The big banks remain some of the most bullish on brick and mortar real estate and mortgage debt investments. They continue to be highly active in this sector. What’s driving it? What does it mean for other investors?
Billion Dollar Bulls
America’s biggest banks are trading tens of billions of dollars of real estate assets. For those that thought COVID-19 might impact lenders hard, this certainly shows they aren’t backing down from the property market. If anything, this has given them even more opportunity to do more profitable deals.
According to coverage by Bloomberg, big institutions like Wells Fargo and US Bancorp are buying pools of mortgage loan notes of almost $20B at a time.
They appear to have found a sweet spot where they acquire real estate backed loans that haven’t received a payment in 90 days at substantial discounts. Each of these trades can be worth billions of dollars in profit to them.
Why So Bullish?
It is true that a lot has changed in the economy, daily life, and the property market in the past few months.
Some borrowers and tenants may be struggling to make payments. Yet, many companies and individuals are enjoying incredible growth in their incomes too.
Property prices seem to keep rising, demand is up in many areas, discounts are available on properties and debt. Those trading in this space are still making a lot of money in this environment, and even without a big post-COVID rebound, those who are most heavily invested in this space know that they have the ability to control the market and increase the value of their assets. You can even include giants like Amazon in this group. On the smallest level, selected well, individual investors have the ability to control the value and performance of these assets.
Ways To Participate
Of course, most investors do not have the capital to buy these pools of mortgage assets as they are traded by the billions. So, how do you participate in this action as a small fund or individual?
Your options may include:
- Private lending
- Partnerships and syndications
- Acquiring and repurposing out of date real estate, like offices, schools, and retail
The smart money still seems to be very bullish on this sector. In turn other investors should be too, and this action signals more deals coming down the pipe for smaller investors as well. How will you participate in these profits?
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