There's nothing mysterious about Bulk REOs. People are often intimidated by what I do. “Bulk REO trading” sounds complicated and scary, like something that Wall Street guys with MBAs would discuss over martinis. A lot of people think they aren't sharp enough, not educated enough, not rich enough to get into this bulk reo investing business.
But in reality, bulk REO trading is just a new way to apply business principles that have been around since the beginning of time: buy in bulk at wholesale prices, sell individually at retail prices. The money left over goes in your pocket. As long as there have been humans walking the planet, this model has been the basis of our trade system.
The wholesale-retail model is so basic, so engrained in human nature, that even kids get it. Drive down a street of any city in America in the summer, and I'll bet you'll see a kid selling water bottles out of a cooler on the corner. He got them from the Sam's or BJ's or Costco, where he bought them in packs of 24 for 25 cents a bottle. Then he sells them to hot, thirsty people on the street for a dollar. And I'll bet you that every day; he goes home with an empty cooler and a pocket full of cash.
What Is Bulk REO Trading
Bulk REO trading is really no different. I buy houses in bulk at drastically reduced prices, then sell them off individually at higher prices and pocket the difference. It's really no different than the kid on the corner with a cooler – though I'm putting a lot more in my pocket than he is. And so can you.
Take the name apart, and it's even less intimidating: REO stands for ‘real estate owned' (as in owned by the bank or lender) and ‘bulk' just means that you're buying more than one at a time. Nothing mysterious there.
Now don't get me wrong – bulk REO trading takes some knowledge and know-how. You need to know where to look, who to talk to and what to say. Most people can't just wake up one morning and decide to close a bulk REO deal and make a profit.
But you don't need to work on Wall Street or have an MBA to make it work, either. I learned it all on my own – by reading everything I could get my hands on, talking to a lot of people and asking a lot of questions, and making a lot of mistakes. But even with those mistakes, I've still been more successful than I ever dreamed I could be, in less time than I ever thought possible.
Since you're reading this, you've already got a huge head start. Through my web site and great resources like REIClub.com, you can learn all the things I discovered through years of trial and error, in a matter of weeks. Start by learning how to find bulk REOs, who to talk to, and what questions to ask. Next you will move on to learning how to cherry-pick the best properties for yourself, and how to package the rest for a quick and profitable sale. And when you really are comfortable you can partner with investors so that you can buy bulk REOs without spending a penny of your own money – or going knee-deep in debt.
7 Bulk REO Investing Terms Explained
It's important to understand what some of the bulk reo traders or asset managers mean when they use special terms or acronyms for bulk reo investments and in marketing bulk reo deals. Here are a 7 Bulk REO terms and acronyms to become familiar with:
Tape or Package
- List of properties being offered for sale and has been created based on Buyer or Seller criteria.
LOI – Letter of Intent
- Buyer provides an LOI. It lays out the parameters of the intended purchase, including price, locations, and types of properties. The letter of intent will initiate the process.
MFA – Master Fee Agreement
- The MFA outlines the parties involved in a Bulk REO transaction and how each group will be compensated. Also referred to as a MFPA (Master Fee Protection Agreement).
NCNDA – Non-Circumvent (Non-Disclosure Agreement)
- Agreement not to circumvent any party in the transaction or to disclose confidential sources. It is designed to protect all parties involved and ensure nobody is cut out of the deal.
Protocol – Required Seller Process
- The process that the seller requires. This will described the sequence of events and required documents and the role of each party in the transaction.
- Party representing the Buyer/Seller in the transaction
IM – Intermediary
- A party that brings a Buyer and Seller together usually through their representatives. In some transactions there are multiple IM's which is referred to as a chain.
So don't be thrown off by unfamiliar terms or strange acronyms. Remember, it's all based on one simple principle: buy in bulk at low prices, resell individually at a higher price, and pocket the difference. That's a formula anyone can understand.