Basics of Bulk REO Investing
The weakness of the U.S. economy has given rise to the largest epidemic of foreclosures in American history. Yet as always, this challenge has given rise to a huge new opportunity for alert real estate investors.
That opportunity is called Bulk REO Investing, and the opportunity is huge.
Consider with me, if you will, the fundamentals of the Bulk REO business.
Understanding of the foreclosure process is central to understanding Bulk REO investing.
Mortgage lenders faced with a non-paying home owner send a large volume of threats, warnings and documentation to the borrower who is late. The formal process of foreclosure begins at the lender’s discretion. The ‘pre-foreclosure’ time starts with filing of foreclosure paperwork and concludes at public auction.
To complete the foreclosure process, the property is auction to the public. Ownership of the property is returned to the lender if the property is not sold at auction. The lender then categorizes the property as ‘Real Estate Owned’ - or ‘REO’ for short.
Lenders usually try to unload their REO properties at close to retail price by listing their REO’s with a real estate broker. However, lenders are increasingly willing to take much less than their REO asset is actually worth. The trade-off is that the buyer must purchase multiple REO properties in each transaction.
The REO investment packages available today have provided a way to profitably capitalize on the U.S. recession. Bulk REO Investors are most successful when they have a well-established source of funding for their REO packages. Some sources of funding for these transactions are: personal funds, hard money lenders, commercial lenders and non-conventional sources such as private investors and hedge funds. Additionally, one man is becoming very well known in the field of bulk REO investing, and his name is Salvatore Bushemi of Dandrew Capital Partners, a hedge fund in New York.
