The volatile real estate market has created apprehension among secondary markets in purchasing CMBS. Consequently, many lenders, including ours, have suspended their loan programs and some have shut down entirely. However, our consistent track record in purchasing distressed real estate has enabled us to negotiate similar terms with another lender.

To mitigate our risks and maintain healthy cash flow, we have decided to lower our leverage on new homes in April. This will ensure that our cash flow remains well within our risk guidelines, allowing us to allocate funds to purchase new homes. In addition, we are addressing a critical pain point that has been overlooked by most in the industry: contractors. We are restructuring contracts and processes within our contractor network to automate protocols, save time, obtain a better top-down view of all our projects, and reduce costs.

Through refinancing our current portfolio, we expect a significant inflow of cash in the next two months, which will allow us to purchase five million dollars worth of real estate. This puts us in an even stronger position to negotiate with distressed sellers in a market where many investors are dropping out. Our updated models now conservatively place bids, with a final after-repair value (ARV) 10-20% lower than current comps.

As an update to our previous pivot, in Q2 of 2022, we began investing in urban submarkets that demonstrated strong potential for appreciation while maintaining low property taxes to balance out higher rates. These assets have proved successful, with cash flow in these areas similar to that of our assets with rates of 5%. The only challenge we encountered was with the rental process, which took an average of four weeks instead of our usual two weeks. However, we have identified several strategies to mitigate this delay and are confident that we can optimize the rental process going forward. Overall, we remain positive about the performance of our portfolio and are actively seeking new investment opportunities in similar markets.