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.

‘Bulk REO Investing’ is the name of the new strategy, and it’s captured the attention of many well-heeled investors.

Take a just a minute to consider the basics of this highly profitable business.

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

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. From that time through public auction is called ‘preforeclosure’.

Foreclosure is completed when the property is put up for auction. If there are no buyers at the foreclosure auction, the lender regains title to the property. The designation of ‘REO’ (Real Estate Owned) is then attached to the foreclosed property.

REO properties are usually listed for sale with local real estate agents. But more and more, lenders are selling their REO properties for a greatly reduced price. But the price of receiving such great pricing is the need to purchase multiple REO properties (a ‘package’) rather than individual properties.

Qualified real estate investors are increasingly finding once-in-a-lifetime opportunities in these REO packages. The most successful Bulk REO Investors will have a well-respected source of funding for their transactions. 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 Salvatore Bushemi of Dandrew Partners, a hedge fund in New York.

Technorati Tags: bulk reo, bulk reo investing, buyer mandate, reo packages, seller mandate

The recession in the U.S. economy has resulted in more foreclosures than experienced by any other generation of Americans. Yet well-funded investors in real estate are seizing upon this opening to profit from an profoundly profitable new opportunity.

That opportunity is called Bulk REO Investing, and the opportunity is huge.

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’.

When a defaulted property is placed up for auction, the foreclosure process is completed. 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.

Local real estate agents are usually used to resale REO properties at retail price to the general public. 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.

The recession in the United States has yielded huge profits to real estate investors prepared to take advantage. Bulk REO Investors are most successful when they have a well-established source of funding for their REO packages. 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 Bushemi of Dandrew Partners, a hedge fund in New York.

Technorati Tags: bulk reo, bulk reo investing, dandrew capital, dandrew capital partners, foreclosure investing, foreclosures, real estate investing, real estate investments, sal buscemi

The Rise Of The Bulk REO Industry

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.

That opportunity is called Bulk REO Investing, and the potential is huge. Let’s take a moment to analyze the basics of this incredibly lucrative business.

As a home owner misses a payment or two, the lender sends the predictable barage of threatening letters and warnings. Following a period of time determined by the lender, formal foreclosure proceedings begin. From that time through public auction is called ‘preforeclosure’.

Foreclosure is completed when the property is put up for auction. 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 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. But as a consequence of the weak economy, lenders are frequently selling their REO properties far below their actual value. Lenders are willing to do so in exchange for the buyer’s agreement to purchase a ‘package’ of REO’s rather than a single property.

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. 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.

Note - One of the nation’s leading experts on bulk reo investing is hedge fund manager Salvatore Buscemi. Sal Buscemi recognized the irrationality of the real estate boom of the late 1990’s and early 2000’s and capitalized on this by forming his very well-regarded hedge fund, Dandrew Capital Partners.

Technorati Tags: bryan ellis, bulk reo, bulk reo investing, dandrew capital, dandrew capital partners, real estate investing, real estate investments, sal buscemi

Everyone feels the negative brunt of non-performing assets, not just the lenders.  Non-performing mortgages limit lenders borrowing power by up to 900% in many cases.  For instance, if a loan of $100,000 is in default, the lender is forbidden from borrowing up to $900,000 until the property is dumped.  Also, as the defaulted asset loses value the lenders must record the adjusted value, thereby taking a great financial hit.

(A quick note from the editor:  For related information, check out Bulk REO Investing.)

Banks have few options that buffer the burden placed on their books by non-performing assets.  Foreclosure is almost always the last action banks take.  These actions are pricey for lenders and start with exhorbitant legal expenses.  The outcome is pervasisve property management while it continues as REO (Real Estate Owned) property.  There is a higher chance that vacant REO properties will suffer damage further plummeting in value.  When selling any property there are expenses - from marketing to transactions that accompany selling real estate.

Lenders also face the issue of staffing.  It matters little that a lender feels the only option is to foreclose if proper staffing can’t be put in place to manage and unload these REO properties.  Since about 1994 there hasn’t been this kind of lending crisis in which REO experts have been axed at jaw dropping proportions.  Not to mention the fact that the US has few experts capable of handling bulk REO’s while juggling the task of managing them, protecting them and divesting them with a low margin of loss.

As quickly as humanly possible today’s lenders, bond managers and servicing agencies appear to be charting the same course: Get rid of those unstable loans even if it means selling at a loss.

Technorati Tags: bulk reo, bulk reo investing, defaulted mortgages, foreclosure investing, foreclosures, mortgage defaults