The recession in the U.S. economy has resulted in more foreclosures than experienced by any other generation of Americans. 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.
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 borrower becomes increasingly behind in his mortgage, the lender regularly calls and writes the borrower with default warnings and threats. The official foreclosure proceedings begin subsequently, as directed by the lender. 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 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. But as a consequence of the weak economy, lenders are frequently selling their REO properties far below their actual value. But the price of receiving such great pricing is the need to purchase multiple REO properties (a ‘package’) rather than individual properties.
These REO packages represent the potential to acquire huge amounts of equity for savvy real estate investors. 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.
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