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.
The real estate investing strategy du jour is called ‘Bulk REO Investing‘ and is a real monster.
Let’s take a moment to analyze the basics of this incredibly lucrative 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 formal process of foreclosure begins at the lender’s discretion. ‘Pre foreclosure’ is the name given to the time between implementation of the foreclosure proceedings and the 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, REO properties are now frequently sold for far less than their ‘book value’. This happens because the buyer of the REO is required to purchase multiple REO’s in a single transaction.
The recession in the United States has yielded huge profits to real estate investors prepared to take advantage. The most successful Bulk REO Investors will have a well-respected source of funding for their transactions. 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. One excellent source of funding for Bulk REO Investment transactions can be found here: Bulk REO Investment Training.
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