In the dynamic corporate landscape of that will be 2024, leaders’ and founders’ roles have evolved significantly. Leading a company is more than just about managing teams or bottom-line growth. Leaders must exhibit adaptability, resilience, and an empathetic understanding of their teams while maintaining mental and emotional health. Their responsibility to their mission, vision, and team goes far beyond their profit

Seeing the Future

Leaders today must navigate a world transformed by global uncertainties, technological advancements, changing business models, increased regulatory scrutiny, and a renewed focus on sustainability and corporate social responsibility. Leaders have a lot of minefields to navigate today. However, these challenges also serve as catalysts for personal growth, leadership development, and increased resilience, equipping executives with the necessary skills to thrive in complex environments.

These challenges are coupled with the pressure of maintaining a company’s financial health and employee well-being, which can often have significant implications on an executive’s mental and physical health. Executives and leaders often feel the pressure to maintain an image of strength and competence, which can lead to reluctance in acknowledging or seeking the help and support they need. For all of these components to be on their shoulders, our leaders must have the resources, skills, and knowledge to thrive and adapt in our ever-changing future.

10 Areas of Focus for Survival

1. Prioritize Your Mental and Physical Health: Leaders must prioritize their mental health and physical health to stay resilient. According to the American Psychiatric Association in workplace statistics, employers throughout America lose $44 billion because of insufficient resources for mental health problems. Regular exercise, balanced nutrition, sufficient rest, mindfulness practices, and consultations with mental health professionals can improve stress management and overall mental well-being.

2. Embrace Continuous Learning: With technology rapidly transforming business operations and models, leaders must commit to lifelong learning. Carving out time each day to stay up-to-date with industry trends, emerging technologies, and evolving consumer behavior is no longer a luxury—it’s a necessity. Aside from daily news feeds, Online courses, industry-specific webinars, workshops, and professional networking events are essential resources.

“The important thing is not to stop questioning. Curiosity has its own reason for existing.” —Albert Einstein

3. Cultivate Emotional Intelligence: Emotional intelligence is crucial for effective leadership. It allows executives to perceive, use, and manage their emotions as well as their team members’ emotions. EQ is so effective that the overall success of the business can improve by 37.2% within the first year. Therefore, fostering an environment of empathy, trust, and effective communication directly impacts the bottom line. Regular introspection, mindfulness practices, and emotional intelligence training can enhance these skills.

4. Promote Diversity and Inclusion: A diverse and inclusive work culture promotes innovation and strengthens the company’s reputation. Leaders should strive to create a work environment where employees of all backgrounds feel valued and heard. Training on unconscious bias, implementing fair hiring practices, and promoting diverse voices in decision-making can enhance inclusivity.

5. Foster Innovation and Agility: In a rapidly changing business environment, leaders must foster a culture of innovation and agility within their teams. Encourage creative thinking, be open to new ideas, show vulnerability, and facilitate an environment that sees failures as opportunities for learning.

6. Invest in Employee Well-being: Employee well-being is intrinsically linked to company performance. Executives should promote initiatives for physical health, mental health, and work-life balance. Flexible work schedules, wellness programs, and open dialogues about mental health can contribute to a healthier, more productive workforce.

7. Prioritize Sustainability and Corporate Social Responsibility (CSR): Leaders should incorporate sustainability and CSR into their business strategies. This enhances the company’s global influence and reputation, risk mitigation, attracts elite performers, and appeals to modern consumers and investors who prioritize companies with firm commitments to sustainable practices.

8. Nurture a Robust Network: Building a strong network of trusted peers, mentors, and advisors can provide critical support and guidance. This network can be a breeding ground for synergy and ingenuity as well as a sounding board for ideas, a source of valuable insights, and a form of reassurance during challenging times.

9. Develop Crisis Management Skills and Plan: If we have learned anything over the past few years, being prepared for a crisis of any magnitude is critical. Crises are inevitable in an uncertain business climate. Companies that do not have a crisis management plan run the risk of harming employees, reputation damage, financial loss, and legal issues. Leaders must develop robust crisis management skills, focusing on proactive strategies, effective communication, and recovery plans.

10. Be Proactive on Social Issues: Weave your corporate values and mission around your position on today’s social issues before you are forced to take a position publicly. In other words, take a position on DEI. Take a position on Climate Change. That way, you can refer to your company’s values/mission/policies and not make up a position when under fire. Taking the time to develop policies and positions that align with your values and that your employees can support will save you time and energy in the long run.

The Corporate Ecosystem’s Role

The corporate ecosystem plays a critical role in an executive’s survival. A supportive organizational culture that encourages work-life balance, professional development, and open conversations about mental health creates a more resilient leadership team. Mental health days, flexible work schedules, professional development opportunities, and accessible mental health resources can significantly contribute to maintaining a leader’s mental and emotional health.

Leading a company in 2024 will be a demanding yet rewarding venture. Executives can skillfully navigate their challenges by adopting this comprehensive survival guide—emphasizing continuous learning, emotional intelligence, diversity and inclusion, innovation, employee well-being, sustainability, networking, crisis management, and mental health.

Leadership in the modern corporate world is not just about guiding teams—it’s about setting the right example of balanced success. And to thrive in this ever-evolving landscape, executives must prioritize their company’s progress and personal well-being. If you take these recommendations to heart and give them focus and attention you can not only survive this year but thrive.

Contributing to this article: Mandy Morris and Elizabeth Hocker

The loan-to-value (LTV) ratio is a key metric mortgage lenders use to assess their risk of lending you money. Most lenders use the LTV ratio, credit score, debt-to-income ratio, interest rate, and property value when processing your mortgage application. The loan-to-value ratio affects the amount of down payment the lender requires.

Simply put—the lower your LTV ratio, the better your chance of getting finance approved at a competitive rate.

This article is a complete guide to understanding LTV ratios and how they can help you make wise property investments. You will also find out how to calculate LTV ratios. Additionally, you will get key insights into securing cheaper financing terms.

What Is LTV (Loan-to-Value) Ratio in Real Estate Investing?

The loan-to-value LTV ratio is the difference between the property’s appraised value and the loan amount you want to borrow. The LTV ratio is expressed as a percentage and helps lenders determine your eligibility for a loan. This percentage figure is used for all conventional, home equity, FHA, and car loans.

The LTV compares the mortgage loan amount to the home’s value or equity. In the eyes of lenders, a higher LTV ratio means your risk of default is greater. Therefore, the lender may increase mortgage costs, like the down payment size and interest rates. On the other hand, a lower LTV increases your chances of securing favorable loan terms. Lenders have more confidence that you will make the monthly mortgage payments.

Understanding the Loan-to-Value Ratio

Calculating the LTV ratio is essential to the mortgage loan application process. Lenders use it to determine the terms of buying a property, refinancing an existing home loan, or approving a home equity loan. Lenders view you as a greater risk if you apply for a loan close to the property’s market value.

Money lenders use the loan-to-value ratio to reduce their risk of losing money in case of a default. For example, in the event of a foreclosure, the lender may be unable to sell the home for a price that covers the outstanding mortgage balance.

The three primary factors affecting LTV ratios are the following:

• Appraised property value
• The amount of the down payment
• The sales price

What Is a Good LTV?

The ideal LTV ratio when applying for a mortgage or home equity loan is 80% or lower. Therefore, your down payment would be 20% of the purchase price. When you have a good LTV, you can expect lenders to offer you the lowest interest rate. You can also avoid paying private mortgage insurance—potentially saving thousands of dollars over the loan term.

How to Calculate LTV

It is easy to calculate the LTV ratio by dividing the loan amount by the value of the asset you are borrowing against. For a mortgage, this means dividing the mortgage amount by the property’s value. To get a percentage figure, you multiply the result by 100.

Here is the formula to calculate LTV:

([Total loan amount] ÷ [property’s appraised value]) x 100 = LTV ratio

For example, suppose you plan to invest in a property with an appraised value of $230,000, and you have $60,000 for the down payment. Therefore, the total mortgage amount is $170,000. This means that your LTV ratio would be 74%. Here is the LTV calculation:

$170,000 ÷ $230,000 = 0.74

0.74 x 100 = 74%

By looking at the calculation, you can see that you could lower the borrowing amount and achieve a lower LTV ratio by making a larger down payment.

It’s important to note the difference between the purchase price and appraised property value. Lenders typically assess LTV based on their appraisal. However, your LTV will be based on the appraised value or the purchase price, whichever is the lowest.

How Lenders Use LTV Ratios

The loan-to-value ratio is one metric that lenders use when assessing mortgage loan applications. Other factors that can affect eligibility for a loan include credit scores, DTI, employment history, the value of the property, and the down payment. However, the LTV ratio will greatly impact borrowing costs regarding higher mortgage rates.

Although the ideal LTV is generally 80%, you can secure a mortgage with a higher LTV ratio. However, you will be faced with higher borrowing costs. Higher interest rates and private mortgage insurance are two ways a high LTV ratio can impact the total mortgage amount.

Let’s see how these factors affect the amount you must repay.

• Require private mortgage insurance (PMI): An LTV ratio higher than 80% may mean you must purchase private mortgage insurance. Depending on the product, this can add between 0.5% and 1.0% to the total loan amount annually. However, the payments are typically necessary until the LTV ratio is below 80%.
• Charge higher interest rates: The LTV affects mortgage rates. Lenders typically charge higher interest rates on a primary mortgage with a high LTV ratio. In some cases, this could be a full percentage point higher than a borrower with a lower LTV.

It’s good to note that if you must purchase insurance on your mortgage, you can get closing costs and the cost of PMI added to your mortgage monthly payments.

Depending on other factors, the mortgage lender may use the loan-to-value ratio to decide that you are ineligible for a conventional loan to buy a home. These factors could include your credit history, insufficient income, or a high DTI ratio.

How Lenders Assess LTV and DTI Ratios

Apart from the LTV ratio, your debt-to-income (DTI) ratio is another vital factor lenders use during the home loan application. Lenders must be convinced you can pay your home loan monthly. To do this, they assess your front-end ratio and back-end ratio.

• Front-end ratio: This figure is the portion of your gross monthly income you spend on housing expenses. These include mortgage payments, taxes, homeowners insurance, and other housing-related expenses.
• Back-end ratio: This figure is the percentage of your income to cover all your debt obligations. These can include a car loan, credit card debt, and other debt that shows up on your credit report.

Why LTV Ratio Matters to Real Estate Investors

The LTV ratio is a crucial real estate metric investors must understand. It helps you know when and how to secure affordable financing for savvy real estate investments. However, it also helps you assess the relative strength of your position in the market. Therefore, the LTV ratio can help you make key decisions when buying, selling, or refinancing a property.

For example, understanding the LTV is useful when deciding to sell or refinance a real estate asset. A low LTV ratio clearly signals that the property has a lot of equity. Therefore, you may want to redirect some of that equity into new investments. This means you can come to the table with a higher down payment, thus reducing the LTV ratio for your next loan. 

What is Combined Loan-to-Value (CLTV)?

The combined loan-to-value (CLTV) ratio considers second mortgage loans like home equity lines of credit (HELOCs), home equity loans, and other liens. Therefore, if you are applying for a second loan, you must calculate the combined loan-to-value ratio.

The LTV and the CLTV are based on how much equity is in the home compared to the total amount you want to borrow.

To calculate the combined LTV ratio, you add the current loan balance on your home to the amount you want to borrow. Then you divide the amount by the appraised value of your home. After that, multiply the result by 100 to know the CLTV ratio. 

How To Lower Your LTV

There are two principal ways to lower your loan-to-value (LTV). First, reduce the amount you must borrow. Second, look for a property with a lower appraised value or offer to buy the home for less. This way, you can lock in a lower monthly payment.

Make a larger down payment

The best way to reduce your LTV ratio is to save up for a larger down payment—ideally, at least 20%. This way, you reduce your LTV because you are borrowing less money. Ideally, it would be best to borrow no more than 80% of the home’s appraised value.

Look for a cheaper property

You can lower your LTV by looking for a more affordable property. Because you are borrowing less, your LTV will decrease accordingly, provided you can still make the 20% down payment. You can achieve the best borrowing costs by lowering your borrowing amount and negotiating a better sales price.

Loan-to-Value Rules for Different Mortgage Types

Although 80% may be the standard loan-to-value (LTV) ratio when applying for a conventional loan, the requirements depend on the mortgage program. Here are the loan requirements by loan type.

Conventional mortgages

A typical mortgage requires an LTV ratio of at least 80%. The best mortgage lenders may have additional requirements for mortgage loans with a higher ratio.

Mortgage refinancing loan

Getting the best mortgage rates when refinancing a loan requires an LTV ratio of at least 80%. Therefore, if you are refinancing your mortgage based on your home equity or have multiple loans, you must calculate your combined LTV ratio.

FHA loans

Home loans backed by the Federal Housing Administration have less stringent requirements. A home buyer can typically qualify for an FHA loan with high LTV ratios—sometimes up to 96.5%. However, taking out mortgage insurance on FHA loans is a requirement, regardless of the down payment size.

VA loans

Government-backed mortgages like VA loans don’t require any upfront payment. If the home buyer meets the requirements, they can qualify for a 100% mortgage. Apart from the VA appraisal fee, they must also pay additional costs on this type of loan, like closing costs.

USDA loans

The USDA loan program allows buyers in rural areas to get a home loan without making a down payment. Therefore, the LTV ratio can be as high as 100%.

Fannie Mae and Freddie Mac loans

Government-backed mortgages like Freddie Mac and Fannie Mae allow would-be homeowners to secure a mortgage with an LTV ratio of 97%. However, these loans require mortgage insurance until the LTV ratio drops to 80% or below. Additionally, home buyers must meet credit rating requirements.

LTV Ratio—In Conclusion

The loan-to-value (LTV) ratio is a crucial metric in real estate investing. The figure measures the appraised market value of the home you want to buy compared to the amount you need to borrow. The LTV ratio helps lenders assess your borrowing risk. 

Reducing the LTV ratio as much as possible generally results in lower mortgage costs. With a percentage figure of 80%, lenders can offer better interest rates, waive the need for mortgage insurance, and offer you better borrowing deals.

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

By YEC

Negotiating contracts and terms with clients is a critical aspect of any business engagement. Whether you’re a freelancer, a small business owner, or work for a large corporation, understanding and implementing effective negotiation strategies is crucial for achieving mutually beneficial outcomes.

To employ the best practices in contract negotiation—as well as safeguard your interests, foster productive client relationships, and ensure the smooth execution of projects—consider the following advice from members of the Young Entrepreneur Council.

When negotiating contracts and terms with a client, what’s one best practice to keep in mind? Why?

1. Maintain open communication

One best practice to keep in mind when negotiating contracts and terms with a client is to maintain open communication throughout the negotiation process. Be transparent about expectations, ask questions when necessary, and be willing to compromise when appropriate. By working together to find mutually beneficial solutions, both parties can feel satisfied with the final outcome. —Eddie Lou, CodaPet

2. Discuss boundaries upfront

Establish preset terms and guidelines. Let the other party know upfront what your dos and don’ts are, along with the rationale for each item. This sets the tone for the rest of the conversation since you are upfront with your non-negotiables. It’s not about making concessions at later stages, but being very transparent about what you need at the beginning. Then, you can start actual negotiations. —Firas Kittaneh, Amerisleep Mattress

3. Prepare to compromise

One of the most important things to remember is to communicate clearly and be prepared to compromise when necessary. This will ensure that both parties understand the terms of the agreement and are comfortable with its outcome. Furthermore, it will create an atmosphere of trust and respect, making it easier for both parties to reach an amicable agreement. —Kristin Kimberly Marquet, Marquet Media, LLC

4. Think about scalability

Keep scalability in mind. For example, ask yourself: Will the terms of the contract accommodate rapid growth? Is it written to allow for contract modifications if the scope expands? When trying to move a deal forward, don’t forget to think about the big picture. —Jack Perkins, CFO Hub

5. Stay mindful of your resources

When negotiating contracts and terms with a client, one thing to keep in mind is that you shouldn’t overpromise. It’s important that you carefully assess your current resources, evaluate them against the client’s requirements, and communicate clearly. This will make it possible for the parties to set clear expectations from the get-go and help them avoid unforeseen conflicts in the future. —Stephanie Wells, Formidable Forms

6. Approach negotiation with goodwill

What I’ve found helpful is to approach the negotiation as a problem-solving exercise, rather than a combative discussion. I don’t want to “win” the negotiation and get my terms only. Rather, I try to find common ground with the other party and find solutions that work for everyone involved. This leads to better outcomes and good relationships with clients in the long run. —Syed Balkhi, WPBeginner

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7. Look for the client’s top priorities

Try to put yourself in the client’s shoes and understand what’s most important to them. They won’t always tell you their top priorities or red lines upfront, so it’s helpful to ask. This can help break the ice and speed up negotiations as well. If you’d rather not discuss the client’s motivations for any reason, use past experience to make an educated guess about their priorities. —Andrew Schrage, Money Crashers Personal Finance

8. Strive for clarity and specificity

One essential best practice when negotiating contracts is to ensure clarity and specificity in the terms and conditions. Clearly define the scope of work, deliverables, timelines, payment terms, and any contingencies. This helps to mitigate potential misunderstandings or disputes in the future. —Jared Weitz, United Capital Source Inc.

9. Seek out an advisor if needed

Recognize when to ask for help and seek the advice of an advisor. Negotiations can be challenging and stressful, especially when significant stakes are involved. An advisor brings specialized expertise and a fresh perspective to the negotiation table. They can review the agreement objectively, navigate complexities, and help you negotiate fair and favorable terms. —Ismael Wrixen, FE International

About the Author

Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most successful young entrepreneurs.

When investors set out to find a new investment, they’ll likely come across an HOA property. Unless you know exactly what an HOA property entails, you may be left asking yourself, “Should I invest in a property with an HOA?”

Investing in a homeowners association property requires significant effort because of the many oversights and restrictions. It’s a challenge, but it has benefits if you’re willing to do the work.

From fees to rental restrictions, we’ll dive into what to expect when investing in a property under a homeowners association.

What Is a Homeowners Association (HOA)?

A homeowners association, or HOA, is a self-governing organization in a “common-interest” community. When part of an HOA, homeowners pay fees to maintain the look and feel of a neighborhood. A resident runs a homeowners association within a community or a volunteer elected to a board of directors that oversees the whole association.

HOA Fees and Rules

Investing in an HOA neighborhood comes at a price. But, on the flip side, you also get to own property in a community where everything looks in tip-top shape. Why? The rules and regulations set by an HOA. Can you say Desperate Housewives style?

Rules

Although every community is unique, here are some rules that you’ll see in most communities:

• Landscaping control
• Decor for holidays
• Standards for property maintenance
• Noise complaint policies
• Home occupancy limitations
• Parking rules
• Pet size and amount limits
• Short-term rental restrictions

Wait, so let’s say you invest in an HOA and want to rebel against the rules. What happens? Not following HOA rules can carry legal and financial consequences. Enforcement policies may include warnings or fines. If you don’t pay the penalties, an HOA may place a lien on your home. However, most homeowners are quick to fix any penalty.

Fees

Each property owner has to pay a set amount of fees that cover the maintenance throughout the community of common areas. Typically in an HOA, you’ll see a community playground or picnic area, maybe even a swimming pool; whatever it is, HOA fees cover the maintenance.

Here are a few other examples of what HOA fees typically cover:

• Pickup of garbage
• Parking areas
• Shared utilities in common areas
• Security of community

So, what do typical HOA fees look like? Homeowners should expect to pay anywhere from $200 to $2,500 annually, but the total amount depends on the community’s offerings. Typically a property owner will pay monthly HOA fees or quarterly, depending on the homeowners association rules. So, if there is a community with all the fixings, there will be a higher fee.

Wait, there’s more? You bet. Aside from typical maintenance fees, homeowner association property owners must pay for assessments. Let’s say a tornado rolls through the neighborhood and does a lot of damage. It’s in an HOA’s power to impose a one-time fee to cover expenses.

HOA Rental Restrictions

There are several different forms of rental restrictions. For an HOA community, one of the primary goals is to protect property values, and part of that protection includes rental conditions.

Considering the overall picture, a renter will likely violate a community rule because they don’t have a vested interest in the property. The two most popular HOA rental restrictions include rental caps and lease restrictions.

Rental cap

Rental properties continue to be all the rage. Who doesn’t want passive income? For an HOA, a rental cap limits the number of homes rented within a development in a certain period. The HOA board members usually approve rentals as they come along and have a waiting list if a certain percentage of homes are already rented.

For those looking to invest in an HOA, don’t be surprised if you must reside in the investment home for at least one year before renting. An HOA board sets the ground rules, which are often very strict for rental restrictions.

Lease restrictions

So, if you’re in the rental space, you’ll be familiar with this term, as imposing lease restrictions is popular amongst landlords. Lease restrictions are a set of rules included within a lease agreement. For example, one common lease restriction rule could be a minimum lease period where someone must rent the property for at least 60 days. Why? The HOA doesn’t want the community to look like party central.

Within these leases, it’s typical to see a renter’s compliance section allowing a landlord the authority to evict a tenant if they are not complying with the lease.

Benefits of Investing in an HOA Neighborhood

HOAs are strict. Homeowner associations are known for enforcing many rules, from parking to noise regulations to housing structure limitations. But, for those living within the community, it does come with its benefits.

Let’s explore a few benefits of investing in neighborhoods with homeowners associations.

Maintenance free

Okay, yes, an HOA doesn’t clean your house, but imagine a world where a shingle falls off your roof, pipes leak in the basement, or landscaping needs upkeep. Depending on your agreement, an HOA may cover those repairs. Sure, some enjoy the everyday maintenance tasks of owning a home, but let’s be honest; there are a few that don’t.

Awesome amenities

Clubhouse? Check. Sauna? Check. Golf course? Check. HOAs are a breeding ground for awesome amenities to ensure residents live their best lives.

Other amenities include a pool, a hiking trail, and a skate park, to name a few. If you want it, an HOA can likely make it happen. The icing on the cake? These common areas are maintained thanks to the HOA fees that residents pay.

Neighbor mediation

Do you have a neighbor obsessively watching you near the property line, or do they call the cops on you just because they feel like it? An HOA helps mediate problems between neighbors to help maintain peace throughout the neighborhood.

If you don’t want tension between you and a neighbor, contact the homeowners association and ask them to resolve the issue.

High property values

Don’t expect any old 1940s broken-down vehicles to pile up in an HOA community, that’s for sure. The appearance and maintenance of these properties is essential. HOA bylaws help prevent property values from going down, so upkeep is necessary. Overgrown lawn? Nope, you typically won’t see this in an HOA whatsoever.

Cons of Investing in an HOA Neighborhood

There are indeed some great reasons to invest in an HOA. However, there are also a few downfalls. For example, HOA fees can cut into income, and strict rules and regulations may disrupt your everyday goals.

The grass isn’t always greener on the other side, so here are a few cons when investing in an HOA neighborhood.

Cash flow losses

There are two options for a house project outside of an HOA community. Either you do it yourself, or you hire a contractor. Some people aren’t handy, so hiring a contractor is the best option. Let’s think about that, most of the time, people will get multiple quotes from different contractors.

So, now think of an HOA. Property owners pay out a flat maintenance fee every month. But what if you never have a leaky sink or a roof that needs repairing? By fronting all that money, you can experience a significant loss in cash flow. It’s like paying for something that you don’t need.

Rental interference

Most often, investors will do their due diligence on a property, including whether or not the home they are investing in is in an HOA. HOA rental restrictions vary, but it’s not uncommon for the purchaser to have to live in the residence before renting out the property or to have a set number of rental restrictions, like the length of a tenancy.

With so many restrictions at play, it’s not uncommon for an HOA investor to see gaps in residency.

Random assessments

No one likes a random bill, yet, an HOA can send community members one. Why? The HOA may decide that, as a whole, the driveways all need redoing. To help fund the project, the HOA dishes out $8k bills. With an HOA, what they say goes, so congrats, you’re getting a new driveway, and you may not even need one. Oh, and if you don’t pay up, you’ll be penalized.

FAQs on HOA Investments

Here are the most frequently asked questions when investing in homeowner association properties.

How do I find out the rules for my HOA?

Your association’s governing documents should have been provided when closing on the property. However, you can also obtain them by referencing the association’s website or public record.

Do associations have to disclose HOA rental restrictions?

Mostly, rental restrictions must be adopted in an association’s recorded declaration. The legality behind purchasing a property in the community is that the property owner has accepted the covenants in the declaration. A purchaser will find that many transfer deeds state restrictions, including rental restrictions.

Can an HOA restrict rentals?

Most of the time, homeowners associations will limit the number of rentals based on a certain rental cap. Once the community reaches a rental cap, no more rentals are allowed, and yes, including vacation rentals!

Will You Invest in an HOA Property?

The call is all yours! If you’re willing to accept the challenge of having multiple rules and regulations while enjoying the benefits of a maintenance-free, well-kept community, go for it! As with anything, it’s all in what you want.

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

If I can get you to laugh with me, you like me better, which makes you more open to my ideas. And, if I can persuade you to laugh at a particular point that I make, by laughing at it, you acknowledge it as true. – Actor and comedian, John Cleese

There’s so much content out there these days, much of it written in the same boring, bland language—which is why creating vibrant, colorful content that stands out and attracts your ideal customers is crucial in content marketing.

How to create lively content? Here are three ideas for your consideration:

1. Infuse your marketing content with subtle humor.
2. Use fresh, detailed language in your marketing content.
3. Let the best of yourself and your brand permeate your content.

In this article, the first of a three-part series on how to differentiate your marketing content by expressing yourself with verve and color, we’ll look at the first idea—how to infuse your content with subtle humor.

I’m not talking about being a comedian or delivering a laugh a minute. I’m talking about occasionally making your readers smile.

A warning: Don’t try to use all of these techniques at once in a single piece of content. Doing so may cause the opposite of your intended effect and drive prospects away.

Humor technique 1: Use words with the letter K

The humor aspect of the letter K is best expressed through a few lines in Neil Simon’s play, “The Sunshine Boys.” In it, a comedian played by Walter Matthau explains the allure of the letter K to his nephew.

Fifty-seven years in this business, you learn a few things. You know what words are funny and which words are not funny. Alka Seltzer is funny. You say ‘Alka Seltzer’ you get a laugh … Words with ‘k’ in them are funny. Casey Stengel, that’s a funny name. Robert Taylor is not funny. Cupcake is funny. Tomato is not funny. Cookie is funny. Cucumber is funny. Car keys. Cleveland … Cleveland is funny. Maryland is not funny. Then, there’s chicken. Chicken is funny. Pickle is funny. Cab is funny. Cockroach is funny – not if you get ’em, only if you say ’em.

Here are a few words with the K sound; can you see yourself using any of them in your content?

• Pickle
• Bikini
• Bonk
• Knickers
• Kerfuffle

You might also use the technique for naming your company and products or services. One brand leaps to mind: Design Pickle.

Design Pickle offers unlimited graphic design for “a crazy-affordable” flat monthly fee.

The word pickle subtly tickles my funny bone, as does the company’s logo—a smiling pickle.

Design Pickle’s founder and CEO Russ Perry says his company’s name is about being easy to say, easy to remember, and able to put a smile on anyone’s face.

“When naming and branding Design Pickle, I had a huge pill of pride to swallow,” he says. “I realized that in my previous agency life, I spent so many years branding companies, products, and marketing campaigns, trying to be as smart and clever as possible but often forgetting one critical requirement: Be memorable. The name Design Pickle fit the bill—and the domain was available.”

Caiden Laubach, Design Pickle’s director of creative and communications, says the team strategically considered humor as part of a recent brand refresh.

“When we went through a brand refresh earlier this year, we purposefully talked about styles of humor that would help take our brand up a notch and elevate us while really sticking to our roots,” he says. “We decided to use sardonic humor because, by definition, it elicits a side smile and maybe a knee slap, often poking fun at collective pain points in a way that draws you in rather than ostracizes.”

Several large brands also use the K sound to great effect, including Kit Kat, Krispy Kreme, and Kool-Aid. The names are catchy, memorable, and likely to make people smile.

Humor technique 2: Use unexpected similes

A second way to infuse humor into your marketing content is to use similes to communicate ideas in unexpected ways.

For instance, to get across the idea of a growling stomach, think of other things that growl and then use those alternatives to describe the growl.

My stomach is growling like…

• A poodle warning you NOT to step closer.
• My sister when I’ve pushed her almost too far.
• The harried lady behind the counter at the DMV.

Granted, I’m not the best humorist, but I can point you to someone who is: Joe Garza, editor of the The Reckless Muse.

Joe wrote a post on using similes and their close cousin metaphors to turn up the humor in content. Although his style differs from mine, the ideas he shares are sound.

Here’s one of his similes from the referenced post to give you an example:

The restaurant’s signature Phaal curry dish was excruciatingly hot and spicy, like the armpits of a sweaty flamenco dancer who used habanero sauce as deodorant.

What do you think? Funny? Not funny?

I vote for clever.

Although not always what I’d consider unexpected or humorous, many business-to-consumer (B2C) brands use similes to good effect, too.

• Chevrolet: Like a rock.
• Doritos: Tastes like awesome feels.
• State Farm: Like a good neighbor.

What’s your brand like or as? If you’re not sure, survey your customers, as they’re the ones who know the real you best.

Humor technique 3: Misdirect, break patterns

A third way to use humor to woo more of your ideal customers is misdirection or breaking expected patterns.

Consider the opening lines of these cliches; if you’re a native English speaker, you likely know their endings:

• All that glitters…
• Only time…
• Every cloud has a…

The humor approach is to give the brain something unexpected. It’s to lead the reader’s mind one way and then make a sharp turn, going somewhere readers weren’t expecting.

• All that glitters is likely to distract me.
• Only time will tell if the cactus needs watering.
• Every cloud has a habit of ruining my picnic plans.

Misdirection is not limited to the endings of cliches. The goal is to break a pattern and make a point in a surprising way.

A few examples:

• That’s about as American as an affordable ER visit.
• I’m ready for the beach; I have my sunglasses, towel, and portable air conditioner.
• Writing is easy; simply sit down, open your veins, and bleed (attributed to Hemingway).

Both B2B and B2C brands use these techniques successfully, often in ads.

MailChimp: In its B2B “Did You Mean MailChimp?” campaign, ad agency Droga5 created a series of ads that played with the brand’s name in unexpected ways, such as FailChips, MaleCrimp (note the K sound), and KaleLimp (ditto). This campaign used misdirection by leading the audience to expect one thing (MailChimp) and presenting something completely different.

Dollar Shave Club: Dollar Shave Club’s launch video, viewed more than 28 million times, begins with the company’s founder saying, “Hi, I’m Mike, founder of DollarShaveClub.com. What is DollarShaveClub.com? Well, for a dollar a month, we send high-quality razors right to your door.” The video then turns unexpectedly, showing viewers a toddler shaving a man’s head, the founder cutting through packing tape with a machete, and a bear costume, all working together to create humor by breaking patterns and misdirection.

Coming up next…

In the next two articles in this series, coming out over the next two weeks, you’ll discover more ways beyond humor to express yourself with verve and color in your marketing content: Using fresh, detailed language and infusing your content with the best of yourself and your brand.

I recently got an unexpected lunch invitation. The most successful real estate developer I know made a beeline for me in the church lobby. He requested lunch as soon as possible. 

We met for lunch the next day. We hadn’t even ordered when he started pouring out his heart: 

“I’ve got a problem. I’ve been doing business with two banks for decades. One of the bankers has become a close personal friend.” 

He paused with a pained, pensive stare at nothing. 

“But they’re both acting…weird. They seemed nervous last fall. But now it’s more serious than that.” 

He went on to describe how his favorite banker changed the terms and then outright canceled an approved loan days before closing a few weeks before. This deal had been in the works for well over a year. My friend had to make a painful phone call to the seller to sheepishly ask for an extension to a now-uncertain closing date. 

He was meeting with me because he knew I invest in commercial real estate. But my friend didn’t need equity. He had that. He needed a new source of debt. 

“I’m done with banks,” he said. “I’ve got to find a private lender I can trust. We’ve got a series of land acquisitions in the works, and I will not be screwed again!” 

“It was the managers who should have been wearing the ski masks.” – Warren Buffett, referring to savings & loan associations in the early 1990s.

I didn’t expect this. As I said, this is no small developer. This three-generation professional operation does large deals with Ryan Homes, D.R. Horton, etc. One of their upcoming developments is platted for 8,000 residential lots, and 1,000 are presold to a national homebuilder.

I would have been surprised…if I hadn’t seen lenders pull back in the last cycle. And the one before.

It was ironic timing because I was planning to sit down to write about our newest operating partner and investment that day.

Investing in a Private Debt Fund

We’re not investing in banks. And we’re not looking to finance loans directly.

We’re partnering with a seasoned operator to invest in a portfolio of commercial real estate loans.

Before I tell you more about them, I want to tell you why.

In the Great Financial Crisis, seasoned investment professionals hedged their portfolios with debt and preferred equity, while most “regular” investors ran for the hills. The pros invested in assets with current cash flow and a safer position in the capital stack. And they created a lot of wealth for their investors.

As investment managers, we made a commitment that our fund would have two top priorities:

1. Safety of principal
2. Predictable cash flow

These are followed by growth and tax advantages.

Fund managers have struggled for the past 12 to 18 months to find investment opportunities that meet these criteria due to market conditions. I admit we’re in that same boat.

We’re pleased with the investments in the fund so far, and we painstakingly vetted each operating partner for safety.

But a few of those investments have limited cash flow in the first year or two as value is being added. So, we looked to people like Warren Buffett and others to observe their practices about how to hedge our portfolio with fixed income.

We discovered the fixed-income component we were looking for in the form of private debt. And we found the appropriate vehicle through our latest operating partner.

Our Private Debt Operating Partner

The founder, a third-generation real estate developer, has created an organization that we believe is uniquely positioned for this role. Between 1988 and 2009, the founder successfully developed over $350 million in commercial and residential real estate projects.

So, unlike most banks and other private lenders, this firm can intelligently evaluate deals, and, as importantly, we believe they are in a position to step in to take the project to completion in the event of trouble. This was a critical condition for us, and it is vital in times of uncertainty like we’re in now.

This group is not your typical local private lender. The track record in the fund we invested in includes:

• Safety: Zero losses from inception in 2009 to date across 128 paid-off loans.
• Scale: 196 loans totaling over $4 billion.
• Alignment: The two founders invested $20 million of their own cash in their fund.
• Yield: Annualized net yield since inception is 12.9%.
• IRR: Weighted average gross IRR for paid-off loans is 19.9%.

If you are puzzled by the high IRR, realize this: In addition to charging points, private lenders often release cash in draws as needed. But the borrower pays interest on the entire loan amount for the entire loan in many cases. This could allow a 12% loan to create a 19% IRR, as an example. 

Our partner employs rigid due diligence criteria, even re-creating the design and the budget from scratch before approving the loan. They do a value analysis, reviewing the location, design, layout, and overall economics, including cost versus potential value.

As a licensed general contractor, they can step in to finish every type of project they lend on, if necessary, potentially increasing profits to investors.

Over 30% of their borrowers are repeat clients. Developers appreciate them because, unlike banks, they can close on a project in four to six weeks.

And private loans may not cost as much as I thought. My developer friend and I did some quick math, and he realized that a loan like this would only cost him about $250,000 extra compared to his nonperforming bank, which seemed to him like a drop in a bucket for a deal projected to profit $7 million to $8 million.

Sample Full Cycle Loan

Here is one of many successful deals our private lending partner completed in the middle of the pandemic. This was a $19.8 million construction loan on a six-unit multitenant retail building in Temecula, California.

For context, this operator’s worst deal generated a 9.7% gross IRR, and the operator’s best deal generated a 113.9% gross IRR. As with all investing, past performance is no guarantee of future returns, and there are other risks of which you need to be aware.

Speaking of cash flow… 

By now, most of us have heard about funds and syndication cutting or stopping distributions and doing capital calls. We take no pleasure in this, especially since many investors are being harmed. 

Hedging your equity investment with debt is no guarantee of success. Debt and equity holders were harmed during the Great Financial Crisis, as many of us recall. 

But I don’t believe this is 2008. And I do believe that a safer position in the capital stack, with returns that rival equity, will be a great move for many of you. 

You should note that investing in debt will not provide the tax benefits enjoyed by equity investors. But debt investments often provide liquidity, a good trade-off for some. 

Liquidity means investors can theoretically enjoy the cash flow for a while and then exit when they locate suitable equity opportunities. If this downturn goes like others, we may expect to see some distressed opportunities at bargain prices within about one to three years. This is a Warren Buffett strategy, one that works for real estate as well as stocks. 

Maybe even better. 

Get the Best Funding

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

Glenn Kelman, Redfin CEO, joins ‘Squawk on the Street’ to discuss what’s happening in the real estate market, how long homeowners will try to keep the mortgage rates they already have, and how home buyers are paying for their homes.