If you've read previous articles that I discussed the correlations between general investment markets and Real Estate Investing you know two things:
1. The smart money (the ones with super deep pockets) are usually on the right side of the market, when everyone else is head faked on the losing side.
2. The most notable stock market investors ever, including Warren Buffet himself, made their fortunes with a rather simplistic investment methodology - buying assets at 50 cents on dollar (or less) of their intrinsic value, regardless of if the market as whole was bleak or positive.
With that in mind, a recent article came out that giving that correlation to the housing market further credence. As America citizens, and most of you likely are, it may be a little concerning as to whom is buying this property. But, as a real estate investor, the signs are positive for a number of reasons.
Sovereign Wealth Funds, which are basically gigantic investment funds from the savings accounts of foreign countries have US foreclosure real estate on the top of their investment wish list. They have billions earmarked to buy REO's and are offering 50% - 60% of the value of the defaulted loan.
This is the exactly what so many have been preaching, that if you can get a property at 30, 40 or even 50% off, it's virtually impossible not to come out on the winning end. Banks aren't lining up to take hits like that, but if you play the numbers game by submitting countless lowballs until one bites, mission accomplished.
Now, this can mean several things for REI's:
1) These funds are going mop up the REOs. This means these super great deals are going to get snatched up in mass quantity. This will likely temporarily reduce supply in their target areas, driving up the prices, allowing them slowly unload them as to not cause a collapse of the artificial support created by their original demand. Depending on how broad of the country they target, this means two things, they're going to get the best deals, leaving the scraps the to small guys, unless you act in front of them. If you get in prior to the mop up, it should create new support (floors) reasonably higher. This generally means new profit and security from loss.
2) This could provide opportunity for reassignment, bird-dogging, etc. These funds will probably be doing most of their spending by purchasing in wholesale quantities from the banks. However, there is no doubt a portion will be through the result of bird-dogging, especially smaller (but still hundreds of millions, if not billions) of funds being more picky with their buys. Seeking these people out and their reps to offer your services could prove to be a worth while endeavor.
As further proof this isn't limited to just SWFs, but also filthy rich private investors of foreign countries, one of our members was offered an opportunity to lock up millions in real estate. The rep for this investor found our fellow member using the same marketing techniques we often discuss here and that we focus on in the AFF program.
I know this topic can easily turn into a politically and nationally sensitive debate about the principle of this. However, please refrain from going there when we discuss this, let's keep it strictly to the implications of REI, and use other sites if you wish to get into the politics. - Thanks, DGadmin
Check out the article here: