Real Estate Investing Bulk REO

There is currently a new trend emerging in real estate investing. Bulk REO is getting a lot of attention these days due in large part to the number of foreclosures that are on the books with most banks. To understand what REO is you first need to understand foreclosures. When an owner is not able to make their house payments the house will enter into the foreclosure process. This process often takes a couple of months, most often resulting in the house being put up for auction. A few years ago foreclosure auctions were the place to be for real estate investors.

Today with the increasing numbers of foreclosed homes, the foreclosure markets are often not successful. When a house isn’t sold at auction it reverts back to the bank, this is now a banked owned property, also known as REO (real estate owned). There are a few aspects that you need to be aware of from this point. First, banks are not in business to own properties, they are in the money business. The more homes they have on their books the more difficult it is for them to do their business, foreclosures limit the funds banks have access to, to lend money. Second, a bank is not going to sell you just one REO, they sell them in bulk. This is where real estate investing, bulk REO style can be beneficial to both the investor and the bank.

In most cases you will be able to acquire homes for 40 to 70% of their value, and this is multiple homes. There is some debate amongst real estate investors that deal in bulk REOs. Some will tell you that it is not possible to get a bulk REO that contains only a few properties and doesn’t cost a few million dollars. Others will try to tell you that you can easily get a bulk REO portfolio for a few hundred thousand and it will contain a couple properties. In the real estate world, there is something for everybody. Which happens more often, well that depends on the level you are prepared to invest at, if you only have $200K to invest you aren’t going to be looking for bulk REO packages of 300 properties that is going to cost you $10M. The opposite is true as well, if you are a big time investor and are looking to spend $50M and acquire 700 properties you really aren’t going to be interested in the small packages when you can get more for your money with a bigger portfolio.

Why the discrepancy though? It stems from a basic misunderstanding in what bulk REOs are. First of all, if you are going to buy only one or two REOs you are not buying a tape/package or portfolio and you are not going to deal directly with a bank. It is more plausible that you will deal with a realtor who has access to foreclosed homes that are now REOs and you will buy each one separately most likely paying more than if you were to buy them together i.e. in a package. So is it possible to buy one or two REOs, yes. It is a different process though then dealing with real estate investing bulk REOs.

Tags: bulk REO buyers, bulk REO packages, foreclosed properties, REO listings, REO portfolios, the foreclosure process