REO Foreclosures The Benefits of Buying and Selling in Bulk
If you have never heard of the term REO', and yet have an interest in investing in
real estate historically one of the most profitable investment sectors on the market this article is for you. Investing in real estate has long since been incredibly profitable for many entrepreneurs, and still remains popular, even after the housing bubble popped in 2007 and 2008. Even though there is uncertainty in the real estate market, there are still opportunities to break into the industry and make a living off of real estate investment. That opportunity comes with REO investing.
What does REO' mean?
REO stands for real estate owned', but a better way to describe what it truly represents is to look at an example.
Mr. X owns a home. He has a mortgage from a bank, which represents a loan given to him by the bank to pay for the value of the home. Mr. X, for whatever reason, can no longer afford to pay the mortgage. The bank, as the underwriter for the mortgage, initiates foreclosure proceedings against Mr. X and attempts to sell its property (his home) at auction. Mr. X's former home does not sell, though, and the bank is left with a property that is generating zero income for the bank.
Mr. X's property is now referred to as an REO property, and it needs to be sold by the bank. The bank is willing to sell the property at a discount to unload it from its list of assets. This is where REO investment opportunities come in.
Buying in Bulk: The Secret
Buying and selling individual properties can be profitable, but savvy investors have found that it is more effective to combine several different properties together and buy and sell in bulk. What are the benefits of buying in bulk?
The main benefit of engaging in bulk REO sales with REO foreclosures is the profit margin that one could possibly receive. The profit margin is the key to success in any business venture, particularly real estate. It has to cover any restoration or renovation costs, plus associated fees and expenses. The margin with individual sales can be small, but with bulk sales, the margin can easily be worth tens of thousands of dollars and up, depending on the size of the package.
Bulk REO properties are also becoming more buyer-friendly, because the buyer does not have to worry about individual properties not doing well. If one or two properties do not sell well, the remainder of the package can more than make up for them. In this way, while bulk REO packages may require many times the amount of capital for a single buy, the risk is somewhat mitigated to acceptable levels.
Heading into the real estate market means understanding the benefits and advantages of the various types of real estate transactions out there. There are several benefits to buying REO foreclosures in bulk, which means breaking into the field is worth considering for any would-be entrepreneur.
REO Foreclosures The Benefits of Buying and Selling in Bulk
By: Mistie Johnson
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