Guide To Bulk REO Investments
No generation in American history has ever experienced the number of foreclosures and defaulted mortgages as is happening now. However, opportunistic real estate investment professionals are turning the recession into great profits with a bit of creativity.
This new opportunity – known as ‘Bulk REO Investing’ – is so huge it’s captured attention from wealthy investors and private investment funds alike.
The basis of the Bulk REO business is foreclosures, so let’s analyze the foreclosure process now.
To understand investing in Bulk REO, you have to understand the foreclosure process.
As a home owner misses a payment or two, the lender sends the predictable barage of threatening letters and warnings. Following a period of time determined by the lender, formal foreclosure proceedings begin. The name for this period is ‘preforeclosure’.
Foreclosure is completed when the defaulted property is auctioned. If there are no buyers for the property at auction, the property is returned to the lender. This property is then considered to be ‘Real Estate Owned’ by the lender, also known as an ‘REO’ property.
Lenders have no interest in owning property, and thus usually opt to list their REO properties with a local real estate broker in hopes of a retail sale. However, REO properties are now frequently sold for far less than their ‘book value’. This happens because the buyer of the REO is required to purchase multiple REO’s in a single transaction.
There is huge profit potential in these REO packages for qualified real estate investors. 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 Buscemi of Dandrew Capital Partners, a New-York based hedge fund.
