No generation in American history has ever experienced the number of foreclosures and defaulted mortgages as is happening now. However, opportunistic real estate investment professionals are turning the recession into great profits with a bit of creativity.
The real estate investing strategy du jour is called ‘Bulk REO Investing‘ and is a real monster.
Consider with me, if you will, the fundamentals of the Bulk REO business.
Understanding the notion of Bulk REO’s requires understanding of the foreclosure process.
As a borrower becomes increasingly behind in his mortgage, the lender regularly calls and writes the borrower with default warnings and threats. The lender directs the subsequent timing of the actual foreclosure proceedings. The name for this period is ‘preforeclosure’.
Foreclosure is completed when the defaulted property is auctioned. If the property is not purchased at auction, ownership reverts to the original lender. The lender then categorizes the property as ‘Real Estate Owned’ – or ‘REO’ for short.
Lenders usually try to unload their REO properties at close to retail price by listing their REO’s with a real estate broker. Yet with increasing frequency, REO properties are being sold for pennies or dimes on the dollar. The trade-off is that the buyer must purchase multiple REO properties in each transaction.
There is huge profit potential in these REO packages for qualified 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. One excellent source of funding for Bulk REO Investment transactions can be found here: Bulk REO Investment Training.
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