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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