Billion-dollar private-equity firms have become the big bully in the distressed property market, but savvy real estate investors aren’t sweating it at all.
Cash-rich, heavyweight private equity firms may be taking foreclosure auctions by storm and putting the fast and furious in the bidding, which may be frustrating for some, but it doesn’t mean that they aren’t overpaying or smaller players need to worry about being run out of the business. Foreclosure auctions haven’t been a main source of acquisitions for most investors for quite some time. Even those who have dominated them in the past are finding other, easier and more profitable ways to grab REOs and pre-foreclosures.
Non-performing loans offer one of these great opportunities for forward-thinking investors. Acquiring distressed properties by way of scooping them up as non-performing loans means beating private equity to the punch, scraping the best deals even before the competition sees them coming, less competition, and more time for due diligence in order to make better investment picks.
Smaller investors can tap into non-performing loans to cherry pick select deals and properties or they can use this as a streamlined strategy to pick up more volume on a consistent basis. The beautiful thing about this is that it can be done without the ongoing marketing costs or employing expensive teams on the street that come with hitting auctions on a large scale or trying to reach and convert distressed homeowners directly.
Non-performing mortgage loans also offer far more flexibility and more exit strategies than the taking on of distressed REOs. You can keep them for income, flip the note without the hassle or cost of rehabbing and closings. Or at least get lead time without holding costs or liability and then flip them.