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.
The new opportunity is known as ‘Bulk REO Investing’ or ‘REO Package Investing’ and it’s a huge opportunity.
Consider with me, if you will, the fundamentals of the Bulk REO business.
You can’t understand Bulk REO Investments without understanding the process of foreclosure.
As a home owner misses a payment or two, the lender sends the predictable barage of threatening letters and warnings. The lender directs the subsequent timing of the actual foreclosure proceedings. The name for this period is ‘preforeclosure’.
To complete the foreclosure process, the property is auction to the public. If there are no buyers for the property at auction, the property is returned to the lender. The designation of ‘REO’ (Real Estate Owned) is then attached to the foreclosed property.
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. Yet with increasing frequency, REO properties are being sold for pennies or dimes on the dollar. But the price of receiving such great pricing is the need to purchase multiple REO properties (a ‘package’) rather than individual properties.
Qualified real estate investors are increasingly finding once-in-a-lifetime opportunities in these REO packages. 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 Sal Bushemi of Dandrew Partners, a hedge fund in New York.