Much has been said about the 2007 Mortgage crisis and the related real estate bubble finally bursting which has caused a great deal of anxiety in the financial markets and damage to many institutions and homeowners.

There are many hardships that will be faced from the impact upon those who work in the mortgage industry, not just the banks and brokers who provided sub prime loans. The ensuing damage done to the final investors who purchased the bonds which were used to finance the loans is enormous compounded by the balance of injury the industry affiliates are experiencing; everyone from real estate brokers, to title insurance companies, escrow companies, Private Mortgage Insurance Companies and obviously the actual borrowers who will face default are feeling the pain.

Whose fault was it? The answers are not simple and nobody is faultless. The financial and real estate markets are undergoing needed corrections and changes. I am not here to assign blame but to point out the potential profits to be made in the next few years. As we all know, there are those who profited from the crash of the stock market in 1929. They were few and far between, but they existed. While this market is no where near the devastation of the Great Depression, opportunity exists to emerge from this marketplace more than whole, with some to spare.

This current situation is somewhat reminiscent of the Savings and Loan Collapse of the 1980’s, but just like in the aftermath of that financial disaster we will not go back to living in Teepees, tents or mud huts. Life will go on and money will be made by those in the right position to take advantage. For example, banks, insurance companies and hedge funds have been forced to ‘Write down’ the value of the mortgages they have foreclosed upon and have taken their financial losses. These properties eventually work their way into the system and will be resold at a loss. Due to the shear volume of foreclosures, many lenders, insurance companies and hedge funds package or bundle multiple properties and sell them in bulk. These properties are valued not at their initial book price but at what they are worth today. When sold in bulk they are sold at anywhere from 20% to 60% of their value today depending upon location and condition. Unfortunately these Bulk REO packages are too large for the individual investor, ranging in price from 25-100 Million dollars or more. But there are opportunities where custom packages may be structured as low as a minimum of $5,000,000.

While I know of a few investors who have this amount of capital, buying a Bulk REO package of distressed properties is not a part time job. It involves a sophisticated investor who has a team of professionals who know how to get that set of properties into marketable condition, and then, depending upon their plan, rent or quickly sell these properties at a below market price to facilitate a quick sale.

Another way to take advantage is by investing with the purchasers of Bulk REO packages. Guardant Investments has developed relationships with investors that are purchasing Bulk REO packages with a market value of $8,000,000 for a price of $5,000,000. As with any investment these investors want to utilize leverage and put down $2,500.000 to $3,000,000 and are seeking a loan for the balance. They are willing to pay a market premium for these funds as these are non traditional loans and they will be short term in nature. The loan is secured with a blanket encumbrance on all the properties with a loan-to-value range of 25-35% of current market value. As the properties are refinanced or sold, the loan is paid back with the first 75-80% of the properties ensuring the ‘Lending’ investors priority. Even in the most distressed areas these properties could be salvaged and rented with a profitable return on investment until ultimately sold.

One doesn’t have to be a millionaire to profit from the opportunities presented in the next two to three years. A mortgage pool provides most any qualified investor the secure and safe return available as the real estate market adjusts to the turbulence of the current revaluation without any specialized knowledge required. Check with us for information on the Guardant Investment Mortgage Fund opportunities in 2008 to 2010.

Keith Webb
CEO