Somebody is still finding a way to make money

Palm Coast Observer
Opinion

There is a big difference between real estate investors and speculators. Speculators tend to be trend driven, trying to jump aboard the latest gravy train. They are the real estate equivalent of day traders who fueled the .com bubble. Speculators were just as responsible for the real estate bubble as the politicians, Wall Street bankers, developers and the crooks who took advantage of lax oversight.

But there were real honest-to-goodness investors in the mix as well. They carefully evaluated each opportunity and executed a plan that promised a reasonable profit at minimal risk. They knew what they were doing when they went into the investment, and they knew how they were going to get out. Their decisions were based on something more rational than the “fool born every minute” strategy.

Though prices for Flagler County homes have only recently begun to show signs of upward pressure, there are folks who saw opportunities as early as 2010. I’ve been watching more than a handful of individuals and groups that are culling the foreclosure or short sale market. They identify opportunities and step into the foreclosure cycle where the lenders and others are unwilling to tread, finding diamonds in the rough.

There is risk. Buyers at foreclosure auctions and tax deed sales need to have a firm grasp of the legal pitfalls and do their homework before buying. They should search the title and view the property. I once witnessed a pair who thought they were bidding on a marina condominium. The property they bought was a boat slip.

Here’s the scorecard of just one investor. He lives in Palm Coast. Since late 2009, he has been involved in the purchase and/or sale of more than 20 Flagler County homes — all through Certificates of Title issued as a result of a foreclosure sale.

This investor is a Palm Coast resident. I’ve identified 17 homes he bought and resold since late 2009. The gross profit on these transactions is about $600,000. Each home sold for more than its acquisition price. Of course, transaction costs were associated with each transaction as well as likely refurbishing costs. But there were no gross losses. The smallest gross gain was $15,900; the largest was $53,000. He is an investor, not a speculator.

On the other side of the coin, the crooks are still taking advantage of lax oversight. Those who gamed the loose lending and appraisal guidelines during the bubble are now milking the distressed property market. More on that later.