5 Ways Vultures Are Making Money in the Recession

Vultures have always had a place in the economy. From time immemorial, regular citizens have scraped by on scavenged goods. Being a vulture today may involve more connections and paperwork, but the basic premise is the same: Profit off something that’s floundering, dead, or simply unclaimed.

We’ve compiled a short list of the ways vultures are making a killing today, despite (or perhaps because of) the recession.

Vulture capitalists

When a company is close to dying, some people just won’t let it rest. These company flippers, or vulture capitalists, buy distressed companies, clean up their operations, and resell them for a handy profit. Some of these vultures lay off employees as a part of restructuring the company, earning them a questionable Main Street reputation.

Vulture funds


Image: mape s/Flickr

These hedge funds prefer to be known as distressed-debt funds, but the activity is the same. A developing country is about to write off its debt, or its bonds are losing a lot of value. A vulture fund buys the debt at pennies on the dollar (or whatever currency that country is running). Bondholders, afraid of losing their entire investment, sell their bonds to the vultures and make a cleaner break than they would have otherwise. Some vultures then either sign a legal agreement with the country to repay the full balance of its debt and interest, offer the vulture an ownership stake in some of the country’s industries, or some other such goody. Some vultures resort to suing the country for the value of its debt and interest. Needless to say, you need to be extraordinarily well-connected to pull off this kind of carrion-eating activity.

In most cases, the vultures get what they came for, and the country doesn’t default.

Vulture collectors

If anything has been plentiful during the financial crisis, it’s bad debt. For banks, debt turns into a liability after a certain period of no payment. In order to get that bad debt off their books, banks have been dumping it at a huge discount.

There’s so much bad debt that in-the-know Main Streeters have been getting in on the action. Organizations like the National Loan Exchange offer deals daily; people also frequent their local (smaller) banks for the stuff. They take out a loan, buy the debt, then figure out a way to collect on it. If they can collect on enough of the debt, then even after they pay off their loan and give the collection agency a chunk, there’s profit to be had.

Of course, the bigger your portfolio, the better. There are no guarantees in this game. But I’ve seen enough people do it—a la the controversial Bill Bartmann–that I can say something’s working.

Vulture real estate investors

If you’re Joe Schmoe looking for a rehab, the market might not be as easy as you think. This is because professional real estate investors are working hard to buy the deals before you do, smack on a new layer of paint, and sell it to you “turnkey” at a higher price. If a real estate investor can get her hands on a good foreclosure and flip it quickly, she can make a handy profit.

The key here is speed. Oftentimes, before Joe Homebuyer even sees a house, real estate vultures are at the auction block or calling homeowners who seem distressed to snap it up first.

Domain vultures


Image: coniferconifer/Flickr

Let’s say you finally registered that trademark for Wellbeing Widgets. Your widgets show promise in the market. You’re ready to hit the big time with a website.

Except that some other weasel already owns wellbeingwidgets.com. And widgets.com. And wellbeing-widgets.com, and so on. Said weasel isn’t doing anything with the domain, but is willing to sell it to you at a gouged price.

This happens all the time. When the economy improves, however, and people start registering more business names, it might especially hurt.

Your trademark, your name, variations on your name, and even misspellings of your website can be squatted upon. It’s illegal, but rarely enforced. A similar kind of under-the-bridge operation is the patent troll, who buys up a lot of patents with no intent of actually making them, then charges the companies who actually manufacture them a fortune for the patent.

  • Awesome information. Did not know anything about vulture capitalists. I think they are not posting free ads. Only the country suffers.

  • Ram Jaladi

    I always thought vulture capitalist as good guys in a way.. This is eye opener.

  • Goodwin

    There are some scum bags who prey on little old ladies and the mentally handicapped. But that’s not who you’re profiling here.

    “Professional” real estate investors are exactly that; “Professional”. They do this for a living (then pay taxes on those profits). They have the knowledge of the market, align the capital (to make quick purchases and repairs) and have the resources to quickly turn an eyesore into a valuable asset. They should make a profit from this.

    But you’re making this hard working knowledgable entreprenuar into a villian and poor Harry Homeowner (who doesn’t have any of the above knowledge, balls, or resources) a victim. Let’s be honest and note that poor Harry is only looking at these “deals” so HE can profit from it. Why is it ok for Harry to make a profit and not for the investor?

  • Vultures making money in todays economy is the reason why it is still moving forward. Even though you have painted a bad picture of them they are the reason we still have an economy. Remember that it was only a couple years ago when the financial world was going to collapse. In steps the vultures that bought up everything they could. Sure they laid off the majority of workers, but they kept the company going. They turned it around (cleaned it up). Streamlined its production and then sold it for a profit. Not a bad system if you ask me.

    If you want to know what the downfall of the economy is look toward the unions and those people who feel that they need more money in order to live on. When is enough actually going to be enough?

    Just my opinion.