Our plan of action

[Bill P.]

I've been involved with real estate investing in some capacity for about 30 years. Even when I ran my multi-state public accounting firm, I still dabbled in buying and selling single family homes. Of course, life was good and the ups and downs in real estate weren't generally outside the parameters of the normal business cycle. Sure the late 80s caused a little pain, but I survived to live another day.
When I sold my accounting practice, I decided that I would focus on becoming a full time real estate investor. The timing was perfect. All the way until 2007 it was like printing our own money. I could buy a fantastic home in Florida for $290k and could sell it within a year for $425k. Those were the days. In fact, I met many like minded individuals and my firm grew proportionally. But we know the good times don't last forever. Unfortunately, when the music stopped this time, it came to a screeching halt.
We spent so much of our time in 2007 - 2009 plugging the leaks in our proverbial dam. With investments in some of the hottest spots in the country, we were getting our butts kicked daily. While we stabilized everything for us and our investors as we went into 2010, the normality never really returned...yet.
Sellers are convinced that the real estate market has declined 40%....except for their home. Banks have money to lend..... if you have a 825 FICO and are a owner occupant. Buyers are almost non existent.....unless there is a government program promoting free money. Foreclosures are running rampant (including the ones with the bad paperwork). Short sales are everywhere (and it takes too long to complete). Unemployment is still way too high and people need jobs to be comfortable to buy homes. Government doesn't have a single voice (or a clue) on what to do about the housing market.
Therefore, like Halloween, the real estate market has turned spooky every day. Is the real estate market growing or are we getting ready to enter a double dip. After all, manufacturing and the GDP don't look very strong from my vantage point. So what is a company to do? Quit? Put their head in the sand? Just go on a long vacation? I would suggest that you consider a course of action like ours.
We are being selective regarding our markets and buying in niches that we feel still are viable in those markets. We think we are at an inflection point in the vacation condo market in some high traffic tourist zones. We think the time is right to create student housing in some selected university towns. We believe it is timely to follow the mandates of the recalibration efforts of our military bases. We are buying packages of REO from small lenders because the discount is too appealing. We are building our investor base and working for (not just hoping for) a better tomorrow.
In this environment, a better tomorrow will come only to those people who are willing to work for it. Not like last time where everybody was dragged along. So be proactive with your life, your career and your profession and be a beacon of light. Your tomorrow will thank you.

[Bill P.]

Vikram- I wish I had a story to tell you that would make me seem to be a genius but the truth is that we have just inquired very professionally to some very small local banks and have gotten some very positive responses. As you know, the majors usually are involved with the securitization process with their properties but small banks tend hold their own loans.
Therefore, if a small bank holds enough bad loans to affect their capital ratios/requirements; they need to make their loans performing or get them off their books.
Currently, we are working with a small bank in Ohio who has a grand total of 19 non-performing loans. We are in the processs of buying 11 of them as a group and have worked in advance a procedure to buy the other 8 after the first 11 have been digested by us. By doing this, we have helped them immensely, we have gotten a new long term friend (I hope!) and we have received some properties at a very favorable $$ amount.
The only problem that we ran into is the fact that they do not like to talk about their problems. It took us about 5 meetings/lunches with a key person before they would open up to us. The bankiing world is fraught with secrecy and it takes a certain about of trust before they will open up.
Furthermore, they may have other similar problems and I was only told of these 19 problems. It may be a test of our ability. There may be more. Only time will tell. But if it works outs as I believe it will, we will have a pretty good reference going into the next small bank later.