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.

This new opportunity – known as ‘Bulk REO Investing’ – is so huge it’s captured attention from wealthy investors and private investment funds alike.

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

To understand investing in Bulk REO, you have to understand 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’.

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 designation of ‘REO’ (Real Estate Owned) is then attached to the foreclosed 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 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.

These REO packages represent the potential to acquire huge amounts of equity for savvy real estate investors. 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 Sal Bushemi of Dandrew Capital Partners, a New-York based hedge fund.

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