As I was driving back to the office from a showing this afternoon I heard this story on NPR’s All Things Considered:
Here’s the gist of the story: an investor in Miami bought 19 bank-owned condos from the bank at 1:25 p.m. on March 5 for $1.25 million. At 1:45 p.m. the same day that same investor sold all 19 condos to another investor for $1.45 million. $200,000 profit in 20 minutes. Nice work, if you can get it.
“There are opportunities where investors who have inside information and/or are well-connected can get their hands on these properties. And if they can line up a buyer there are fantastic profits to be made,” said Peter Zalewski, principal of Miami’s condovultures.com.
The story actually made me reminiscent of the Phoenix real estate market circa 2004-06. In the outskirts of Phoenix, especially, investors (many from California) were buying new homes in bulk, sometimes to rent for a short while, sometimes to turn around and re-sell to individual homeowners right away. And they were making boatloads. Prices were increasing so fast that new home builders stopped advertising prices – sometimes a home would become $10,000 more expensive every month.
Today, the Miami condo story is playing out in the Phoenix and Scottsdale bank-owned condos market, too. Not that I’ve seen a $200,000 profit in 20 minutes, but there are incredible deals to be had. I recently listed a Scottsdale bank-owned luxury condo at 32nd St. and Camelback for $100,000. Wow.
So what does this mean for you as a prospective buyer of Phoenix or Scottsdale condos? It means that there are incredible deals to be had. But to get them you need, as Zalewski pointed out:
1. To be well-connected. Banks don’t market bank-owned Scottsdale condos directly to prospective buyers. They use real estate agents, like me, to do it. So you don’t have to “know a guy who knows a guy who once met a guy” but you do need to hook up with a Scottsdale real estate agent who’s in with the banks.
2. To connect with buyers. The great thing about working with an agent at the #1 ranked real estate agency in Arizona (that’s Keller Williams Arizona Realty) is that you’ll immediately be connected to hundreds (or thousands) of potential buyers for your property, if you’re planning to flip it, or renters if you’re planning to rent it out for passive income.
The term “condo arbitrage” sounds dirty – and maybe even illegal. I prefer to think of it as making some money on Phoenix or Scottsdale condos.
What do you think?
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