Investment experts gave audience members a sneak peak at their strategies at Greenpearl’s Distressed Real Estate Summit today.
“There is so much opportunity out there, it’s staggering,” said investor Alan Schnurman at a panel discussion focusing on residential real estate.
The panel, moderated by Dirk Davis, the principal of Florida-based REO Solutions USA, was one of a day-long series of events attended by some 600 real estate professionals from all over the country, Greenpearl said.
Schnurman, an attorney at Zalman & Schnurman who has invested in properties in downtown Manhattan, Brooklyn and the Hamptons, said while in recent years investors were seeing cap rates of 4 and 5, he now expects deals to be had at cap rates of 8 and 9.
Moreover, he said he is seeing positive market signs after an extremely slow winter.
Schnurman owns eight developable lots near the ocean in Sagaponack, and he’s spent three years getting the approvals for them, finishing the process just as Lehman Brothers folded. After a winter in which he got “no calls,” two months ago he suddenly received five offers on the same lot within three days. Since then, he’s sold that lot and three others.
“Things have picked up,” he said. “There is a renewal of confidence in the market. I see it because I’m there everyday.”
On the other hand, the market for new condominiums is still suffering, with cap rates being kept down by Fannie Mae and Freddie Mac guidelines that don’t allow them to back loans in new condos that are less than 50 to 70 percent sold, said Scott Sherman, a senior acquisition associate at New York-based real estate investment and development firm Becker Brothers.
As a result, “unless it makes sense as a rental it’s not going to make sense for us,” Sherman said, adding that his company is looking at properties in Miami and recently took over a condo conversion in Annapolis, Md. Overall, however, he said, opportunities have been limited thus far.
“Right now we haven’t seen the shoe drop yet on the multi-family side,” he said.
Charles Kohout, founder of New Jersey-based real estate investment education company Applied Education, said lately he has been providing the transactional funding for short sales and pursuing buy-and-hold properties, and surprisingly — equity deals.
“Nobody is looking for equity deals,” he said. “People have convinced themselves they’re gone. [But] you can actually find them right now.”
Because of job losses and other factors, he said, owners are sometimes willing to walk away from properties worth as much as $200,000. What’s more difficult, he said, is finding a loan to buy the property.
To get around that, he’s said he’s been lining up both buyer and seller in advance and facilitating the transaction for them through a technique he calls “the absolute assignment of rights.”
After the conference, he said, he planned to stop in Rutherford, N.J., to pick up a check for $30,000 earned through such a deal, after putting in only a $10 binder deposit.
Frank Cimino, principal of Frank Cimino Enterprises, agreed that opportunities are out there.
“I follow municipal foreclosure sales and traditional foreclosures sales,” he said. “If you do your homework you can find those deals.”