Mortgage meltdown vs. purchasing apartments

If you have the cash to buy and the time to manage, by all means, and look for foreclosed apartment buildings. Become friendly with your local bank or mortgage company and get information on potential foreclosures.

Have you owned and managed apartment buildings?

What I have seen so far is that most of these loans were made with little or no money down. The result is that the owners have no equity in the property. That means that they cannot drop the price because they don't have equity or cash to pay the difference at closing. The net-net is that they sit on the high price until the bank takes it away. Even then, I have not seen the banks cutting deals to get rid of property. They also seem to be willing to sit on property right now. Perhaps they are willing to ride it out.

-john-

The banks have the same problem as the hedge funds. Once they sell, the rest of their properties get marked to market. Repricing their REO holdings then could push them into a margin call where they have to sell even more holdings. Quite the vicious loop.

The banks have every reason to ride it out, they know that if they are short on cash, the government will throw some cheap money their way.

Yes it's a vicious loop. In order to get growth, you have to create greater and greater debt. Thumper

So, John, in your words, the deep discount prices on such apartments have not yet arrived.

The only place that I have seen deep discounts on apartments or condos are places where the developer has gone bankrupt. There are a few projects like that here in the Twin Cities that are offering $100K off of the original list price. Given that these units are still selling slowly, the discount price may still be at or above market value.

-john-