Vulture Investors Swarm To Houston As Flooded Homes Sell For 40 Cents On The Dollar

Tyler Durden's picture

      "The time to buy is when after there's blood water in the streets."

As 1,000's of families along the Texas shoreline continue to struggle with putting their lives back together following the apocalyptic landfall of Hurricane Harvey roughly 6 weeks ago, vulture investors are increasingly swooping in to exploit their misery with offers to buy flooded homes for cents on the dollar.  As Bloomberg points out this morning, one such investor is Bryan Schild who has sourced capital from local "hard-money lenders" to scoop up 30 flooded homes for as little as 40 cents on the dollar.

Bryan Schild drives through the byways of Houston looking for what could be the investment opportunity of a lifetime: homes selling for as little as 40¢ on the dollar. “We Pay Cash For Flooded Homes $$$$$$$$ Don’t fix it, sell it. Quick close,” read the signs piled in the back seat of his Ford pickup.

 

Schild stops by a ranch-style house where 74-year-old Paul Matlock lives with his wife, disabled from multiple sclerosis. Matlock is desperate to leave and is considering Schild’s offer of $120,000—half the home’s value three weeks earlier. A half-dozen other investors have made offers, one as low as $55,000. “The whole thing makes me feel like there’s a bunch of vultures sitting on my back fence,” Matlock says. “They’re waiting for the dead body to fall over.”

 

It’s axiomatic on Wall Street that the time to buy is when fear overtakes greed—when blood (or, in this case, water) is in the streets. Now some are eyeing the billions of dollars in hurricane-ravaged property in Texas and Florida and deciding it may be the time to take out their checkbooks. Investors such as Schild figure they can buy low, either fix up and flip the houses or rent them out for several years, and unload them later, doubling their money or more.

And if exploiting the elderly isn't enough to make you a little queasy, how about taking advantage of a disabled Army vet who has been forced to live out of a hotel room and eat two meals a day just to save a little cash after he lost his home to Hurricane Harvey...

One of Schild’s prospects is Joseph Hernandez, a disabled U.S. Army veteran married to a housekeeper. The couple are living in a hotel and saving money by eating only two meals a day. Schild has made them a painful offer. If they walk away from their two-bedroom house, worth $127,000 before Hurricane Harvey, Schild will pick up the mortgage payments, paying nothing else. Although he says he sympathizes with the Hernandezes’ plight, he thinks the offer is fair because he figures the home is now worth less than its $65,000 mortgage.

 

Hernandez is in a bind. He didn’t buy flood insurance because his house wasn’t in a high-risk area. He can’t afford to rebuild, and he’s been told he’s eligible for only $23,000 in federal assistance. If he turns over the deed, he’s looking at losing the entire $60,000 in equity he had before the flood. “It’s blurry, what’s coming,” he says. “We’ll probably have to sell to an investor, and that’s not good. We were forced out.”

 

Hernandez isn’t ready to take Schild’s deal. But Matlock, who rescued his disabled wife from chest-high water, is tempted by the investor’s $120,000 offer. Their home, now stripped to the beams, has flooded twice in two years. Schild says Matlock should be able to recover much of his loss on the house’s value through federal flood insurance. (In past storms, homeowners have complained the program lowballed them.) Before he leaves, he asks Matlock to spread the word. “Anybody looking to sell, tell them to call me,” he says. “I’ll give them a bid.”

Houston 2

But, it's not just small-time, local investors looking to earn big profits from the misery of displaced Texans.  Nope, wall street investors, led by Bain Capital, are also getting involved.

The cycle begins with small-time investors such as Schild, who’s bought more than 30 waterlogged houses for an average $175,000 apiece. Then Wall Street swoops in. Gary Beasley, former chief executive officer of Waypoint Homes, also sees an opportunity. He’s pitching private equity firms and pension funds on the potential profit in buying flooded homes, repairing them, and renting them back to homeowners.

 

Bain Capital LP and billionaire Marc Benioff, co-founder of Salesforce.com Inc., are backing Beasley’s two-year-old company, Roofstock Inc. It runs a website where investors can buy and sell single-family rental properties. Beasley thinks owner-occupants may be interested in selling there, too, and that flooded neighborhoods are the Next Big Thing. “It’s much like the housing crisis, when the institutional guys came in to buy homes nobody wanted,” he says. Like other investors, Beasley and Schild view themselves as helping homeowners to move on and Houston to rebuild.

Of course, as Andrea Heuson, a finance professor at the University of Miami, points out, most of the people selling aren't doing so because of a lack of financial sophistication that impairs their ability to comprehend the fact that they're getting shafted but rather just a complete lack of alternatives.

Others take a less rosy view. “What worries me is people making pretty dramatic decisions without the education to figure out what the alternatives are and without looking at the situation rationally,” says Andrea Heuson, a finance professor at the University of Miami who specializes in mortgages. Some of those considering Beasley’s strategy don’t want to be named for fear of looking like catastrophe profiteers, Beasley says.

 

Many homeowners would be forgiven for panicking. During hurricanes Harvey and Irma, wind and water damaged almost 1.8 million homes, causing uninsured flood losses of as much as $57 billion, according to CoreLogic Inc., a real estate data firm. Homeowners without federal flood insurance are most likely to be desperate. Those with policies don’t yet know how much they’ll get for their losses, which is key to deciding whether it makes sense to sell.

On the upside, these displaced families will be able to buy their homes back from Bain at double in the price in 5 years or so...

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
major major major major's picture

They are just providing more liquidity...

Rapunzal's picture

I remember at hurricane Katrina, the victims that had flood insurance got 50c on the dollar. All those big corporations gave the victims the same choice, take out half now or full payment in 2 years.
A lot victims got cheated out of their money, because they couldn't wait for 2 years.
But at the same time all big insurers ran ads on TV for months on end, showing for millions of dollars in ad costs how helpful they have been.

It's sad marketing trumps justice, you just have to sell it to the people.

nmewn's picture

The councilman with the cash in his freezer did ok ;-)

Rapunzal's picture

Lol, yes I remember this story ;) only trumped by the corrupt politician from California who made a list how much a bribe cost, he was already so old he would forget himself.

johngaltfla's picture

Sold to them. Apparently the morons never read what happened to the "investors" after the Great 1926 Miami Hurricane.

Juggernaut x2's picture

1926? Are you saying that hurricanes are a fairly common occurrence in FL? And people keep building there? And the rest of us taxpayers keep paying to fix it up down there? I'm shocked.

johngaltfla's picture

Shocking, eh? We are on par to have a population on par with TX and CA in ten years. I'll be long gone by then.

Chupacabra-322's picture

Disaster Capitalism at its finest.

Slack Jack's picture

Record-Setting Hurricanes; Record temperatures; Record-Setting Wildfires; ya think it might be global warming?

THE EVIDENCE OF GLOBAL WARMING IS OVERWHELMING.

So, why is the global rise in temperatures so worrisome?

For one thing, as temperatures rise good farmland will become desert (e.g., dust-bowl conditions will probably return to the American Midwest).

Another major problem is sea-level rise.

Have a look at http://pubs.usgs.gov/fs/fs2-00/

The U.S. Geological Survey people claim that;

The Greenland ice sheet melting will raise sea-level 6.55 meters (21.5 feet),
the West Antarctica ice sheet melting will raise sea-level 8.06 meters (26.4 feet),
the East Antarctica ice sheet melting will raise sea-level 64.8 meters (212.6 feet),
and all other ice melting will raise sea-level 0.91 meters (3 feet).

For a grand total of about 80 meters (263 feet).

So, what does an 80 meter (263 feet) rise in sea-level mean. Have a look at the following map of the world after an 80 meter rise. It means that over one billion people will have to be resettled to higher ground and that much of the most productive agricultural land will be under water. Fortunately, at current rates, the Greenland ice sheet will take over a thousand years to melt and the Antarctica ice sheet, much longer. However, the greater the temperature rise the faster the ice sheets will melt, bringing the problem much closer. Remember, the huge ice sheet that recently covered much of North America, almost completely melted in only 15,000 years (today, only the Greenland ice sheet, and some other small patches of it, remain). Since then (15,000 years ago), sea-levels have risen about 125 meters (410 feet), only 80 meters to go.

The ice sheets have been continuously melting for thousands of years. What is left of them today, is still melting, and will continue to melt. Human caused global warning will cause this remnant to melt significantly faster. This is a big, big, problem.

For HUGE detailed maps of the "World after the Melt" go to:

http://preearth.net/phpBB3/viewtopic.php?f=16&t=23

Global temperatures are increasing. And by quite a lot each year.

2016 is the hottest year on record for global temperatures.

This is 0.0380 degrees centigrade hotter than the previous record year which was 2015.

0.0380 is a large increase in just one year.

2015 was the hottest year (at that time) for global temperatures.

This was 0.1601 degrees hotter than the previous record year which was 2014.

0.1601 is an absolutely huge increase in just one year (at this rate temperatures would increase by 16 degrees in a century).

2014 was the hottest year (at that time) for global temperatures.

This was 0.0402 degrees hotter than the previous record year which was 2010.

http://preearth.net/images/temp-anomalies-1880-2017.txt

The conspiracy to hide global warming data.

The National Oceanic and Atmospheric Administration (NOAA) is given tax money to make global temperature records available to the public. However, certain people at NOAA continually sabotage this aspect of NOAA's mandate. For example, these people have (deliberately) sabotaged the web-page that delivers the temperature records.

Look for yourself:

Go to the page: https://www.ncdc.noaa.gov/monitoring-references/faq/anomalies.php scroll down to the The Global Anomalies and Index Data section and click the download button and see what happens. Well, you get the message:

"Not Found. The requested URL /monitoring-references/faq/anomalies-download was not found on this server."

I guess that the 2017 data must be truly horrible if they have to hide it away.

http://preearth.net/phpBB3/viewtopic.php?f=16&t=23

johngaltfla's picture

Hey dumbfuck global warming commie moron sucker, how do you explain the NOAA report?

You know, the one showing an increase in Arctic ice, Antarctic ice, and the sea levels falling for 2 years?

tmosley's picture

They're evaporating! The seas are boiling!!! It's the end of the WORLD!!@!@!

AAAAAAAHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH

julian_n's picture

Only today I read of a massive problem for penguins caused by excessive ice this year - http://www.telegraph.co.uk/news/2017/10/13/just-two-penguin-chicks-colon...

Perhaps the penguins have been listening to too much of this BS and built their nests too far from the water's edge?.

D.T.Barnum's picture

I'm pretty sure saw that famous scientist Michio Kaku say the CIA made typhoons hit the Vietcong.  Weather control is potentially profitable, apparently.

I think this is the one: https://www.youtube.com/watch?v=viMH3K2xmpI&t=330s

 

Wait What's picture

"Weather modification will be a force multiplier by 2025." Silver Iodide, Operation Popeye, WC-130, SpaceX, Elon Musk, they're all a part of it. Don't be suprised when it's revealed weather can be modified for political purposes.

Juggernaut x2's picture

State Farm got kicked out of FL after the 2005 hurricanes because of all the crap they pulled.

johngaltfla's picture

"crap" is an understatement.

Fraud is more accurate.

squattingdog's picture

State Farm and many others, what they pulled is CRIMINAL in my opinion. I remember it very well. I went to work for CITIZENS as a programmer while I was in Engineering school and I was shocked when I realized we were created by the state of Florida because of the actions these “Reputable” insurance companies had taken. I laugh when I read some of the comments from people who think that in situations like Houston the insurance companies will play by the rules, SUCKERS!!!

Endgame Napoleon's picture

When we had a flood here, I was working in an insurance agency, where I heard many awful stories, including a couple who had just finished paying off a modest home. The husband let the wife renovate it to make it like she always wanted it to be, and it was ruined by the flood. They still owed all that money on the renovation. Sad.

As bad as private insurance can be, FEMA’s flood insurance is worse, covering only part of renovations in many cases. The agents have no control over FEMA.

Surely, some veterans organization can help that veteran. What are the Wounded Warriors and all of those organizations for if not to help people like that?

Walt's picture

And the mortgages are underwater...

wisehiney's picture

Something tells me that the joke will be on the vultures this time.

Juggernaut x2's picture

you are right- because it's Houston

BarkingCat's picture

I would not give them half the value BEFORE the place was flooded.

Houston?  You want to invest in Huston? 

Are you fucking retarded? 

Déjà view's picture

Buyer...BEWARE !

http://abc13.com/home/plumbing-problems-wreak-havoc-on-houston-homes/869...

Clay soil results in a foundation of woes in Houston construction

https://www.bizjournals.com/houston/stories/2002/04/29/focus5.html

Texas, Louisiana Improve Building Code Rankings; More Work Needed

In the 2015 report, Texas landed fourth from the bottom of the IBHS ranking, scoring a 36 on a 100-point scale, where 100 is the highest and best score. Nearby Louisiana came in just above the middle — at number eight — with a score of 82. Both Texas and Louisiana have improved their rankings since 2012, however, when Texas had a score of 18 and Louisiana’s score was 73.

http://www.insurancejournal.com/news/southcentral/2015/04/14/364255.htm

aloha_snakbar's picture

Is the black, brain eating mold extra ?

nmewn's picture

No its absolutely...Faaarrreee! ;-)

813kml's picture

These people just need a good real estate agent that can market the recently installed indoor pools.

nmewn's picture

Well one things for sure, Millennials won't be hired any remodeling ;-) 

wisehiney's picture

Out of square, out of level, out of plumb and especially out of mind.

Justin Case's picture

They're still in the basement, waterlogged.

nmewn's picture

Thats an indoor pool with fast food wrapper floaties! ;-)

Juggernaut x2's picture

They're not dumb enough to do ball-busting work for $9-an-hour like the Mexicans

Got The Wrong No's picture

Not as long as they can sponge off of their dumb ass Parents who spoiled them. You know, the people who are responsible for them not having a job. 

 

Endgame Napoleon's picture

Assertions about millennial do-it-yourselfers aside, they will not be hired due to the ample supply of welfare-aided illegal aliens, although they should be using the rebuilding to train millennial citizens to do construction work. If they gave a **** about the future of the country, that is what they would be doing, rather than vulture capitalism.

tmosley's picture

> vulture investors are increasingly swooping in to exploit their misery with offers to buy flooded homes for cents on the dollar

Commie Tyler needs a helicopter ride.

People who can't afford to fix their homes need money to start over somewhere else. You want to force them to stay and fix those homes with money they don't have? Or just abandon them to rot? Or are you just upset that they aren't selling their fucked up flooded homes for the price of a nice, unflooded home?

Christ Almighty.

DisorderlyConduct's picture

I know, right? Vultures? Huh?

I suppose they should pay people what was market before the houses were completely screwed up?

I like how Hernandez isn't taking the offer - like that's some sort of moral victory or something. Hey, you own a house that's been flooded and you didn't buy insurance. If you do want out, these people are saviors! Moreover there's a lot of them so there's competition. It's not like they only get one offer - like when govt gives the one and only offer.

Isn't that a good thing..?

Cardinal Fang's picture

Um, vultures, yeah. They are not coming down and offering some sort of bridge loan or whatever to help these people rebuild.

Not that I think the vultures should offer, or that the homeowners should rebuild.

It's just that a vulture is a vulture.

I knew a company that specialized in buying assets of failed companies.

They actually called the company Condor.

Condors are just proud vultures.

Know what I mean?

DerdyBulls's picture

Vultures keep the shit out of the environment. I'm okay with that.

tmosley's picture

>They are not coming down and offering some sort of bridge loan or whatever to help these people rebuild.

No, they are buying property for what it is worth.

If you go to a restaurant and buy a five dollar slice of pie, and someone comes along and takes a shit on the plate, would you still eat it? Pretty much what you are saying these people should do.

I'd also rather not see a bunch of productive capital sitting around gathering dust when it could be put to work making the world a better place. That company of yours is good.

DisorderlyConduct's picture

Offering a bridge loan on that kind of property is way risky. So you're OK with it if they were offering bridge loans at say - I dunno - 15% interest?

Because what's fair is what the market will bear. All the rest is just a bunch of words.

DerdyBulls's picture

Totally agree. This article is laced with emotional manipulation and irrationality. No one is picking on poor and disabled people. These people are SOL to the max. Stuck. The cash helps them move on. The risk of buying a flood home is significant. A lot of unknowns. Let the egalitarians on this site put their money where their mouth is and go pay full price for the homes. Any takers? Hell no. Shut your effing mouths. This site is getting shitier by the day. 

Wait What's picture

ZH has always been little more than doom porn and click-bait. It's what monetization begets on every site on the the web. Sorry to break the news to you but Santa Claus doesn't exist, and ZH is just another infotainment site, so don't get your panties in a bunch over what you read.

JohnG's picture

Not always.  There used to be actionable information, and the comments were a gold mine.

All the good ones are mostly gone or lurking.

WallStreetPro and Cheeky Bastard were just fucking hilarious.

Then there was robotarder who just got sick of people who don't understand that you trade the goddamn tape no matter what you think.......

Endgame Napoleon's picture

Well, in some cases, you are right. The article pointed out that for one guy it was a good solution. Maybe, he has a paid-for home. For the other guy, it does not sound like such a great thing.

aloha_snakbar's picture

"Hell is other people"

Jean-Paul Sartre

CRM114's picture

Well, he did say that, but then he was an insecure neurotic, so maybe not the best principle to live by.

Actually, find me a philosopher who wasn't f#cked up. 

buzzardsluck's picture

Am I the only one who could live very happily on 5 millionish dollars (30 homes x 175000) without ever having to work a job again?

Father ¢hristmas's picture

SHUT THE FUCK UP, TYLER!  DAMN!

BULLIIIIIIIIIIIIIIIIIISH!!!!

DerdyBulls's picture

2 in 10 articles posted here are worth reading, soon to be 1 in 10. Not the ZH I used to know, or the predominant crowd. Oh, and the SERVER SUCKS AS MUCH AS THE AD TRAFFIC.

covfefe MICdotard's picture

Bain Capital & Marc Benioff

https://en.wikipedia.org/wiki/Marc_Benioff

 

Anyway ~ Sounds like a modern day Marcus Lucinius Crassus story