The real estate investing strategy du jour is called ‘Bulk REO Investing‘ and is a real monster.
Consider with me, if you will, the fundamentals of the Bulk REO business.
To understand investing in Bulk REO, you have to understand the foreclosure process.
As a borrower becomes increasingly behind in his mortgage, the lender regularly calls and writes the borrower with default warnings and threats. After a certain period, the lender will then formally begin foreclosure proceedings. Between the formal beginning of the foreclosure process and the public auction is the ‘preforeclosure’ period.
Foreclosure is completed when the defaulted property is auctioned. The lender regains ownership of the property if there are no buyers at auction. The lender then categorizes the property as ‘Real Estate Owned’ – or ‘REO’ for short.
Typically, lenders list their REO properties with local real estate agents in hopes of selling the property to a retail buyer who will pay full price. But as a consequence of the weak economy, lenders are frequently selling their REO properties far below their actual value. But the price of receiving such great pricing is the need to purchase multiple REO properties (a ‘package’) rather than individual properties.
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 Buscemi of Dandrew Capital Partners, a New-York based hedge fund.
