In search of "distressed" homes
Banks are trying to get rid of foreclosures, but California-based Redwood Real Estate Partners wants to buy them -- along with homes nearing foreclosure. It said today that it's started an investment fund to get $500 million in distressed properties.
The company expects to focus a lot of its attention on the western U.S. -- not surprising, since there are a lot of foreclosures in California and nearby states. But it told me that Maryland is on its list of "targeted states" for acquisitions.
This move is a change for Redwood, which invests in commercial real estate. Here's the plan, according to its website: "Purchase bulk portfolios of residential REOs and late stage defaulted whole loans through direct relationships with mortgage banks and financial institutions."
The company wants individual homes and buildings with up to four residences, valued between $100,000 and $900,000, with no more than "light rehab" needed.
And it intends to quickly resell -- "at discounted retail levels priced lower than competing distressed inventory." It thinks it can do so because it's expecting to get the properties at a "significant" discount from lenders who see a benefit to getting a bunch of homes off their books -- in return for cash -- in one fell swoop. That $500 million in distressed properties it wants? It's expecting to pay $300 million to $350 million for them.
If Redwood succeeds, this could mean new opportunities for buyers. And new challenges for traditional sellers, the homeowners who just want to move.