - Regional Bank Risk

20:23 - Private Equity Funds Writing Bad Paper and the Consequences

22:50 - Forbarence

26:45 - Title Companies and RMLOs

31:00 - Embezzlement by Servicing Company

32:10 - Downfall of Commercial

33:55 - Interest Rates

38:40 - Defaults

40:00 - Affordability and Demand

43:50 - Fed Buying Mortgages

45:20 - Average Consumer

47:30 - 6 Months from Now

48:00 - Rents are Going Down

51:00 - Home Ownership vs. High Rise Amenities

52:20 - Stress Testing Your Deal

54:45 - Speed of Rate Drops

57:40 - Lack of Credit and Liquidity

1:00:00 - New Realtors in TX

1:04:45 - Cosplay and Yachts