HUGE (Smart) Money Starting to Snatch Up Foreclosures!

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. Eye-wink - Thanks, DGadmin

Check out the article here:

first home

Opinions please, Im trying to find out witch way is the best way to approach these owners. House is paid for and being sold by six siblings of parents who have past away. Unfortunantly my girlfriend and I both have bad credit. Both of us have previous bankrupcies.But we do have good jobs and make decent money. We really want this house

First Home

Jan Malek's picture

Have you approached the children about holding the mortgage since the house is already paid for. Also I am thinking that there might be a bit of equity in this house, a bank or a hard money lender might think twice to offer you the purchase money if there is equity. Do you know of any REI's in your area?? This equity thing might be your key....Jan

National, Regional, and Local

Wib's picture

Just got Dean's book yesterday and love it! Have read through Part 1 (Chapters 1-6) and this approach mentioned by dgadmin is right in line with the principles of national, regional, and local analysis techniques! Smiling

Sounds like this approach to be on the front end of distressed properties will not only be lucrative relative to being a REI, but also make onself available as a bird dog to those investing from that correct?



sully's picture

thats correct, very informative post by the DG admin, thanks


Im a college kid and was wondering if i can make money with no credit using the foreclosure methods..

what method of acquiring real estate is best in this market

what is a realistic time frame for developing deals in this market?

not's different everywhere

sully's picture

but i do know the market that i'm in, it takes on average 6-7 months to sell a house, altho, it is getting better little by little, SULLY.


I completely undestand the concept of of generating clients though the AFF system. I agree, , this is a great source of generating prospects. However, Not sure on what to do once the owner who is still in the preforclosure stage contacts me and has equity on the property. How do i go about finacing the deal without using my personal credit. I'm self employed. I contacted a mortgage broker in order to get prequalified and he told me that i had be in business for at least two years in order to proceed. My mid score is 660. I have obtained a list of REOs from my realtor as well. Please help

Hi Jcat

Kanbee's picture

How are you doin? Have you read the BARM book yet...If you haven't then you have to go read it. you would have to assign the property to someone else for profit, just that simple. Go on here and read the articles on Assignors for more info.

Loans and prequalifying

Kathy J S's picture

I too am self employed, and never had an issue before getting loans and money. I had found a good deal house that was already foreclosed, wanted to make an offer with bank. went to get pre-qualified, and could not get any money. I have a score over 800. I was told it was a federal law that you have to get a loan at a bank or mortgage company you now have to show an income to debt ratio of 45@ and it no longer matters if you have a good credit score! I am still in shock.

Back to the original article...

birdogging for huge real estate investment companies, like the ones mentioed in this article, may not be a bad idea. It would give someone like me (the newbie) the experience in talking to real estate agents, banks, and key players in this field. Plus I could earn some cash to purchase my own properties. Hmmmm I wonder how I could get started doing this birdogging for wealthy investors?