Note: To follow is an excerpt of an interview with Alethea Cox, loan specialist, Kingston Management Services, an FDIC qualified bidder and Michael Anderson, Founder and Co-owner of RealSource, who’s company has a track record of placing thousands of investor/clients in the right properties in the right markets at the right time. To listen to the show archive or download an MP3, go to www.IncomePropertyInvestmentTalk.com/071509.

Mosca: There is a real opportunity right now to make money in real estate and on today’s show we will focus on an investment opportunity of a lifetime: FDIC distressed assets. These assets are worth more than the current market conditions assigned to them and, over time, could be, may be, will be significant profit generators. The good news is unlike in the past days perhaps of the RTC and S&L, you, as entrepreneurial real estate investors, have access to these unique deals via a “Virtual Deal Room,” an online portal for asset acquisition, market data and relationship building (click “Best of Times” box on upper left hand corner of our Web page at http://www.IncomePropertyInvestmentTalk.com). That said, I believe it the first step in building a solid FDIC Strategy is for investors to develop relationships with professionals that have the expertise with FDIC assets and all of the steps necessary to be successful. Can you tell our audience about Kingston Companies and your experiences with the FDIC?

Cox: As you can imagine, it’s a competitive world and you have to be able to show value quickly and capture and harness down portfolios. It’s not always the largest bid. At times it is the strongest strategy, the one that’s going to benefit the many variables in place such as the FDIC, the local communities and individuals that will be able to take those properties to the end consumer.

Mosca: Mike, we’ve all heard the phrase, “history repeats itself.” Back in the ‘80s with the Resolution Trust Corporation and the ‘90s with the S&Ls, there were opportunities similar to the opportunities that exist today but mainly they were available only to the “connected.” Today, that has changed. Can you tell us your past experiences helping entrepreneurial real estate investors get their hands on these types of opportunities and how your company’s expertise in connection with the Kingston Company is going to help the entrepreneurial investor of today?

Anderson: When the Resolution Trust Company was formed to start liquidating the assets of the S&Ls, they were bundled into very, very large packages and primarily sold to large institutional investors who in turn would break those packages down and sell them to intermediate investment firms who in turn would break it down again. Each one of these layers was taking a profit and disposition off of these progressively smaller packages until an entrepreneurial investor would get a single property that had been marked up substantially. RealSource was engaged in that whole process and found properties that represented a tremendous value to the individual buyer even thought they had gone through a lot of hands, each of which had made a profit on those assets. Today, the FDIC seems to be more interested in getting this to the end buyer as quickly and directly as possible. In the case of the loan portfolio that the Kingston’s bought, those properties are being sold direct. Kingston bought the package and they are offering it directly to the end user. That represents an opportunity to buy with a much better discount than what was available back in the late 80s and early 90s.

Cox: When we purchased the loans portfolio, we are working on behalf of the FDIC to help recuperate some of the funds that have been loaned out and we are also, in part, working with borrowers to who have found themselves in different situations. Some of those individuals have workable solutions and some of those individuals don’t. What we do is take the objective of getting that higher return back and working on behalf of the FDIC but working with the borrowers and the public and then also getting those properties moved on to end consumers or working with the borrower to get them into more of a win-win situation. When we talk about value, we are talking about value from the standpoint of trying to find a synergistic solution for all that are involved. We don’t want neighborhoods out there in America or partial developments that are devaluing current residential markets or commercial real estate sitting as a sore thumb in a beautiful sector town. What we do is get that property moved as quickly as possible.

Mosca: And the types of inventory that are available Alethea, is it a variety of different things?

Cox: As you can imagine, we have several varying types of classes, everything from commercial to raw lands to residential partially built. We even have gravel pits. We are a variety of stages of the workout. We've got anything from a note purchase to short sale auctions to REO properties.The states that we primarily are in right now are Arkansas, Utah, Idaho, Wyoming, Nevada, with some in Florida, Kansas City, and Mississippi.

Anderson: The package covers a broad spectrum. The thing that I liked about their package and we’ve looked at a lot of FDIC assets, is that the properties are in phenomenal locations. These are highly desirable locations and prior to the downturn in the state, relatively attractive throughout and are now starting to see some upturn in a number of these areas. Like I said, at RealSource we look at a lot of different packages. What is so attractive about the ANB package that Kingston Management Services has is their locations were so prime prior to the market downturn. One of those is the Teton Valley area of Idaho, which exploded the first part of the decade and it has never looked back. The process of sales slowdown in the slower economy has not really had the effect in Tetonia and some of these areas as it has in others, just because it was not really driven by the jobs, it was driven by the desirability of its location. Another example would be St. George, Utah, where they have just wonderful scenery, climate and lifestyles. The great thing about the opportunities in this package is that the prices have been rolled back to the point where they have reached maximum levels of affordability, especially when you consider the low cost of financing right now. For me this is kind of an opportunity that you probably will never see in these areas again. The chances to buy because of the principles of scarcity and location, the chances of buying again in Tetonia or in the Teton Valley area or St. George, you will never see those again. The market is already starting to show upturns. I was just reading on a blog from Idaho Falls from a real estate agent and they were talking about there has already been an 11% increase in sales this summer from the previous year. So, if you are looking to be an absolute bottom buyer, you probably have missed that opportunity in some of these really highly desirable areas Kingston Management Services are servicing. If you’re looking for a retirement property, a great place for a second home or a great investment, you want something that’s going to stay rented, and these are the areas that you want to be looking at.

Alethea: One of the fun things that Mike mentioned that speaks very well of this loan portfolio and the opportunity that would be available directly to the public is the word lifestyle. What is more attractive than being able to go out in a climate that is conducive for the recreation that the landscape provides? These areas, if you were to search them out, are very highly sought after. They will come back. They are affordable now and each one of these areas has economic development strategies within those communities to help get them flourishing. They were not hit hard as what we have seen in other areas, so we have been fortunate enough to be able to pick up large volumes of properties in these areas, everything from single families to multi-units, to commercial grounds. I am very confident that a buyer getting into a property in these areas will greatly benefit in the future for themselves. We’ve got a lot of properties in our loan portfolio that could be advantageous for many individuals with all different kinds of lifestyle hopes and business adventures they want to incorporate.

Anderson: Investors can buy, come and cherry pick the package. There is nothing withheld on the Virtual Deal Room. Come pick out the thing that fits you the most. There is everything on there. There are offices, office space, and hotels, there are homes in these highly desirable areas and if you are only interested in one specific kind of asset in a specific kind of location, you can buy just that one asset. If you want to buy a performing note, they’ve got performing notes. If you want to buy a non-performing note and take it to the foreclosure process, that’s available. As a matter of fact, you can even get some help in taking the properties through foreclosure. It's kind of one-stop shopping. Everything that you need is right there to make these transactions happen. Come and get exactly what you’re looking for.

Cox: We have short sales as well. When we talk about why we are awarded the loan portfolios and what our strategy is it is not to incorporate a lot of red tape, it’s to do what’s essentially necessary to protect all parties involved but also to have it as quickly and swiftly a clean process for the transaction in transition and those properties. So, if you are ready to make an offer, you will work directly with a loan specialist one-on-one. There will be some requirements but the process is filtered. If you have everything in line ready to make a purchase and can verify that you have access to the funds that you are committing to and show your own due diligence to us, then what we can do is give you an approval almost essentially on-site.

Part Two of this conversation will appear next week.