Reo Bank Of America Properties - Is Bulk REO Investing Real?
Reo Bank Of America Properties
You've probably heard about real estate investment opportunities currently available in the US real estate market called "bulk REO". Before we go any further, let me explain what a REO property and a bulk REO property is for the sake of those readers who are not yet clear about what this term means. Reo Bank Of America Properties
REO (Real Estate Owned) refers to properties which have gone through the foreclosure process and the bank now owns the house. It used to be that these properties would almost always sell at auction, largely to investors eager for a great deal on an investment property. However, the enormous number of foreclosures currently going on in the US means that many of these properties now go unsold and become the property of the bank or other lending institution.
Many people are changing their strategy to investing. Most savvy real estate investors, are changing from working the "pre-foreclosre" angle to buying direct from the bank's REO departments. They are putting together purchase deals for multiple REO properties in the million to five million dollar range.
Maybe you've heard of people who talk about buying bulk REO properties in the hundred million and even billion dollar ranges. I've come to learn that in most cases these people are blowing a lot of hot air. Half a million to five million makes sense, but excuse me, a billion dollars? Think about it. A billion dollars is a thousand million-dollar properties, or two-thousand half-million dollar properties. What bank is going to have that many properties available to make a giant REO package like that?
Maybe these new "want-a-be" investors feel like they have to talk big numbers to be taken seriously. I don't know. I have had people tell me that they a billion dollars instantly available in a bank account from a pool of investors. That tips legitimate sellers off that these people probably don't know what they're doing.
Do you have 1,000 million-dollar investors? If so, can I have their phone numbers? Honestly, if you could write a check for a billion dollars would you be spending your day combing through websites of unknown reliability wondering who you should make that check out to?
My point is this: if you're serious about investing in multiple REO properties, there's nothing wrong with being honest about how much you have to invest. It is a lot more realistic to find ten investors that are in for $100,000 each, or even 100 investors that are in for $10,000 each, and there are enough low-priced foreclosure properties that a million could buy several of them at once in some markets.
I'm not saying that high volume REO deals don't go down. I'm just saying that the scale is in the million dollar range rather than the billion dollar range. These bulk REO packages usually consist of a dozen or fewer properties, and they're not the norm. The typical REO bulk packages consist of only two or three properties, and yes, they are done by ordinary investors like you and me.
Getting involved in the bulk REO business is actually a pretty simple process. It takes some legwork, but it's eminently doable by a determined investor with some initiative.
Reo Bank Of America PropertiesThe first thing you do is get to know the higher ups in local banks. These are the banks where the top brass are mostly local, and that have been banking in your area for awhile. Don't start with Bank of America, because the chances of your talking to the top REO department officials with only a million bucks in your pocket are pretty slim.
Once you've got to know a handful of local bankers, mention that you invest in real estate and would really like to have a sit-down with the REO supervisor. But don't do this unless you have the cash available to close a deal fast.
Your first REO purchase, and probably your second one too, should be a smaller portfolio of properties. This deal would demonstrate to the bank that you are trustworthy and have the cash to close a purchase quickly. Don't screw this up, because if you get a deal accepted and something happens and you can't close it, you can write off that bank for any future REO purchases.
After you've closed a couple of REO sales, it's time to broaden your horizons a little. This is when you can start buying bigger "pools" of property at a time. You have to time it right to get the best deal. You know how people say that to get the best deal on a car you should go toward the end of the month when the sales people are all trying to meet their quotas? It's similar with banks when a quarter is coming to an end.
At the end of a quarter, banks report their earnings. The top brass are thinking about what kind of bonus they're going to get at the end of the year. These people do not want under-performing assets (like foreclosure properties) on their books. Knowing the quarterly reporting timeline, come to the bank officer you're closest to about a month ahead of time and let him or her know that you would be willing to take several under-performing assets off their hands and would like to look at what they have.
From there, it's time to negotiate. Don't give them your best offer first. You know how it is, you come at the deal from both ends until you reach a happy middle. If you play your cards right, you'll come away with several properties that you've bought at below market value. The bank crosses a few under-performing assets off their books, and their quarterly reports suddenly look brighter.
The key to doing this and doing it well is realizing that real estate investing is a business, and you should approach it as if you were a business: You, Inc. Like with any other business investment, you want it to increase in value so that you can buy low and sell high. You can't look at it from the point of view of someone who's "flipping real estate" (even if at some point you actually end up doing that). You have to come at it with a long-term perspective, and you have to know the market inside and out.
If you approach bulk REO investing as a business you'll realize that you have a lot to learn, and you'll take the time to learn it. Getting educated in bulk REO investing will put you miles ahead of the wanna-be's who talk about billion dollar deals but never close them. As they say in Texas, they're all hock and no spit. Applying solid business principles to bulk REO investing is the way to be successful at it.
Reo Bank Of America PropertiesReo Bank Of America Properties - Is Bulk REO Investing Real?
By: Real Estate Expert
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