The recession in the U.S. economy has resulted in more foreclosures than experienced by any other generation of Americans. But smart real estate investors are turning these ‘lemons’ into ‘lemonade’ in an incredibly profitable new way.
This new opportunity – known as ‘Bulk REO Investing’ – is so huge it’s captured attention from wealthy investors and private investment funds alike.
Let’s take a moment to analyze the basics of this incredibly lucrative 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. After a certain period, the lender will then formally begin foreclosure proceedings. From that time through public auction is called ‘preforeclosure’.
When a defaulted property is placed up for auction, the foreclosure process is completed. If there are no buyers at the foreclosure auction, the lender regains title to the property. The property then receives the designation of being an ‘REO’ or the more formal name, ‘Real Estate Owned’.
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. However, lenders are increasingly willing to take much less than their REO asset is actually worth. However, the purchase of a ‘package’ (or group) or REO properties is the trade-off for receiving such great prices.
There is huge profit potential in these REO packages for qualified real estate investors. REO packages are easiest to buy and sell with a well regarded source of financing in place. 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 Capital Partners, a New-York based hedge fund.
