With all the foreclosures and distressed property price declines, is this finally the time for investors to take the plunge in Florida?

Some sophisticated players appear to be saying, "yes, absolutely," provided you can acquire mortgage notes or real estate at wholesale prices as low as ten cents on the dollar.

That's right. It's not fifty cents on the dollar, not thirty cents on the dollar, but ten to twenty cents.

For example, Realty Times last week spoke with Larry Kestin, founding partner and managing principal of the New York equity firm, Glenmont Capital. Kestin recently completed acquisition of what he calls a "structured" package of residential real estate and mortgage paper in Vero Beach -- on Florida's Treasure Coast - for ten to twelve cents on the dollar.

Glenmont bought 45 houses, 138 developed lots and two major land assemblies on the water for about 8.8 million dollars, marked down from a valuation of one hundred million several years ago.

Kestin said he plans to sell the portfolio in phases during a multi-year holding and redevelopment period. Even if he sells to other investors at 35 cents on the dollar two years from now, Glenmont will still be tripling its money.

Kestin said the firm had been shopping the Florida market for well over a year, but only recently found the combination of unique location. "Vero Beach is a gem," he said, and a highly-motivated seller who had special needs that Glenmont could address through its deal structuring.

One of South Florida's best-known experts on so-called "vulture fund" investing, Jack McCabe of McCabe Research and Consulting in Deerfield Beach, says strategies like Glenmont's "can work - but you've got to be patient, you've got to do a lot of home work and understand the risks" and the potential for long holding periods that may not work out.

"The question is-how good are you at catching falling knives?" he asked.

McCabe said one vulture investor he knows specializes in well-located, finished building lots held by publicly-traded home building companies … and has purchased $100 million worth for about $12 million.

But McCabe is no Pollyanna about Florida vulture real estate.

He warns that there are perils all over the place, not the least of which is the possibility that Florida may no longer be the magnet for retirees and foreign buyers that it was during the boom.

The deals and potential profits are there, says McCabe. But so are the snares to catch the unwary.

Published: March 6, 2009

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consumer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.