According to a recent dallasnews.com article, ”New Vultures” is the recent term some folks are applying to those who invest in distressed assets. I’d be inclined to consider this sour grapes on the part of those unable or unwilling to seek out long-term profit opportunities in the midst of a financial crisis.
It’s fitting that, in Texas, a state famed for it’s larger than life gestures, there have been several investors (who prefer the more flattering moniker of “opportunity funds”) moving in to grab failing assets like mortgage-backed securities and real estate accounts for a pittance, with the intention of holding onto them until their prices increase again.
This certainly isn’t an easy process, but it’s worth it. In the words of Craig Hall, a Dallas-based real estate developer who has joined another broker to purchase distressed realty accounts: “It’s a lot of risk-taking and a lot of work…We’re going to see one of the greatest transfers of wealth in our lifetime.”
The transfer he refers to is that of vulnerable property owners, banks, and other financial institutions eager to sell their distressed accounts for pennies on the dollar.
Many analysts feel that the U.S. housing prices can fall even further, which will continue to drive down the price of distressed real estate assets. Furthermore, there’s no way the U.S. government can purchase all these accounts and other debts, which creates substantial opportunities for New Vultures/opportunity funds. And it won’t just be the housing markets that have distressed accounts for sale.
Investors such as Hall and Texan developer Fehmi Karahan perceive credits cards, car loans, office buildings, undeveloped land, and other areas as potential sources of distressed asset purchases. Says Karahan, who created a fund to purchase distressed real estate, “Everything that’s being talked about is related to subprime and mortgages, but there are a lot of commercial projects that in my mind are the ’subprime’ of that industry. You may see another wave of things that shouldn’t have been built and are leveraged too thin hit the marketplace in the next two to three years.”
What this all adds up to is investment opportunity. And while you don’t have to live in Texas or wear a ten gallon to take advantage of it, you do have to “man up” and put your money to work.
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