Thursday, October 21, 2010

Government Owned Real Estate Selloff

Want to make a quick killing in real estate?  Here's a trick that actually does work.  But you will need a lot of cash and some good government connections to pull it off.  Both are doable, but tough.

The government at all levels is broke.  The Feds, the states, and even your local city and county needs cash to pay usually absurd levels of fixed operating expenses like salaries and pensions.

So now there is a huge selloff in government owned real estate.  Everything from parking garages to baseball fields to prisons to rivers and lakes.  If the government owns it, it is likely for sale.  The government is also picking up many properties through forced sales, foreclosures, tax sales, and other creditor proceedings.

Today some real estate investors just bought the Orange County (California) fairgrounds.  Check out the sweet deal they got.  Even some of the local pols realize how sweet it was and objected.  Read this excellent article from the O.C. on who these local investors are and how they put this deal together.  Fascinating stuff.  This is a truly spectacular piece of real estate.  Impossible to recreate at any price.  The map above shows how large this parcel is and how many separate cash flows it has all on a rather undeveloped piece of land.

Wherever you are, some government is likely selling or attempting to sell a piece of your neighborhood.

The deals will be excellent for shrewd investors.  The government is motivated, very very motivated, and needs cash fast.  The properties they hold are often local gems, irreplaceable.  And the financing offered including tax abatements, low interest loans, and other incentives are unique to dealing with a government entity.  No private party can waive taxes, for example.

There are many ways to play this trend, a subject I will address further in future articles.