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 What is an REO?
  An REO (Real Estate Owned) property has previously been foreclosed on and unsuccessfully sold at a real estate auction, and is presently owned by a bank. When a home is at this stage, it’s available to be sold for a large discount because banks are anxious to get rid of the “toxic asset”. Banks are not in the business of managing properties. With Bulk REO’s, groups of homes are packaged together and sold in bulk in order for banks to increase their cash flow.
 

How to Profit from Bulk REO’s?

The Representative Approach

With Bulk REO investing, you have a chance to step in as either a buyer or seller’s representative, and make significant profits. As a representative, it’s your job to broker packages either for the seller or buyer. Typically, you will make money by charging points. Each point represents 1%. Therefore if you make 3 points on a $1,000,000 deal your fees will be $30,000.

In addition to points, you can also use the "spread" strategies to increase your profits when brokering these deals. For example, let’s say a Bulk REO wholesaler is selling a package for $400,000, and you offer it to another client for $450,000. You have just worked the spread to make $50,000.

The Cash Buy Approach

If you have the right connections with banks, your second option is to become a Tier 1 buyer of Bulk REO’s. These are usually private equity funds, hedge funds, real estate investment trusts, or high net worth investors that play in the game who have the cash to buy packages of 100 plus homes. This is where you get the greatest discounts—when buying directly. Then you can re-sell these homes wholesale to secondary buyers for maximum profit.

Rent or Sell Approach

Third, you can buy Bulk REO’s to rehab them for rent or sale. With this option, after the home has been rehabbed, you can sell the house either with the borrower taking out a conventional mortgage with his/her bank, or if they are credit challenged, obtaining an FHA loan. We offer this type of financing. If the borrower cannot qualify for either of the two you may want to consider seller financing.

To learn more about purchasing or investing in NPNs, REOs, or refinancing notes

Please phone Dan direct at 858-204-6209

or email your request to DCassel@CasselFinancial.com