Buying Properties At A 60% Discount
There are still a lot of investors looking to get into real estate. Some of them are newbies looking for deals, and others are experienced and have sellers begging to take their properties off their hands.
According to Bloomberg.com,
40 cents on the dollar. That’s how much Morgan Stanley Real Estate paid for an 80 percent stake in the 32 communities, 60 percent less than the price at which the properties were valued just two months earlier. That’s also what some investors say they would pay for distressed land, condominiums, homes and whole developments, whether it’s now or later this year.
As the U.S. housing slump drags into its third year, sellers will start cutting prices as much as it takes to find buyers, said Marcel Arsenault, a self-described “vulture investor.” Properties will be available to buyers with the financial strength to ride out the slide. Now that a price has been set, all that’s left is the waiting.
“We’re watching Denver, Phoenix, Austin and Tucson, but South Florida is our principal focus,” said Arsenault, 60. “If you’re a vulture, Florida has more carrion. This stuff is lying on the ground. It’s lost life. Some of the stuff in Phoenix is still breathing. Perhaps not for long.”
Arsenault said he and his three partners may buy a block of about 50 new, unsold condominiums in Orlando, Florida. They have a price in mind and they’re willing to wait until they get it: 40 cents on the dollar.
“There’s a risk to buying too early in the downturn, but buying too expensive is our biggest pitfall,” he said.
Orleans Homebuilders Inc. of Bensalem, Pennsylvania, sold 1,400 lots to nine different buyers in December for $32 million. The book value of the properties was $86 million, the company said in a statement. Orleans also anticipates receiving about $20 million to $25 million in federal income tax refunds as a result of the sales, the statement said.
Don’t be fooled by 20% discounts from appraisals obtained during the peak. The market has probably dropped significantly since then.
Don’t be in a hurry to buy right now, unless you have deep pockets. The credit liquidity is definitely going to create a strain on home prices for quite a while. Fannie Mae’s Chairman announced that he expects the housing market to continue to slide into 2010. That’s quite a change in tune from 6 months ago, where everyone was saying that prices would pick up in 2008.
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January 11th, 2008 at 8:38 am
That is a nice discount. I am hoping to get some deals then push them back onto the market once it comes back up.
January 12th, 2008 at 10:31 am
Hustle Strategy, I often wonder about comments that I hear from many ‘investors’ that share your same sentiments. My only question is, when you try to time the bottom, and buyers who were priced out of the last market as well as ‘investors’ that succeeded in the last market, as well as normal cyclical buyers are all getting in the market at the same time, combined with interest rates under 7% what do you think will happen to housing prices? Just a question.
January 12th, 2008 at 11:31 am
if you need a place to live, anytime is a good time to buy.
that being said, check out David Lereah’s track record. lereah is the chief cheer-leader for NAR.
Right at the peak of the housing bubble in spring 2005 he published a book called ‘are you missing out on the real estate boom’.
A year later he republished it under a new title, ‘why the real estate bubble will not burst and how to profit from it’.
The guy has been proven completely wrong. For every guy like him, there’s atleast 1 investor who knows a bubble and how to time it.
I really hate it when agents keep on harping on the same tune that real estate never goes down. Bullshit. it does and it already has.
Just like the Fed and their “look, there’s no inflation” delusion, agents need to accept the truth.
January 13th, 2008 at 5:47 am
“There’s a risk to buying too early in the downturn, but buying too expensive is our biggest pitfall,” – great advice.
January 24th, 2008 at 2:56 pm
Hey,
Have you ever taken a loan in US to buy an investment property in India? I was planning to do that but am not sure if mortgage companies over here lend out money for the same.
Thanks,
Dividend Pirate
January 24th, 2008 at 10:43 pm
Pirate,
You can take out a HELOC to buy property in India. Probably a wise idea.
Alternatively, you can buy property in India as an NRI from International banks like Citigroup and HSBC.
January 24th, 2008 at 11:19 pm
Thanks. I have already taken out a HELOC to buy one property. This is one more pre-construction in Mumbai that I am considering. I will check with Citigroup and HSBC to find out information regarding getting a loan as an nri.
February 5th, 2008 at 5:00 am
Carnival of Everything Finance: # 12 Edition…
Welcome to the February 1, 2008 edition of Carnival of Everything Finance.
We had over 120 really good articles submitted for this edition. Unfortunately I could not include all of them.
Earning Money
Matthew Paulson presents What to Do When You C…..