There are more foreclosures in the United States right now than we have ever experienced before. But smart real estate investors are turning these ‘lemons’ into ‘lemonade’ in an incredibly profitable new way.
The new opportunity is known as ‘Bulk REO Investing’ or ‘REO Package Investing’ and it’s a huge opportunity.
Foreclosures are at the heart of the Bulk REO business, so let’s consider the foreclosure process.
Understanding the notion of Bulk REO’s requires understanding of the foreclosure process.
Mortgage lenders faced with a non-paying home owner send a large volume of threats, warnings and documentation to the borrower who is late. Following a period of time determined by the lender, formal foreclosure proceedings begin. From that time through public auction is called ‘preforeclosure’.
To complete the foreclosure process, the property is auction to the public. The lender regains ownership of the property if there are no buyers at auction. This property is then considered to be ‘Real Estate Owned’ by the lender, also known as an ‘REO’ property.
Lenders usually try to unload their REO properties at close to retail price by listing their REO’s with a real estate broker. However, REO properties are now frequently sold for far less than their ‘book value’. The trade-off is that the buyer must purchase multiple REO properties in each transaction.
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 Bushemi of Dandrew Capital Partners, a New-York based hedge fund.