What is Bulk REO?
Bulk REO investing (the ‘REO’ stands for ‘real estate owned’) basically involves buying and selling bundles of REO properties as a package, rather than each property as an individual entity. First, though, it may be helpful to understand what REO investing is before diving into bulk transactions.
REO – or real estate owned – is a property that remains unsold after going through a foreclosure auction. It is owned by a bank or the mortgage company, whichever entity holds the mortgage to the property. These properties may frequently be in a state of disrepair, but this can be an advantage to an investor who wants a cheap property. And by all measurements, these properties often are cheap, since they are often sold for less than what the mortgage is worth.
Bulk real estate owned investing involves taking these properties and buying them from the bank in bulk groupings of properties called bulk REO tapes, and then selling them as a group to interested entities for profit.
Why Bulk REO?
Buying and selling bulk Real estate owned properties is an option for many investors because of the relatively large return on investment that can be realized. The spread – or difference between the buying price and selling price – is often upwards of $50,000, and can very well reach into six digits on a regular basis. This is in direct contrast to individual REO properties that may result in a small spread after maintenance and other costs are considered.
As you can see, selling REO by the bulk is a promising enterprise – but becoming a bulk REO trader is not without its risks. While you can usually get into regular REO sales with your own capital, being a bulk REO trader requires having access to large amounts of funds, since you are dealing with multiple properties at once.
As a result, access is fairly limited to those who can obtain funding. However, the possibilities are definitely there, since there are plenty of venture capitalists, hedge funds, and other large investment groups willing to fund a bulk REO investor. The trick is learning how to participate in the process and get the training required to become knowledgeable about the industry and how it operates.
Therefore, those interested in bulk REO should undergo training and instruction by experts to learn how to break into this field and succeed.
By Frank Salisbury