The real estate investing strategy du jour is called ‘Bulk REO Investing‘ and is a real monster.
Take a just a minute to consider the basics of this highly profitable business.
To understand investing in Bulk REO, you have to understand the foreclosure process.
Mortgage lenders faced with a non-paying home owner send a large volume of threats, warnings and documentation to the borrower who is late. After a certain period, the lender will then formally begin foreclosure proceedings. ‘Pre foreclosure’ is the name given to the time between implementation of the foreclosure proceedings and the public auction.
To complete the foreclosure process, the property is auction to the public. If the property is not purchased at auction, ownership reverts to the original lender. This property is then considered to be ‘Real Estate Owned’ by the lender, also known as an ‘REO’ property.
Lenders usually try to unload their REO properties at close to retail price by listing their REO’s with a real estate broker. Yet with increasing frequency, REO properties are being sold for pennies or dimes on the dollar. However, the purchase of a ‘package’ (or group) or REO properties is the trade-off for receiving such great prices.
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. There are many sources of funding for these transasactions including: hard money and commercial financing, as well as non conventional sources such as hedge funds and private investors. Additionally, one man is becoming very well known in the field of bulk REO investing, and his name is Salvatore Bushemi of Dandrew Partners, a New-York based hedge fund.
