Bulk REO Investing is proving to be one of the most profitable fields of investment during this year and potentially beyond. Bulk REO Investors profit by buying groups (commonly called portfolios) of properties from lenders who have foreclosed the properties and have urgent desire to reduce pressure on their balance sheets. Due to the urgency of the balance sheet needs of the banking institutions coupled with the investors ability to purchase a package of REO properties rather than singular properties, its quite possible for a well-financed bulk reo investor to acquire REO packages at extremely attractive deals.
Many real estate investors make offers to banking institutions on the basis of a portion of unpaid principal balances. This means that if they make an offer of 80 cents on the dollar for a group of mortgages with a remainder of $3,000,000 in principal balance, then they pay $2,400,000 to get that group.
When the REO portfolio transactions are finalized, investors have multiple houses which may then be sold to bring a return to their fund. To do this, the investors resell their houses to retail home buyers via seller financing. By eliminating traditional lenders out of the transactions, they are able to move their houses quickly and at very attractive options.
Try to learn when the banks financial quarter ends. This is when they report their quarterly earnings and financials and when most of supervisory management get evaluated for increases in pay. Just like any business, financial institutions dont want to show these underperforming properties on their books especially when their earnings reports are due.
Valuate the properties, figure out what you need to get them for, and put in your second (or third) best offer (do not give your best offer first).
Negotiate until its a win-win, and you walk away with several houses at well below market value, and the lending institution walks away with those houses off of their records just in time for their quarterly earnings reports to their shareholders.
The future seems quite bright for astute Bulk REO investors.