Tag Archives: distressed property

“What You Get for…$1.00” — The Housing Crisis Gets Crazy

The New York Times has a weekly real estate feature called “Property Values” that shows “What You Get for…” a certain a mount of money. 

This week the Times shows you “What You Get for…$10 Million” and it pictures palatial estates in Newport, Rhode Island, Kauari, Hawaii, and Whitefish, Montana.

But this week’s most interesting — and relevant — “What You Get for…” story wasn’t published in the Times, and the property isn’t situated in an up-scale locale.

The story was published in the Detroit News.

And the property — a cozy two story — is located in the foreclosure-ravaged Motor City.

It recently sold for $1.00 — after being on the market for for 19 days.

After reading the story, we tried an experiment. 

We went to realtor.com and looked up houses in Detroit.  For the minimum amount would put $0 and for the maximum amount we put $1000. 

The result was four more houses for $1, eight more for $100 or less, and a total of 172 properties at or under $1000.

Then we tried Cleveland, Ohio. 

The result was 10 properties available for $1 and five more for $1000 or less.

You can try the same experiment with other cities.  We think you’ll find similar results.

We noticed, too, that this example of America’s housing misery was providing aid and comfort to an old — and perhaps renewed — enemy.

The online edition of Pravda — which used to be the official newspaper of the Soviet Union and is now the official newspaper of Russia’s new bosses — put the Detroit Press story on the front page of its English language edition, just below the news about its shooting war in Georgia and South Ossetia.

Don’t Get Scammed! — 10 Tips to Avoid Getting Ripped Off by Real Estate and Foreclosure Investment Scams

There are a lot of real estate scams out there and many of them are now offering the bait of making easy money in the foreclosure market.

Scammers like to run with the hot trend — and right now the hot trend in real estate is foreclosures and distressed property.

Of course, there is money to be made by investing in distressed and foreclosed real estate.

But as with any other kind of investing, making money in distressed property and foreclosures requires significant expertise and experience and adequate capitalization. 

Before you trust your money to a stranger who tells you he has a sure-fire way to make lots of cash by investing in the hot, once-in-a-lifetime foreclosure and distressed property market, make sure that he has the expertise and experience and the capital (not just yours!) to back up his claims.

Here are 10 tips to avoid being taken in by scammers who promise you quick and easy returns on your real estate investment:

1. Be very skeptical and ask lots of questions. 

2. Get the names of the people who will be running the investment fund.  In particular, get the names of the people who will be making the investment decisions.  Demand that they tell you their business and investment track record and that they provide you with documentation of their claims. 

3. Check their qualifications.  Make sure that they are licensed securities or real estate professionals and not just telemarketers. 

4. Research all the names you get.  Use the Internet.  Do a google search for the investment fund and for anyone involved in the fund or business.  Search for their names and the name of the investment fund on scam.com, the Securities Fraud Search Engine, and  other community web sites and bulletin boards, as well as the Better Business Bureau.  Also check their names with your state Attorney General and the Securities and Exchange Commission.  Carefully read the online material on telemarketing fraud put out by the U.S. Department of Justice. 

5. Find out whether the people raising the money for the investment fund are licensed securities brokers.  If not, don’t invest.  You can check their broker status here.

6. Before you invest, get the advice of people you trust.  Ask your attorney, your real estate broker, your financial advisor, and your adult children what they think about the investment.  On the other hand, avoid pressure from relatives and friends to invest in “can’t miss” schemes.

7. Get all promises or claims in writing and save copies of the paperwork. Verbal agreements don’t mean anything. Demand documents and then review them carefully.  Ask your attorney, your real estate broker, your financial advisor, and your adult children to review them as well.  Even when you get promises in writing, remain skeptical, especially regarding revenue projections.  At best, these projections are guesses; at worst, they’re outright lies.  Be particularly skeptical about projections in a business plan.  Remember that a business plan is not a legal document — you can put anything you want in a business plan and scammers always do.

8. Take your time before deciding whether to invest.  Scammers use lots of tactics to pressure you to make a decision.  Don’t let anyone rush you into an investment.  If they tell you, “only a few lucky investors can get in, so you must act right away,” it is almost certainly a scam.

9. Demand to know how much of your investment, or the total fund raise, is actually going to purchase property and how much is going to pay the people who are raising the money.  Don’t trust any investment where more than 10-15 percent of the total raise is going into the pockets of the fund-raisers. 

10. Live by the rule: If something sounds too good to be true, it probably isn’t.  If someone tells you that there is a “guaranteed return on your investment,”  it is almost certain that you should invest your money somewhere else.  Scammers play on greed and fear.  Deals that promise exceptional returns — and deals that must be done now — are the hallmarks of a scam.

 

Disgraced Ex-Governor Eliot Spitzer Starting Real Estate ‘Vulture’ Fund

Do you want to profit from the housing crisis and the mortgage meltdown?

Disgraced ex-New York Governor Eliot Spitzer might have just the opportunity you’ve been looking for.

Spitzer is putting together a real estate “vulture fund” to buy and flip distressed property, envisioning projects valued between $100 million and $500 million.

According to the New York Sun, “Eliot Spitzer, in his first big business venture since he was shamed out of office by a prostitution scandal, is shopping around a plan to start a vulture fund that would scoop up distressed real estate assets around the country, revamp them, and flip the properties for a profit. Late last month, the former governor of New York gathered a group of high-level Washington, D.C.-based labor union officials in a conference room at the headquarters of his father’s real estate business in Manhattan and pitched them his idea for starting such a fund, a source said.”

Eliot Spitzer’s father is multi-millionaire Manhattan real estate developer Bernard Spitzer, known for building one of New York City’s largest real estate firms (one of his properties is The Corinthian, a spectacular 55-story, 1.1 million square foot apartment building), as well as for bank-rolling his son’s political career.  The ex-Governor has been working with his father’s firm since resigning last March.

The Sun stated that “In the half-hour meeting, Mr. Spitzer told the officials that he was determined to take his ailing father’s real estate company to ‘the next level’, the source said. Mr. Spitzer said he would lay out his business plan in greater detail at a later date, and would ask the labor officials to consider investing pension fund money under their control.”

“Mr. Spitzer is moving aggressively to occupy a niche created by the credit crunch, the subprime mortgage crisis, a surge in foreclosures, and a declining real estate market. He is looking to mine for riches in projects that banks are no longer willing to finance.”

Spitzer apparently believes that the prostitution scandal that cost him the Governor’s office (and a fast-track to even higher political office) was really a blessing in disguise:

“During the meeting, Mr. Spitzer expressed relief that he was no longer burdened with the frustrations of being governor, according to the source. And, in contrast to his repentant resignation speech that he delivered beside his tearful wife, Silda Wall, he took a more relaxed view of his indiscretions. He has told friends and associates that he is consoled by passersby who stop him on the city sidewalks and tell him that sex is ‘no big deal’ and that the disclosure that he frequented prostitutes was distorted out of proportion, the source said. Europeans, the former governor has noted, have been especially supportive of him and perplexed by the fallout from the scandal.”

Spitzer’s real estate dreams may have to be put on hold, however, as federal law enforcement authorities might force him to make other plans.

The New York Post reports that ” The noose appears to be tightening around sex-crazed ex-Gov. Eliot Spitzer.”

According to The Post, “The federal case against him is so strong that prosecutors had no interest in striking cooperation agreements with the ringleader of Spitzer’s hooker-supplier, Emperors Club VIP, and his second in command, sources told The Post‘s Murray Weiss. Prosecutors have records of Spitzer’s transactions, phone records and taped conversations with Emperors Club, and are confident they need little more to nail him on charges that could include violating prostitution laws and money laundering, sources said. Probers are also said to be looking into whether he used campaign funds to pay for his pleasures.”

“The case against Spitzer includes the cooperation of curvy call girl Ashley ‘Kristen’ Dupre and a second hooker. Her old boss, Mark Brener, 62, will plead guilty Thursday without the sweetheart deal he was hoping for – he’ll have to serve up to 30 months in the slammer on money-laundering and prostitution-conspiracy charges.”

In addition, Temeka Lewis, who worked for Brener at the Emperor’s Club, pled guilty in a cooperation agreement that requires her to testify about Spitzer’s involvement with the prostitution ring and his alleged attempts to conceal payments for sex.

We think that a “vulture fund” meeting with Eliot Spitzer where he pitches cashing in on the foreclosure crisis doesn’t help improve the image of labor unions or union leaders.

We also think that anyone considering investing in Spitzer’s real estate project should think about whether the fund could do without the presence of the ex-Governor for several years while he stays at the Gray Bar Hotel.

 

Bascom Group Expands Reach for Distressed Real Estate

Another major player has expanded its participation in the distressed real estate market.

Bascom Group, an Irvine, California, real estate (apartment) investment and asset management firm, has announced a new joint venture called Bascom Portfolio Advisors (BPA) that will target distressed multi-family, office, industrial and retail properties in markets throughout the nation,  including broken condo deals.

According to the Bascom Portfolio Advisors’ press release, “In anticipation of looming credit problems stemming from impending loan maturities, potential capital imbalances and decreasing property values, BPA offers workout expertise. Through a range of consulting services, BPA will evaluate distressed assets, identifying financial, operational and market driven issues and present effective solutions to optimize asset values and minimize losses. BPA has resources in place to implement work out solutions, including, asset management/oversight, new capital infusion, and assistance with liquidation.”

Bascom Group has previously engaged in several other join ventures in the distressed property market, including a 2006 joint venture with the private equity firm Warburg Pincus Real Estate I, L.P. to invest up to $200 million in non-performing loans and distressed multi-family properties and both non-performing and sub-performing loans by investing in the underlying senior and mezzanine debt instruments.

We noted in a recent post that major investors, fueled by domestic and foreign investment groups, wealthy individuals, endowments and pension funds, are about to spend billions of dollars buying distressed debt and real estate.

We think that Bascom Group’s announcement is further evidence that there is currently no hotter market than distressed real estate, and that major investors are ready to scoop up distressed properties with significant equity or which they believe to have been mismanaged.