With more foreclosures now than ever before, America’s weak real estate market seems to set new dismal records each month. But challenge always gives rise to opportunity, and opportunistic real estate investors are rising to the challenge.
This new opportunity – known as ‘Bulk REO Investing’ – is so huge it’s captured attention from wealthy investors and private investment funds alike.
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.
A home owner who misses one or more mortgage payments is faced with an ever-increasing volume of threatening correspondence from their lender. After a certain period, the lender will then formally begin foreclosure proceedings. From that time through public auction is called ‘preforeclosure’.
To complete the foreclosure process, the property is auction to the public. If there are no buyers at the foreclosure auction, the lender regains title to the property. Such a property is then classified as an ‘REO’ (Real Estate Owned) by the lender.
Lenders usually try to unload their REO properties at close to retail price by listing their REO’s with a real estate broker. 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 recession in the United States has yielded huge profits to real estate investors prepared to take advantage. 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 New-York based hedge fund.
