Real Estate Leverage How Banks Sell Debt After Crashes

I was selling a lot of debt for all these banks. That's what kept me busy. >> that. Yes, you're selling debt. Selling debt, interesting. Part of being a broker. But selling debt, so what is debt? When you buy a property, let's say you buy a property for $5 million. You don't have $5 million. Right. >> But you go to the bank and you say, "Hey, lend me four and I'll put up a million dollars." That's how almost every transaction goes down. It's why people buy real estate cuz you could buy it without your money. You buy with the bank's money. That helps your return, like you would know. Leverage. You leverage. Leverage. Leverage. It's why real estate is still a great vehicle for investing. And it always will be. As long as the leverage is there, it's why people will be investing in real estate. So, good cycles and when everyone's paying their mortgage, everything's great. What happens when the market crashes? What happens right now? Right? We'll talk about We'll get into New York City, what's happening. >> thinking, yeah. Right? With values just plummeting, what happens to the loans? So again, if I buy a property for five and I take a $4 million mortgage, and now the property's worth $3 million. So, the investor lost all his money. It was worth five and now it's worth three, he's wiped out. He owes the bank four. What does the bank do? Right. So, they foreclose, right? Bank could foreclose, but banks are not in So, yeah, the easy answer is the bank forecloses. But now what? If you're the bank, you're Mr. Bank, you don't want the property. You don't know how to run the property. You wouldn't want to know what to do with it. Right. [music] >> It's not your business. So, what most banks do is they'll go and sell it and they'll take this mortgage that they have, called debt, and they sell it. And they'll sell it to an investor who wants to buy it and go and own the property.