Beginner’s Guide To Bulk REO Investments

There are more foreclosures in the United States right now than we have ever experienced before. However, opportunistic real estate investment professionals are turning the recession into great profits with a bit of creativity.

‘Bulk REO Investing’ is the name of the new strategy, and it’s captured the attention of many well-heeled investors.

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.

When a home owner begins to miss payments on their mortgage, the lender begins to send late/overdue notices to the home owner. After a certain period, the lender will then formally begin foreclosure proceedings. The ‘pre-foreclosure’ time starts with filing of foreclosure paperwork and concludes at public auction.

Foreclosure is completed when the defaulted property is auctioned. Ownership of the property is returned to the lender if the property is not sold at auction. The lender then categorizes the property as ‘Real Estate Owned’ - or ‘REO’ for short.

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, lenders are increasingly willing to take much less than their REO asset is actually worth. But the price of receiving such great pricing is the need to purchase multiple REO properties (a ‘package’) rather than individual properties.

These REO packages represent the potential to acquire huge amounts of equity for savvy real estate investors. REO packages are easiest to buy and sell with a well regarded source of financing in place. 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.