U.S banks have begun reporting their REO and non-performing loan numbers for Q3 2013. So where are the sweet-spots for distressed property and debt investors, who is holding the bargains, and what new trends hold the most significant risk or returns?
Florida is frequently heralded as the epicenter of the new housing rebound. Yet, while the Brickell financial district and Miami Beach boast an array of shiny new sky scraping condo projects, there is still certainly a dark underbelly plump with distressed property for the picking.
While national foreclosures dipped a reported 34% year over year in August, and Florida was bumped from the number one spot by Nevada again, according to the RealtyTrac “U.S. Foreclosure Market Report,” and 24/7 Wall Street, there are still deals to be found. After all Florida is still home to six of the top ten metropolitan areas with the highest foreclosure rates. On September 29, 2013, the Miami Herald quoted Zillow saying that more than 30% of South Florida homes were still underwater.
The latest round of distressed asset data from U.S. banks shows a significant shift in the stages of default various property and loan types are in, as well as the types of loans that make up the largest percentages of the pool.
At the same time several evolving situations and trends are highlighting unique opportunities for acquiring and profiting from buying non-performing loan notes and REO from American banks.
Here’s the breakdown….
Q3 Florida Bank REO & Non-Performing Loan Reports
While the numbers are only just starting to come in for the 3rd quarter 2013, billions of dollars in non-performing loans and REOs are still being held by Florida banks.
The Top 10 Florida Banks with Distressed Assets (ranked by total assets) are:
- Bank United
- Raymond James Bank
- Mercantil Commerce Trust Company
- Capital Bank
- City National Bank
- Sabadell United Bank
- Florida Community Banks
- Ocean Bank
For the period ending June 30, 2013, 206 Florida banks reported over $1.34 billion in REOs. Of course, this number is dwarfed by the dollar volume of non-performing loans coming down the pipe directly behind them.
As of the end of the second quarter, and despite all of the new building going on, almost half of all REOs in the state were construction REOs. At this point the bulk of non-performing commercial and construction loans were already in the last stages of foreclosure or had become REOs. In contrast, only a tiny number of residential loans had become REOs, while the vast majority were first time defaults in the early stages of default.
Figures coming in for the third quarter show this becoming more balanced as loans move through the foreclosure process. Brannen Bank alone shows a large percentage of distressed residential loans with little reduction in inventory since last December.
Florida’s Diverse Real Estate Landscape
While it may be virtually all sun, sand, and palm trees to most, Florida’s real estate market is actually incredibly diverse. For investors willing to do their homework and think outside of the box a little, many attractive deals can be be found in buying notes and REO from banks.
Most automatically associate Florida with the eclectic party scene of South Florida, luxurious golf of the Palm Beaches, or perhaps Mickey Mouse and the Disney resorts in Orlando. Yet, this is just the tip of the iceberg.
Starting in the panhandle there is the secret luxury haven of Destin with its private high-end beach rentals and second homes. Moving down to Tampa, which was bought into big time by foreign investors during the last boom, and where there are over 7,000 homeless deemed to be breaking the law by authorities. Across the state is the often forgotten hub of Jacksonville, where RealtyTrac reports some of the highest average profit spreads for investors flipping houses. In the southwest, Naples stands as one of the wealthiest communities in the world.
While these areas have seen home prices and sales activity rebound, distressed sales still make up an average of a third of transactions in many counties according to the Sun-Sentinel.
With the $350 million state mortgage aid Florida HHF (Hardest Hit Fund) now tapped out, it’s pretty much down to investors and investment groups to scoop up distressed debt and non-performing bank assets to bail out homeowners and recycle the landscape.
However, those that invest in both residential and commercial properties in the state now stand to win big, especially with the Panama Canal widening expected to be completed by 2015, and the huge surge in commerce it will bring.
3 classes of opportunity to watch for in Florida right now include:
1. The East Coast “Facebookville”
News of Facebook’s new dive into real estate with a planned 400 unit residential complex echoes a Florida trend that has been re-emerging since the end of last year. This is a resurgence in the live-work trend. This was hot in the Sunshine state in areas like Wilton Manors and downtown Fort Lauderdale at the end of the last boom. Now it’s back on with new urban burbs popping up in Doral and hopes for some in southwest Florida.
2. Government Shutdown
No matter how short lived, the fallout of the recent government shutdown is likely to result in new mortgage defaults, others getting further into the hole, and some shallow pocketed buy and hold investors feeling the pinch in their cash flow. This will create new distressed opportunities for several months.
3. Big Discounts on Big Ticket Properties
Perfectly timed with the start of the #HouseofVersace series on the Lifetime channel, The Donald just got Trumped out of the foreclosure auction of the Versace Mansion in South Beach for just $40M, or a third of its previous list price.
There are plenty more of these types of substantial bargains to be found for those ready to step up.
The Key to Cashing in on Distressed FL Like the Nakash Family
Hotel Victor owners, the Nakash family were the ones to scoop up the Versace deal. For those eager to replicate these types of huge money deals or even to swoop in to capitalize on construction REO opportunities it is all about data on non-performing loans and REO for sale and contacts.
Savvy investors get connected with BankProspector.