Real Estate Investment

The real estate foreclosure industry remains a fertile place to invest money. In the stultified US economy, banks along with other lenders especially dealing in real estate finance have built up a collection of foreclosed properties. This misfortune has created conditions for people with the means to invest in the market. In fact, this damaged economy has ushered in a highly profitable investment niche, commonly referred to as bulk REO investing.

What Does REO Mean?

REO, an acronym, means Real Estate Owned, and is typically used by real estate finance communities. More specifically, it most commonly refers to real estate owned by a bank or other real estate finance company as a result of the property’s former owner defaulting on mortgage payments. Although bulk REO investing sounds like a new real estate finance term, it is actually founded upon the age-old concept of purchasing multiple foreclosed properties in a single transaction. In order to understand how this niche is doing so well, it’s helpful to first understand how foreclosure markets work and why it can be so profitable for people who can afford to invest in REO purchases.

Why Do Banks and Real Estate Finance Companies Sell Properties So Cheap?

Banks and other real estate finance lenders prefer to loan money and are not in the business of stockpiling real estate. In fact, having too many foreclosed properties on their books quickly turns into an accounting nightmare, as what was once deemed an asset when it was in the form of a healthy loan quickly turns into a liability when the real property is actually returned. To protect their own credit and interest, banks auction or sell real estate surpluses for less than cost or retail value. Real estate finance companies prefer to take a loss than actually get saddled with responsibility of ownership. Banks don’t want to rent properties out, or lease or sell it in a retail capacity, as this would mean having to invest money for repairs, protect it from vandalism when vacant and so forth. Instead, they far prefer to give others who are willing to invest money and time in these efforts, an opportunity to buy the property for less than its retail value as an incentive for a fast sale.

Why Would Banks be Willing to Sell REO Properties in Bulk?

Even in today’s economic climate, those that can invest in real estate are buying foreclosed properties to sell them at profit. It’s usually people who can not only afford the property, but also be able to put up for repairs or improvements before listing the property for sale. That said, since banks own so many foreclosed properties right now, they are more eager than ever to sell them off. Therefore, in an effort to avoid the liabilities discussed earlier, real estate finance professionals have created bulk REO investing packages.

Are Properties Included in a Bulk REO Sale Worth the Investment?

It isn’t uncommon for bulk REO packages to include properties in sub-par condition. However, those looking to invest money in real estate, and who are often buying such properties for a mere fraction of their retail price, are eager to do so regardless of their condition and sometimes are even willing to purchase them sight unseen, as they realize the profit potential involved.

As bulk REO offerings become more common, those looking to invest money in the foreclosure market are discovering an enormous opportunity to create substantial real estate wealth. The original owner might have lost the property, but investors who see opportunities from real estate finance companies have been able to take a down real estate market, and get money out of it.

With more foreclosures now than ever before, America’s weak real estate market seems to set new dismal records each month. But challenge always gives rise to opportunity, and opportunistic real estate investors are rising to the challenge.

The new opportunity is known as ‘Bulk REO Investing’ or ‘REO Package Investing’ and it’s a huge opportunity.

Foreclosures are at the heart of the Bulk REO business, so let’s consider the foreclosure process.

Understanding the notion of Bulk REO’s requires understanding of the foreclosure process.

As a home owner misses a payment or two, the lender sends the predictable barage of threatening letters and warnings. The official foreclosure proceedings begin subsequently, as directed by the lender. From that time through public auction is called ‘preforeclosure’.

Foreclosure is completed when the defaulted property is auctioned. If there are no buyers at the foreclosure auction, the lender regains title to the property. Such a property is then classified as an ‘REO’ (Real Estate Owned) by the lender.

REO properties are usually listed for sale with local real estate agents. Yet with increasing frequency, REO properties are being sold for pennies or dimes on the dollar. But the price of receiving such great pricing is the need to purchase multiple REO properties (a ‘package’) rather than individual properties.

The recession in the United States has yielded huge profits to real estate investors prepared to take advantage. 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. Additionally, one man is becoming very well known in the field of bulk REO investing, and his name is Sal Buscemi of Dandrew Capital Partners, a New-York based hedge fund.

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.

Understanding of the foreclosure process is central to understanding Bulk REO investing.

Mortgage lenders faced with a non-paying home owner send a large volume of threats, warnings and documentation to the borrower who is late. Following a period of time determined by the lender, formal foreclosure proceedings begin. Between the formal beginning of the foreclosure process and the public auction is the ‘preforeclosure’ period.

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.

REO properties are usually listed for sale with local real estate agents. Yet with increasing frequency, REO properties are being sold for pennies or dimes on the dollar. This happens because the buyer of the REO is required to purchase multiple REO’s in a single transaction.

The REO investment packages available today have provided a way to profitably capitalize on the U.S. recession. 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 Bushemi of Dandrew Capital Partners, a New-York based hedge fund.