The weakness of the U.S. economy has given rise to the largest epidemic of foreclosures in American history. Yet as always, this challenge has given rise to a huge new opportunity for alert real estate investors.
This new opportunity - known as 'Bulk REO Investing' - is so huge it's captured attention from wealthy investors and private investment funds alike.
Foreclosures are at the heart of the Bulk REO business, so let's consider the foreclosure process.
To understand Bulk REO investing is to understand the foreclosure process.
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'.
When a defaulted property is placed up for auction, the foreclosure process is completed. If the property is not purchased at auction, ownership reverts to the original lender. The property then receives the designation of being an 'REO' or the more formal name, 'Real Estate Owned'.
Local real estate agents are usually used to resale REO properties at retail price to the general public. However, lenders are increasingly willing to take much less than their REO asset is actually worth. Lenders are willing to do so in exchange for the buyer's agreement to purchase a 'package' of REO's rather than a single property.
There is huge profit potential in these REO packages for qualified real estate investors. The most successful Bulk REO Investors will have a well-respected source of funding for their transactions. 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 hedge fund in New York.
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