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Real Estate Assets, Net
3 Months Ended
Mar. 31, 2019
Real Estate [Abstract]  
Real Estate Assets, Net
Real Estate Assets, Net

The Company acquires REO either through direct purchases of properties for its rental portfolio or through conversions of mortgage loans in its portfolio such as when a mortgage loan is foreclosed upon and the Company takes title to the property on the foreclosure date or the borrower surrenders the deed in lieu of foreclosure.

Rental Property

As of March 31, 2019, the Company owned 20 REO properties with an aggregate carrying value of $19.2 million held for investment as rentals, at which time 16 properties were rented. One property was acquired as an RPL but transitioned to foreclosure prior to boarding by the Servicer, one was acquired through foreclosure and nine were transferred from Property held-for-sale, where all nine were acquired through foreclosures. The remaining rental properties were directly purchased. As of December 31, 2018, the Company owned 21 REO properties with a carrying value of $17.6 million held for use as rentals, at which time 16 were rented. One property was acquired as an RPL but transitioned to foreclosure prior to boarding by the Servicer, one was acquired through foreclosures, and 12 were transferred from Property held-for-sale, where all 12 were acquired through foreclosures. The remaining rental properties were directly purchased.

Property Held-for-Sale

The Company classifies REO as held-for-sale if the REO is expected to be actively marketed for sale. As of March 31, 2019 and December 31, 2018, the Company’s net investments in REO held-for-sale were $18.6 million and $19.4 million, respectively, which include balances of $0.9 million and $2.2 million, respectively, for properties undergoing renovation or which are otherwise in the process of being brought to market. For the three months ended March 31, 2019 and 2018, all of the additions to REO held-for-sale were acquired through foreclosure or deed in lieu of foreclosure, and reclassified out of the mortgage loan portfolio.

The following table presents the activity in the Company’s carrying value of property held-for-sale for the three months ended March 31, 2019 and 2018 ($ in thousands):
 
 
Three months ended March 31,
 
 
2019
 
2018
Property Held-for-sale
 
Count
 
Amount
 
Count
 
Amount
Balance at beginning of period
 
102

 
$
19,402

 
136

 
$
24,947

Transfers from mortgage loans
 
26

 
4,171

 
27

 
3,958

Adjustments to record at lower of cost or fair value 
 

 
(475
)
 

 
(408
)
Disposals
 
(33
)
 
(5,028
)
 
(27
)
 
(4,226
)
Transfer from Rental property
 
3

 
880

 
4

 
440

Transfers to Rental property
 
(1
)
 
(293
)
 
(4
)
 
(942
)
Other
 

 
(77
)
 

 

Balance at end of period
 
97

 
$
18,580

 
136

 
$
23,769



Dispositions

During the three months ended March 31, 2019 and 2018, the Company sold 33 and 27 REO properties, respectively, realizing net gains of approximately $0.1 million and $0.6 million, respectively. These amounts are included in Other income on the Company's consolidated Statements of Income. The Company recorded lower of cost or net realizable value adjustments in Real estate operating expense for the three months ended March 31, 2019 and 2018 of $0.5 million and $0.4 million, respectively.