The recession in the U.S. economy has resulted in more foreclosures than experienced by any other generation of Americans. 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.
Take a just a minute to consider the basics of this highly profitable business.
To understand investing in Bulk REO, you have 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’.
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. 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.
Qualified real estate investors are increasingly finding once-in-a-lifetime opportunities in these REO packages. REO packages are easiest to buy and sell with a well regarded source of financing in place. 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 Buscemi of Dandrew Capital Partners, a New-York based hedge fund.