Wednesday, April 9, 2008

One's misfortune is your gain.

This magazine arrived in the mailbox today and sums up my view of the various opportunities within markets that the upheaval and perfect storm present. Make no mistake about it this is the greatest financial crisis since the Great Depression. The wave of bank failures has just started. The FDIC just added about 150 new staff members that are experienced in dealing with insolvent banks. Terrible news is everywhere, but the best deals are always to be had when everyone is running around losing their mind.
Deals abound:
Goldman Sachs Sold $500m worth of Chrysler Debt at 0.63 on the dollar. Remember the US government bailed out Chrysler in the 80's and made billions on the loan. Maybe this hedge fund will do the same on this loan. Time will tell.
A home builder sold improved land for 15 cents on the dollar (of builder's total costs).
Client's are buying foreclosed homes at 60% of what they sold for in 06 and in some markets 05.
These deals are done quickly. Just like the good old half-yearly at Nordstrom or the blue light special at K-Mart. You have to know the sky isn't falling, have the cash or financing in place and pull the trigger. These deals won't last.
I hear news from realtors across the country of multiple offers on homes in great areas that are priced right. Remember their is no such thing as a national market for housing. In Santa Monica, CA for example you can have a 2m home and six blocks over you have 500k fixers. Real estate is local and often block by block. The smart money is looking at this as the best of times. Sure prices in all markets can go lower but how many people have bought the bottom of any market? It is better to be a little early to the show than to be late and have missed it all together. Welcome to the FIRE SALE SHOW. Where cash is king.

1 comment:

Austin Lender said...

Great article, I could not have said it better myself. The key point is that you have to have all your ducks in a row and be able to move on a deal fast, because they just don’t last.