In "my other life" I run a direct response marketing agency (fun stuff!) and one of my clients just happens to be in the real estate game as well. I guess that’s why we hit it off and he has been a client of mine for about 6 months now.

Anyhow, my client is one of the nations top experts on Foreclosure Workout services for banks and a by product of the work they do is that they have direct access to many of the top regional and national banks… and their REO disposition departments. Because of these connections, my client has begun to help investors of Bulk REO Properties (bank owned real estate) put together REO purchase deals of $1 million and up.

However, in the process of marketing this service, my client and I have been seeing all kinds of people saying lately that they are "bulk reo property" buyers. Then they go on to say that they have "$1 billion ready for investment"… or "I have access to $400 million".

Really?

No… I mean… really?

90% of the REO buyer leads we gather through their website are legitimate and say they have between $500,000 and $5,000,000 available for purchasing bulk REO properties.  That’s about right.

But…

What gets me is that people:

1. Think closing a $5 billion bulk REO deal with a bank is an everyday occurrance today (do you realize how many properties that would be???)
2. Think that they have to throw around big numbers like "billions" in order to be taken seriously in the bulk REO market

That’s not the case.  The $5 billion deals (if any) are where the bank is selling bulk notes… not actual properties (to my knowledge… if I’m wrong prove me wrong…).

And, from what we’ve found in interviewing the investors who have asked to work with my client… most of the people who say they have something like "$1 billion sitting in a bank accessible to me"… are full of hot air and are not real serious players.  If you had $1 billion in the bank ready to buy a bunch of properties… I’m pretty darn sure you wouldn’t be searching around the internet submitting your info to websites.  Would you?

At the least… you’d have someone doing it for you (I hope).

So please… unless you can write a check for $1 billion today… don’t say you have it sitting in the bank from a pool of investors.  The key to doing these deals is being real and upfront about your true capabilities.

So, Are Bulk REO Deals Being Done?

Short answer.  Yes.  Bulk REO package deals with banks are happening.  Mostly in the several hundred thousand dollar to several million dollar range with 3-15 properties.

But, even these packages aren’t all that common.

The huge majority of REO deals with banks are onsey and twosey and are happening with everyday investors like me and you.

What’s A Great Strategy To Purchase Bulk REO’s For The Everyday Real Estate Investor?

Truly, there’s no one strategy that trumps them all.  But, a great way to get a hold of several REO properties at a time is to do the following:

1. Build up a good relationship with one or several banks (good relationships… get to know the people working there by a first name basis).  Usually local and regional banks are great places to start.
2. After you have a good relationship with your banker, tell them that you invest in real estate and would love to chat w/ their REO disposition supervisor … (the highest up person you can talk to that has the last say on REO sales).
3. Make sure you have the financing to be able to close deals fast and start off by purchasing REO properties one at a time from the bank.  This is where you build their trust and show them that you have the money to close fast and are the real deal.  If you get an offer accepted you better be able to close on it or you can kiss future deals from the bank goodbuy.
4. Once you have a property or two under your belt with the bank, it’s time to start thinking like a Fortune 500 corporation .
5. Find out when the banks financial quarter ends. This is where they report their quarterly earnings and financials… and when most of upper management get evaluated for bonuses.  Just like any business, banks don’t want to have these underperforming assets on their books… especially when their earnings reports are due (they need to keep their investors happy).
6. Leverage your relationship and your knowledge of their quarterly report timeline and come to them a few weeks to 1 month before their quarter ends and let them know you’re interested in purchasing several of their underperforming assets (REO properties) and would like to look at the REO properties available.
7. Analyze the properties, determine what you need to get them for, and put in your second (or third) best offer (never give your best offer first… do I really have to tell you that? ;-).
8. Negotiate until it’s a win-win. .. and you walk away with several properties at below market value… the bank walks away with those properties off of their books just in time for their quarterly earnings reports to shareholders.

In essence, companies who have investors have to please their investors.  Investors don’t like to see poor financials… so companies will often take a lower price on these properties so they can boost their financials in time for the end of the quarter.

Do Business… Not Real Estate

A great way to succeed in ANY BUSINESS, including real estate investing , is to treat it like a BUSINESS.  Weird thought huh?

Look at and study how successful companies (in other markets) have become successful (Warren Buffet is a great person to study), and get creative to see how you can apply those same principles to your real estate business.

Think outside of the real estate "guru" education box… and get entrepreneurial.

Don’t hesitate to shoot me any questions… and we’ll chat soon!

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Categories: Properties for sale, building your business, how to start in real estate, real estate investing, real estate investing techniques
Tags: bank reo's, bulk reo properties, real estate investing, reo properties