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Bulk REO’s- Hot Real Estate Niche
Posted by: | CommentsBy Kenny Rushing- Guest Article Contributor
Buying and selling bulk REO’s is among the hottest real estate niches in the country right now. But this business is only a few years old, so the fact is not many people know how this business works yet.
Lucky for you, I have been one of the few investors in the country who has actually closed bulk REO deals and play in this market everyday. I like doing $1 deals with Bulk REO’s just as much as I do when buying and selling single REO homes.
However, I like doing bulk REO deals more because the profit potentials are much bigger.
In addition, the bulk REO business is far less competitive than buying single REO homes from REO agents. Most investors don’t understand how to make money with Bulk REO’s, or they think buying bulk REO packages are too risky.
“Isn’t Bulk REO Investing Too Risky?”
When you buy a pool of bulk REO assets from a bank, you are buying “sight unseen”. This is enough to scare away most traditional investors. Don’t worry, you’re about to discover how to take the risk out of buying Bulk REO’s.
Traditionally, most real estate investors are used to going out and physically inspecting properties themselves. I refer to these people as “touch & feel” investors. However, when you buy Bulk REO homes from banks, “touching and feeling” these homes are impossible to do when you’re contracting to buy 30-500 homes or more scattered across the country. Therefore, you have to depend on others to go out in each local market and inspect the properties for you.
I have been active doing Bulk REO deals for 15 months now. Traditionally, I am a “touch and feel” type of investor like many of my peers and it was hard for me to adapt to buying properties “sight unseen” and not inspecting a property before I contracted to buy. For that reason alone, I had no choice but to develop a system that would allow me to buy and sell Bulk REO deals without ever looking at a single property but still feel comfortable along the way.
“Why Are Banks Selling Off Bulk REOs?”
Due to the U.S. economic meltdown and foreclosure crisis, banks across the country are failing. This has created a unique opportunity to buy properties directly from banks like never before. Today, banks all across America have BILLIONS of dollars in defaulted loans. As I write this report, there are over 1,905,723 foreclosure filings right now. If foreclosure filings continue at this pace we would have exceeded the 3 million foreclosure filings the U.S had in 2008.
When a borrower is in default of their mortgage note, the bank will move to foreclose on their home. The mortgage note is now considered non- performing and becomes a liability on the banks balance sheets. Immediately the bank will hire an attorney to begin the foreclosure process.
In addition to attorney’s fees, if the homeowner in default fails to pay the hazardous insurance policy, the property taxes and neglects to maintain the property, the bank will have to step in and pay those expenses as well.
Some banks have thousands of these properties and the financial burden is enormous. At this point the bank wants nothing more but to get rid of this money pit!
The timeline to foreclose on a property will depend on if the property is located in a judiciary or non-judiciary State as we discussed in the Foreclosure Frenzy article. In a non-judiciary State, the process to foreclose is much faster and can be done in 2-3 months, while in a judiciary State the process normally takes about 6-12 months.
Once the court has issued a “Notice of Judgment” in a judiciary State or a “Notice of Trustee Sale” in a non-judiciary State, the bank will move to sell the property at the foreclosure auction. The foreclosure auction is normally handled by the local Sheriff’s office. At auction, an opening bid on the property is set by the foreclosing lender. This opening bid is usually equal to the outstanding loan balance, interest accrued, and any additional fees and attorney fees associated with the sale. If there are no bids higher than the opening bid, the property will be purchased by the attorney working on behalf of the bank.
If this occurs, and the opening bid is not met, the property is deemed a REO or “Real Estate Owned”. This typically occurs because many of the properties up for sale at foreclosure auctions are worth less than the total amount owed to the bank or lender.
Banks have become accustomed to using this process to sell off foreclosure homes to remove them from their books. These homes are considered “toxic-assets”. Today, due to the U.S. foreclosure frenzy, banks are plagued with these toxic-assets while the courts that handle these foreclosure proceedings are backed up making the foreclosure process take longer then ever before.
With Federal Regulators breathing down the throats of banks to do something about all the defaulted loans on their books, banks are now seeking other non-traditional ways to get rid of their toxic assets……such as selling their non-performing notes and pools of Bulk REO properties to investors.
This new approach of bundling up Bulk REO properties and selling them at steep discounts saves the banks the headache of continuing to pay for the property taxes, hazardous insurance, utilities, maintenance cost and more importantly, removes the toxic assets from the banks balance sheets enabling them to stay in compliance with Federal and State bank regulations.
“What Are Bulk REOs?”
Bulk REO’s are foreclosed properties that banks own. Some of the homes may be currently listed with an Agent while others may not. Banks are not in the property management business. They are in the lending business and want these toxic assets off their books. Therefore, this has created a tremendous opportunity for investors who know how to play in this market.
A bulk package is also referred to as a tape. These tapes contain tens or hundreds (sometimes thousands) of REO properties. A tape is nothing more than an excel spreadsheet list of properties.
“Can I Do $1 Deals With Bulk REOs?“
Yes, in fact you can get started trading Bulk REO deals without any money. Let’s learn exactly how this can be done.
There are several ways to make money buying and selling bulk REO’s. Your options are either:
- Brokering Bulk REO Deals
- Buying Bulk REO Properties from Banks
Brokering Bulk REO Deals…
Brokering Bulk REO deals is much easier to do than buying them from banks. A Bulk REO Broker or Trader (some people refer to them also as Syndicators) acts as a middleman between the seller of a Bulk REO tape and a buyer. It is important to note that a professional license is NOT required to broker Bulk REO deals.
The great part about brokering Bulk REO deals is that you don’t have to use “Cash or Credit” to get started. Nor do you need an office, staff or car for that matter and you can do it part-time from the comfort of your home. Brokering Bulk REO deals only requires that you have a telephone, fax machine and a computer.
- Computer: Will be used to network with other Bulk REO Brokers, Bankers and Investors online.
- Telephone: Will be used to communicate offline with the people you network with online.
- Fax Machine: Used to send and receive all the documents and contracts when doing these deals.
“How Do I Get Started Brokering Bulk REOs?”
The first thing you have to do is understand the role of a Bulk REO Broker so you can find your niche to play. There are two types of Bulk REO Brokers. The first is a Seller’s Rep and the other is a Buyers Rep.
A Buyer’s Rep works exclusively with buyers who are looking to take down tapes. They match their buyers with sellers of Bulk REO tapes and charge a fee for their efforts for finding product for their buyer to purchase.
A Seller’s Rep works exclusively with sellers looking to sell Bulk REO tapes. The seller may be a bank, private equity fund, hedge fund or a private investor. The seller’s rep will get paid a fee for their efforts at finding a buyer to buy the tape from the seller.
Some Brokers work as both buyer and seller reps. The hat they wear will depend on what lead source they have. If they have a source of product for sale, they may become the seller’s rep. If they have a serious buyer of Bulk REO product they may wear the hat of the buyer’s rep.
I have acted as both the buyer and seller rep and made money. However, I prefer to wear the seller’s rep hat because my strength is creating marketing advertisements that sell Bulk REO product. Last month I closed on a small Bulk REO deal and made $25,000 working as a seller’s rep. It only took 4 hours of work to get this deal done.
Let me explain how this deal worked:
- Step 1 – Find The Product
A Bulk REO private seller called me about a small 24 home nationwide tape he had just taken down from a bank. He was asking $300,000 for the tape.
- Step 2 – Find A Buyer
I passed on taking down the tape myself but decided to call a buyer I knew who was interested in taking down a nationwide tape. My buyer was very interested.
- Step 3 – Arrange A Conference Call
I arranged for my buyer and seller to talk about the particulars of the deal. The buyer provided verifiable Proof of Funds (POF) to my seller and the tape was sent to him via email.
- Step 4 – Due Diligence
The buyer conducted his due diligence in 3 days and moved forward to take down the tape.
- Step 5 – Master Fee Agreement
The seller and I signed the Master Fee Agreement to pay me the difference between the seller’s price of $300,000 to me and my sale price to my buyer for $325,000.
- Step 6 – Contract & Closing
The buyer executed a contract and made arrangements to close the next day. Once the funds were sent to my seller’s Title Agent, I picked up a check for $25,000.
The worst part about brokering Bulk REO deals is finding REAL buyers and sellers. Most of my time is spent filtering through the fake buyers and sellers of Bulk REO’s. There are lots of fake buyers and sellers of Bulk REO who care nothing more than to waste your time.
~ Kenny Rushing, House Hustler
About Kenny Rushing…
Kenny Rushing is a remarkable tale of a life turned around. A resident of Tampa, Florida who is an evolving account of transformation that is simply extraordinary. Kenny is best known for the moving story of his humble and troubled beginnings, and his phenomenal success as a real estate investor – in spite of the seemingly insurmountable odds he faced. He is a phenomenally successful real estate mogul, civic leader and devoted philanthropist. His company, Rehabbers Superstore, Inc., now grosses millions of dollars per year through real estate transactions and investments. Kenny Rushing is quickly becoming known for the life transforming impact his uncommon wisdom is having on the lives of those who have benefited from his knowledge, wisdom, training and coaching. His goal over the next five years is to teach 1 million people how to achieve financial independence and flip their life through real estate investing.
Kenny Rushing is a living testament that: If KEN Can Do It – So KEN You!
Jeb Henley’s Video – The changing Real Estate Market
Posted by: | CommentsJeb Henley has been selling Real Estate since 1975 and have seen multiple market upheavals. He has sold investment property from California to Florida.
He will be exploring the question of whether we are going into a 2nd Dip in the price of inventory. If you are wondering where will Job Formation start, this is for you. If you are wondering what market segment will make the highest appreciation, mark your calendar and join us on this August.
The Changing American Dream of Home Ownership
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Let me share some insights to you before I meet with everyone in August.
I actually Broker property in multiple markets. My clients still have holdings in Sacramento, Stockton and across America. The Theme of my August Meeting will be Changing Market conditions. As anyone who has tried to buy real estate will know, getting a loan is now very difficult.
The Credit Market is still frozen as far as real estate goes and the changes in the Appraisal process only magnify the problem. What the Banks do not want is more Bad Loans. But the Inventory is piling up and there will be a tipping point very quickly.
For Example sales are off in some regions 33% and inventory is up 25%. That is occurring, while interest rates are dropping. Where are sales headed? Probably lower and that is a problem with the inventory of foreclosed homes.
Home foreclosures are so much more corrosive than I ever imagined. By the way this month the FNMA number rose back up on delinquencies.
If Americans no longer trust homes hold value, then you will experience the Tampa, Florida market. In some areas prices have dropped 90%. Tampa is an actual city with jobs and running water. Vegas has a higher default rate than Tampa.
Should you jump back under your bed?
No in certain Markets, the re bound is happening just the way it did in Stockton and Sacramento. Now the Golden markets are San Diego and Phoenix. Be very careful is my prediction. Once Americans lose faith with the “American Dream” it will be hard to rebuild the faith.
Houses are like paper money, part fiction and part fact.
I sold Houses in Santa Cruz County at $35,000 and watched them go to Million. Given it was the same house, that is Fiction and Belief. The problem right now is Lending which is almost impossible to get a loan on anything. This will trigger more people to walk away from their homes. If lenders make lending so difficult that homes do not sell, values will fall. This is what I am describing as Phase 2 or the Double Dip provided by Lenders. Because credit is so tight, the Banks will possibly create their own 2nd crash of values.
A potential shift in attitude is occurring in America back toward Renting. Rents have stabilized in many markets and demand is strong. I have changed my buy direction towards Multi Family. In certain markets (Phoenix) it is under priced and rents are stable. Values have come down 75% into 1982 prices and that is below their real value.
Next Month we will talk about Phoenix and Vegas. Prices, Jobs, future, and past. Real Estate still makes more sense than the stock market. The key is studying where to go and why.
Plan on attending August for more specifics on various markets in the U.S. and why they make more sense than Santa Cruz.
4 Plex in Santa Clara $650,000
4 Plex in Phoenix that is newer and better condition $105,000 (was $400,000 two years ago)
I look forward to meeting you all with more data and facts. See you in August.
Jeb
The Changing Trends in Real Estate – Jeb Henley Workshop
Posted by: | CommentsPlease join us for our monthly meeting as we welcome St. Investment Broker, Jeb. T. Henley
- Is now the time for income property?
- Where are buying opportunity locations?
- Where is job growth?
- The lending crisis and real estate prices?
About Jeb Henley:
Henley has been selling Real Estate since 1975 and have seen multiple market upheavals. He has sold investment property from California to Florida.
He will be exploring the question of whether we are going into a 2nd Dip in the price of inventory. If you are wondering where will Job Formation start, this is for you. If you are wondering what market segment will make the highest appreciation, mark your calendar.
Does Your Thinking Limit Your Success?
Posted by: | CommentsPlease join us for our monthly meeting as we welcome personal development presenter, Cassie McDowell
Cassie helps individuals make better choices to garner success. Cassie will be talking on the following topics:
- Correlation between thoughts and results
- How to make better choices for an enjoyable life
- How to break through the limiting perceptions to become successful
- How thoughts, feelings,actions and behaviors are inter-linked
- How to control your thinking
- How to improve the quality of our life
- Experiential exercises and processes to break through our limiting belief patterns
About Cassie:
Cassie helps individuals make better choices to garner success.
As a Presenter at Productive Learning & Leisure, she specializes in personal and professional development courses, helping people break through their limiting beliefs and habits that unknowingly inhibit their dreams and desires. PLL closes the gap between what we have and what we want.
Cassie enjoys hiking with her 3 year old lab, photography, and traveling.
Hurry and Book your Seats Now.
Protected: Limited time only…
Posted by: | CommentsPros and Cons of Investors getting a Real Estate License
Posted by: | Comments
Are you trying to weigh out the Pros and Cons of operating in the dual role of investor and real estate agent? Wondering if a real estate license will benefit your business?
If so, you’re not alone. and they’re great questions to consider I’ve heard many investors say that once they had one or their spouse got one…it really improved the quality of their investing business.
Would that be the case for you or for me?
I don’t know, but let’s explore it a bit more in detail.
Some investors report these benefits
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Control over their Deals:
If you’ve ever lost control of a deal or wish that you’d been able to do something different that what your agent did…now’s your chance. If you’re an agent, you’ll have full control over your deals. You’ll be able to submit the kinds of offers that you like, negotiate with sellers, banks and other agents directly. You’ll be able to control the showing of your own properties, the marketing and anything else that you believe will effect a certain outcome.
Many investors believe that the monthly fees and overhead are worth the cost because they feel that they close more deals that they’re in control of.
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MLS Access:
Having a real estate license will allow you to have access to the MLS without relying on colleagues or other agents to get access. As long as you have your license, this will be a permanent perk and you won’t have to access it on thew sly or worry about someone else getting into trouble of allowing you access.
The MLS enables you to generate search queries and find properties that really fit your criteria along with the historical data on that subject property. The MLS access allows you the time needed to create a farm area and begin to mine that farm in your own time.
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More Profit:
Every time an investor sells a house using another agent, they’re spending anywhere from 5-6% in commissions and on each house that they buy using an agent they’re also enabling their agent to make up to 3% in commission….per house.
What this means is that if an investor had a license or their partner/spouse had a license- the profit would increase by anywhere from 6-8% if they facilitated the purchase and sales. Imagine the extra profit that could be made by not having to use another agent. If you had a license where you just utilized it for 2-3 deals per year, that would be Thousands of additional profit per year in our market.
The Cons
Some of the drawbacks:
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Securing Your License
This is Step one in the process… where you acquire your license. It’s not very costly but will be several hundred dollars to get the course and then a few more hundred bucks to apply for the exam and license. The course will take a few months (respectively) and approximately 80-120 hours in studying exams. After you’ve gotten your license, you’ll need to decide on a sponsoring broker to work under which may involve some additional fees and responsibilities. In order to retain your license, there will be some continuing education requirements as well.
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Paper, Paper, Paper.
Let’s get real. I’ve heard and you probably have to about the mountains of paperwork involved and if you’re an active agent, you’ll have lots of paperwork. This could end up being the most challenging aspect of having a license, but there’s no way around it. Think about it this way, you’ll be responsible for writing your own offers, submitting forms to attorneys, agents, brokers, the MLS, etc.
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Disclosures.
Licensed real estate agents are held to a higher standard in the business. At all times, they must disclose to sellers and buyers that they’re a licensed agent and if in doubt at any time…full disclosure is strictly encouraged.
There is a mix of opinions about the disclosure aspect by some investors. A portion of investors believe that this duty negatively impacts their business and hinders the creativity of certain deals….which is why they’d avoid choosing to get their license.
On the other side of the coin, having a real estate license can add to your credibility, reputation, leads and referrals. What are your thoughts??
Considering becoming a Real Estate Agent?
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Thinking of becoming a real-estate agent, but do not know where to start?
First, you would have to determine if this kind of career is the right one for you. Most people usually think that to be a successful real-estate agent, you just need to be good in convincing people to buy properties. Good communication and persuasion skills are, of course, plus points,but that is not all. You also need to be familiar with the industry.
Real estate agents ensure that the buyers would be able to find their dream homes, while sellers get their property’s worth. It would take skill and mastery before you could become successful in this career, just like in any kind of occupation. You would need proper training and education. There are different institutions that offer courses for those who would like to enter the real-estate industry. Usually, states would require an aspiring real-estate agent or salesperson to spend about 30 to 90 hours classroom education.
The Professional Licensing Commission in your state would have lists of reputable educational institutions where you could take your courses. You could also ask the Real Estate Association for recommended institutions. A high school diploma is a requirement and at least be 18 to 21 years old.
Before becoming a true real-estate agent, states would require a license to operate. You would need to pass a licensing examination. Agents are required to renew their license every two years but it still depends on the state. You would also need to attend seminars even if you are already licensed. The real-estate industry is continually evolving or changing. A real-estate agent should always be aware of changes in laws and regulations in the state where they are located.
But taking real-estate courses are not the only thing that would prepare you for the industry. It is recommended that you work with a mentor broker for about 2 to 5 years to get experience. It is like apprenticeship. After that period of time, you could start thinking about setting up an individual practice.
Technical requirements like coursework and license will equip you, but it is your attitude that will help you become successful in your field. As a real-estate salesperson, you need to be sociable or a people person. You would be working with different kinds of people, not only the buyers and the sellers. A real-estate agent will also work with lending officers, lawyers, mortgage brokers, insurance company representatives and even land-use officials.
A real-estate agent can become very busy, if they’re lucky and great at what they do. Clients would often call an agent during the time when they are available, asking for updates or advice. Flexibility is another attribute you would need to develop. Clientele could be a problem for beginning agents. You would need patience since it would take time before you have your own client list.
Another concern for real estate agents is the income. Most experts would recommend that those who are only starting to learn the industry should have an alternative source of income. But if you are selling multi-million houses everyday, then you would not have any problem with income at all. But success would surely come if you would work hard and learn from every step you take in the industry.
Some of our FEC/REIA Club members are Real Estate Agents and would welcome any questions that you may have. Attend on the 4th Thursday of the month and network with one or several of them.
Click here for a DIY Real Estate Agent’s Course.
Click here to go to the Dept of Real Estate
Real Estate Investing Basics
Posted by: | CommentsWhat Are Your Investment Goals?
When it comes to investing, many first time investors want to jump right in with both feet. Unfortunately, very few of those investors are successful over the long haul. Investing in anything requires some degree of skill and strategy. It is important to remember that nothing is a sure thing – there is a risk of losing your money!
Before you jump right in, it’s better to not only find out more about real estate investing and how it all works, but also to determine what your goals and tolerance are.
- What do you hope to achieve with your investments?
- Will you be funding a college education for your kids or your self?
- Buying a home to live in?
- Will you be Retiring soon?
Before you invest a single penny, really think about what you hope to achieve with that investment. Knowing what your goal is will help you make smarter investment decisions along the way!
Too often, people invest money with dreams of becoming rich overnight especially after watching some late night guru standing near a boat in the Tropics talking about how easy, risk free and simple it is. This is possible – but it is also rare. It’s a very bad idea to start investing with hopes of becoming rich overnight.
It is safer to invest your money in such a way that it will grow continuously over time, and be used for whatever you consider to be important.
You may strongly consider talking to a financial planner before making any real estate investment decisions. Your financial planner can help you determine what type of investing you must do to reach the financial goals and time line that you have set. He or she can give you realistic information as to what kind of returns you can expect and how long it will take to reach your specific goals.
Join and attend a real estate investor club to meet other investors that are doing what you want to be doing. Arrive early and stay late as this is the time when the real networking occurs and deals are discussed. FEC/REIA meets every 4th Thursday of the month at 6:30 at the Doubletree Hotel in Rohnert Park and we have a different topic and speaker each month. Join us every month to learn the basics and advanced strategies of what is really working in today’s market.
Again, remember that investing requires more than just making a decision to do so and contacting an agent. It takes a certain amount of research and knowledge about the real estate market if you hope to invest successfully and make money.
