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With more foreclosures now than ever before, America’s weak real estate market seems to set new dismal records each month. But challenge always gives rise to opportunity, and opportunistic real estate investors are rising to the challenge.

That opportunity is called Bulk REO Investing, and the opportunity is huge.

Take a just a minute to consider the basics of this highly profitable business.

Understanding of the foreclosure process is central to understanding Bulk REO investing.

Mortgage lenders faced with a non-paying home owner send a large volume of threats, warnings and documentation to the borrower who is late. The formal process of foreclosure begins at the lender’s discretion. The ‘pre-foreclosure’ time starts with filing of foreclosure paperwork and concludes at public auction.

When a defaulted property is placed up for auction, the foreclosure process is completed. If there are no buyers at the foreclosure auction, the lender regains title to the property. This property is then considered to be ‘Real Estate Owned’ by the lender, also known as an ‘REO’ property.

Lenders have no interest in owning property, and thus usually opt to list their REO properties with a local real estate broker in hopes of a retail sale. Yet with increasing frequency, REO properties are being sold for pennies or dimes on the dollar. The trade-off is that the buyer must purchase multiple REO properties in each transaction.

There is huge profit potential in these REO packages for qualified real estate investors. The most successful Bulk REO Investors will have a well-respected source of funding for their transactions. There are many sources of funding for these transasactions including: hard money and commercial financing, as well as non conventional sources such as hedge funds and private investors. Additionally, one man is becoming very well known in the field of bulk REO investing, and his name is Sal Buscemi of Dandrew Partners, a New-York based hedge fund.

The weakness of the U.S. economy has given rise to the largest epidemic of foreclosures in American history. But challenge always gives rise to opportunity, and opportunistic real estate investors are rising to the challenge.

The new opportunity is known as ‘Bulk REO Investing’ or ‘REO Package Investing’ and it’s a huge opportunity.

Consider with me, if you will, the fundamentals of the Bulk REO business.

You can’t understand Bulk REO Investments without understanding the process of foreclosure.

As a borrower becomes increasingly behind in his mortgage, the lender regularly calls and writes the borrower with default warnings and threats. The lender directs the subsequent timing of the actual foreclosure proceedings. The name for this period is ‘preforeclosure’.

The defaulted property is ultimately auctioned, thus completing the foreclosure process. The lender regains ownership of the property if there are no buyers at auction. Such a property is then classified as an ‘REO’ (Real Estate Owned) by the lender.

Lenders have no interest in owning property, and thus usually opt to list their REO properties with a local real estate broker in hopes of a retail sale. However, REO properties are now frequently sold for far less than their ‘book value’. Lenders are willing to do so in exchange for the buyer’s agreement to purchase a ‘package’ of REO’s rather than a single property.

These REO packages represent the potential to acquire huge amounts of equity for savvy real estate investors. Bulk REO Investors are most successful when they have a well-established source of funding for their REO packages. There are many sources of funding for these transasactions including: hard money and commercial financing, as well as non conventional sources such as hedge funds and private investors. Additionally, one man is becoming very well known in the field of bulk REO investing, and his name is Salvatore Bushemi of Dandrew Capital Partners, a New-York based hedge fund.