Ray Piel

The following are just 3 of the top mistakes made by new investors in this niche. This is the main reason why I encourage seeking the right training, preferably with a mentor who is currently successful and active in the business.

Mistake 1

Not Recognizing "Daisy Chains"

Unfortunately in this business you will encounter a collection of never ending daisy chains of "brokers" and self proclaimed "mandates" constantly misrepresenting product they do not control nor have the proper authorization to advertise or sell.

Only through training and experience will you be able to recognize these clowns of the business within 2 minutes of being on the phone with them. You will learn early on that it is not about finding the deals, but learning how to spot these clowns and get off the call as fast as possible.

These people who obviously have nothing else better to do will be your downfall if you do not learn early how to get pass them and on to the real product source, which is the most difficult point to locate.

Mistake 2

Not Performing Due Diligence

Any time you are investing you need to run a thorough due diligence to make sure the numbers make sense.

This is the main cause of failed stories about investing in this industry. The slightest mistake can empty your pockets in the blink of an eye; this is why mentorship and training prior to investing is crucial in this business.

Hire local Realtors to run your BPO (broker price opinion) and establish real market value with updated figures for today's Real Estate market.

A lot of newly formed hedge funds find themselves guilty of this crucial mistake. They let ruthless sharks that have been around for a while talk them into buying a tape which is either full of garbage assets or over price.

Mistake 3

Not "Cherry Picking"

This has to do more with being affiliated with a real source or company that will give you access to their product and thus cherry pick from their lists or properties.

Instead of waiting for that "home run" of 100 properties, you can work on those "one base hits" by cherry picking one property at time from a tape. Rehabbing and selling these one at time will put money in your pocket immediately. You can always wait for the "big deal" this way.

Investing ONLY in the right type of properties will bring you success and eventually fortune in the Bulk REO industry. This is the easiest and most effective way to make money when you get started. Most companies and individuals will not circumvent you when dealing at the one off level.

- CONCLUSION -

Be alert and be realistic and you will find the right source and the right training to be successful in Bulk REO and Non Performing Note investing.

Read, research and listen, but as everything else in life, you need to make up your own mind and choose your own path to success. By trusting your instincts and using some basic common sense, you can make this happen and earn small fortune in the process. I wish you the best of luck in your future endeavors. Now, go make a fortune.

Happy Investing!

Ray Piel

As you read this article history is being made across the United States, as the foreclosure market reaches an all-time high, even higher than the great depression!

It's no secret that Bulk REO investing has become big business and all levels of investors are looking for a way to participate. In this article we will discuss the difference between an REO (real estate owned) and NPN (non performing note), plus how you can profit from both as an investor.

Let's start with the fabled REO...

An REO (real estate owned) is simply a property that has gone through the foreclosure procedure and has been taken back by the bank due to an unsuccessful sale at the court house. These REO properties are currently owned by banks, private equity firms or hedge funds that have purchased them from the banks in large tapes or packages.

How do you make money from Bulk REO investing?

• First we have the Mandate or Broker:

Brokering Bulk REO is no different than any other business where you find the product at a certain price, then go out and sell it to an investor and earn a commission for your time and effort. The big difference is that with Bulk REO that commission can be thousands of dollars per transaction. For example, if you sold a $1MM dollar package or tape, your commission can be 1.00% to 3.00%. That means that you can potentially earn $30,000 for just one transaction.

In addition to points, you can also use the "spread" strategy to increase your profits when brokering these deals. For example, let's say a Bulk REO wholesaler is selling a package for $500,000, and you offer it to another client for $550,000. You have just worked the spread to make $50,000.

• Second, we have the Cash Buy Approach

If you have the right connections with banks, your second option is to become a Tier 1 buyer of Bulk REO's. These are usually private equity hedge funds, real estate investment trusts, or high net worth investors that play in the game who have the cash to buy packages of 100 plus homes. This is where you get the greatest discounts-when buying directly. Then you can re-sell these homes wholesale to secondary buyers for maximum profit.

• Third you can take the Rent or Sell Approach

With this approach, the average investor is able to earn a sweet return on investment. After rehabbing the property, you can sell it with the buyer obtaining a traditional mortgage. Or if the buyer does not qualify for a loan, you can hold back the lien yourself and keep all the interest.

Non Performing Notes, what are they?

A Non Performing Note is a mortgage that has not been paid and it is in some stage of the foreclosure procedure, such as late 90 days, summons served, etc.

How do you Profit from Non Performing Notes

• The Quick Flip Strategy

Obviously the most sought approach is to buy the notes at deep discounts and then sell them fast for a quick profit. This will avoid having to deal with delinquent homeowners that have not paid their mortgage. If you take down a million dollars worth of notes at 20% of the UPB (unpaid principal balance), and quickly turn around and sell it at 30% of the UPB; you just pocketed a handsome $100,000 profit.

• The "Cash for Keys" Strategy

Another strategy is the now famous "cash for keys" method. Using this approach you can negotiate with the homeowner a reasonable fee for moving out without having to go through the foreclosure machine. This is good for you since you avoid the time and cost involved and it is also positive for the homeowner since they avoid a foreclosure stamped on their credit report. This will allow you to list their property for sale within a very short amount of time.

• Reduce the Loan Principle Balance Strategy

This strategy will make sense for those homeowners that are able to qualify for a new mortgage or have a friend or family member that will co sign for them. Let's say you paid $40,000 for a note that had a UPB of $200,000; you can propose the following to the homeowner: "I will cut your principal balance in half and you can stay in your home, but you have 14 days to refinance your mortgage and cash me out". Most homeowners that have the ability to get this done will not think twice to take advantage of this opportunity. Once closed, you just earned a hefty $60,000 profit, plus made possible to keep the dream of ownership alive for another fellow American.

To really make considerable profits Bulk REO and NPN investing is the way to go in this current real estate market because you're buying distressed assets at rock bottom prices. It is best to navigate both sectors of the bulk market, this way you keep your options open and double your opportunity windows. Choosing the right niche depends on several things; your short and long term investment goals, how long you can commit your money into an asset before you need to recover those funds (typically, it may take longer to get your money back if it is invested in an NPN); if you prefer to own the paper (mortgage note) as opposed to the tangible assets (deed); or what your exit strategy entails.

It does not matter which strategy tickles your investment bone, all you need to make sure is that you are dealing with a real source for Bulk REO and NPN and you are paying a price that make sense. Now, go make a fortune!

If you have been waiting on the sidelines to participate in Bulk REO investing. If you have been waiting for that “dream bank package” within driving distance from your home and keep procrastinating to take action. If you have “paralysis of analysis” and are overwhelmed about investing into property you have never seen… read on…

Don’t you just find it amazing how some people still claim they have a buyer to take down a billion dollar Bulk REO tape and that they need to close fast. Are these people taking some type of medication that clouds their sense of reasoning? Do you truly believe that any given regional bank keeps this amount of toxic assets? Have you even broken this down into numbers and stepped back to consider the amount of Real Estate property this would entail?

Unfortunately, most new comers to the world of Bulk REO (bank owned properties sold in bulk packages or tapes) feel that real players will pay more attention to them if they bounce around the word “billions”. The truth is that the majority of real Bulk REO packages range from as little as $100K to an average of $15MM. These tapes normally contain 10 to 300 properties.

These realistic numbers open a window of opportunity for every level of investor out there. If you have been kissing your local reo agent’s butt for a meager property here and there at almost retail price, you really need to look into Bank Bulk REO and NPN (non performing notes) investing. The profits here dwarf anything you would attain with your local Realtor and you do not have to kiss any body parts for it.

Gurus have taught us to approach the local banks and credit unions directly to solicit Bulk REO and/or NPN product. This really is not a good idea, you control nothing when dealing with a bank, plus at the end of the day you are still negotiating with a salaried employee. Dealing directly with a bank will not guarantee you the best deal. Banks give their “best deals” to larger institutions such as other banks and hedge funds with which they have established relationships.

Contrary to popular belief, the best deals are secured when dealing with Bulk REO Traders. These individuals or companies have done the dirty work for you and negotiated the best price possible with the banks. Another advantage of dealing with traders is not having all the pressures and paperwork imposed by banks. Plus you get exactly what you paid for; most of them allow you to “cherry pick”.

That sounds easy enough, but if it was this easy then everyone would be doing it.

The toughest part of investing in Bulk REO and NPN is finding a real source with real product that has not been shopped and blasted all over the web.

Use the internet to your advantage, search the name of the “mandate” or broker. Make sure he shows up related to the industry in several credible sites. Also make sure that he has not been blacklisted everywhere. After the research, use your common sense and feel the person out; does he know the business, does he at least sound like he knows what he’s talking about, etc.

With some help from Google and good use of your common sense, you will be able to determine if you have found the real source for Bulk REO and NPN product. Once you do, be ready to “proof up” (provide a verifiable proof of funds). No reputable mandate or asset manager will send out their tapes unless they know you are financially capable of taking down the package. It does not have to be bank statements; it can be a simple 3 line letter from your banking officer.

If your new found Bulk REO source does not have what you are looking for, don’t give up. These mandates or companies usually have new product every month, just make it a habit of following up with them.

Word of caution; do not get caught in the “I want to build a dream tape with properties located within driving distance of my home”. This will NOT happen and it is NOT real, also don’t expect to find high end condos in South Beach within these tapes.

People please wake up and come back to reality, bank tapes are composed of aged old assets that the lender can not sell off through the MLS or Multiple Listing Service. Think about it, why would a bank package into a discounted tape nice clean property that they can get top retail dollar via the MLS. If it doesn’t make sense to you, why would it make sense to the bank?

You can still make a handsome profit investing into these bank’s toxic assets. All you are doing is buying cheap, selling cheap and still rack up trucks full of dollars for yourself.

That sounds very nice Ray Piel, but how do I sell something that’s across the country which I have never seen?

Good question, do as our company and the banks do!

Stay with me for a minute… To run your due diligence, you normally will hire a third party to get you a BPO or Broker Price Opinion of the properties. These BPOs are performed by local licensed Real Estate Agents or REO Agents. The competition is tough for these agents to get hired to do these BPOs, meaning that the ones that get the jobs are the sharpest of the group.

Here’s the answer to the question… Hire the same agent that does your BPO to list and sell the property for you. This agent can also help you maintain and protect your investment during the sales process.

Don’t complicate it more than it is, on your first run you may feel a bit overwhelmed; I sure did. But like anything else in life, after a couple of transactions, you will be a seasoned Bulk REO investor putting millions back in your pocket.

This amazing opportunity to make this kind of money in such a short amount of time will not be around forever. Stop seating on the sidelines watching people who are no different or smarter than you make all the money.

Go invest in Bulk REO and/or NPN and make a million bucks before the end of 2010.

By now you have probably heard of the “mythical” Bulk REO Investing Market. Before we go any further, permit me to dedicate just a few lines to explain Bulk REO for the sake of those readers who are not yet familiar with this term.

The term REO refers to Real Estate property that has gone through the foreclosure process and the bank had to buy it back due to a lack of sale at the public auction. Gone are the days when investors used to fight each other over at the court steps searching for that bargain deal on an investment property.

Due to this shortage of court auction house buyers and the incredible rate of foreclosures across the US, an enormous amount of foreclosed inventory is being kicked back to the banks every day.

The unsold Real Estate inventory that the banks are now holding it’s labeled as Real Estate Owned or REO. These are considered toxic assets that the banks do not want to see in their books. They now become the responsibility of the institution’s asset manager, who is assigned the tedious task of getting these toxic assets off the bank’s books by selling them via the MLS (Multiple Listing Service).

These properties get listed on the MLS by local Realtors; normally the agent who performs the BPO (Brokers Price Opinion) or inspection for the selling bank gets the listing. Once a Realtor gets a few of these listings under their belt, they become known as an REO Agents. These REO Agents are considered and treated almost like “Rock Stars” by the local investors and wholesalers.

This “master plan” engineered by the lenders was supposed to work like clockwork, but the weak housing market and the banks getting greedier with the sales prices of these assets has turned out to be an ineffective sales method.

Comes now the mythical Bulk REO… when these foreclosed properties do not sell via the MLS and REO Agents, the banks package them into “tapes” or “packages” which are nothing more than a list of discounted properties offered for sale.

The Bulk REO tapes and NPN (non performing notes) packages are offered at steep discounts to investors and hedge funds. The properties get discounted as much as 50% or more of their BPO valuation or mortgage value in the case of the NPNs. This creates a huge “dream come true” opportunity to make a lot of money in a short period of time for the smart and funded investor.

- And this is where the dream ends and the nightmare begins…

What makes this incredible investing opportunity so great is also what makes it so horrible. The lucrative buzz generated by Bulk REO in the Real Estate and investing communities has brought forward a wave of newcomers into this arena.

Unfortunately these “joker brokers” have set up shop online and are blasting out and misrepresenting product that does not belong to them. They normally acquire these “bait” tapes by utilizing POFs (proof of funds) obtained by innocent third party investors who have the will and the means to take action, but lack the source for real product.

These joker brokers have made a circus of this most lucrative investing opportunity and have left a sour taste in the mouth of real investors in the industry.

Quick tip #1: as soon as you hear on the other side of the phone “I have a $500MM tape going for $50MM in CA”, don’t waste your breath to respond and hang up. These size tapes get traded between banks and institutions, never with independents. People who like to make others waste time by offering these ridiculous packages should really get a hobby doing something else. Not to mention the fact that banks do not discount product in CA, they don’t have to, it sells very well through the MLS.

Quick tip #2: ironic that I even mention this while you are reading this article online, but I believe in sticking to reality. Beware of online forums and blogs, especially in the non reputable sites that anyone can just post some quick lines. Not all that shines is gold and I get my content stolen more times that I care to remember. Don’t get me wrong, some forums and authors are the real deal; just make sure to conduct your due diligence.

Quick tip #3: and this is more common sense than anything, but we are all guilty of it at some point. Keep an eye out for unrealistic claims of profit and fortunes. Don’t fall for the “I have a direct connection to this bank or that bank”. There is no “connection”, banks sell to the highest bidder and they’re not playing these idiotic games.

Quick tip #4: if you receive an email from a joker broker, pay attention to the structure of their writing, their spelling, grammar, etc. Scammers never went to school; instead they cheat their way through life. This one is by no means a solid tip; I have seen some scammers that steal someone else’s writing to conduct their schemes.

Quick tip #5: any reputable Bulk REO trader or mandate will not deal as an “affiliate” of a corporation. These are usually internet marketers being in a place where they do not belong. These are the ones that use your POF to go shopping for tapes to sell.

Quick tip #6: more times than none, real companies will have product in the $1MM to $10MM. Once in a while they may have something (such as commercial property) north of that, but it’s not common practice. Like with any other business, use your common sense and as I always preach: if it sounds too good to be true… you know the rest.

The good news is that if you are interested and capable of investing in Bulk REO and NPN packages, you can make a fortune in a very short span of time. There are a few companies out there with real product for sale today (or as we say in our industry; “ready for take down”), but you need to be very careful about who you trust and do business with. Now go change your life by investing in Bulk REOs.

We have all heard the ongoing rumor that has been circulating our industry for the past year or so...

"There is a glut of foreclosed property that the banks are holding back and anytime soon we will see an avalanche of REOs hitting the market place when the second wave hits us"

You are probably inclined to believe this because it has been getting harder to buy at a decent discount from the MLS and it has been scarce in the Bulk REO arena as well.

Well, let me tell you that these rumors are false and they have been spun by brokers and pretend investors that are not active in the business. Or by "gurus" that are trying to sell you the next "silver bullet method" by preying on your fears of the Real Estate market.

The truth is that there is more demand than supply. The players that were sitting by the sidelines are stepping on to the field, as well as a hoard of hungry international investors and hedge funds.Bank-owned-REO-homesl

In fact, the latest sales numbers have been so great that they have surpassed the number of foreclosures currently hitting the market. To be honest, I am starting to believe that there is no glut of foreclosed homes at all.

That being said, it is true that there are a huge number of mortgage defaults and foreclosures that are still hanging. This is an astronomical number, but it does not mean that there are stacks of foreclosures sitting inactive in bank files all over the world and not being marketed to the masses.

Due to a ton of misleading information on and off line, a good number of investors out there believe that they can take down Bulk REO Tapes in CA, AZ and NY at $0.50 cents on the dollar.

Ladies and Gentlemen, please hear this... Those packages do NOT exist! Bank Tapes in those markets are going for $0.80 cents to PAR; and in some instances above market value.

That is not investing, that is speculating, and we all know there is no difference from doing this to taking your capital to Vegas and rolling it at the roulette wheel.

Banks are not stupid nor going broke, they are in fact very smart and very liquid. They are releasing their inventory in those states through Realtors and retail buyers via the MLS, online, and print media.

Our company buys Bulk REO Tapes and Non Performing Notes straight from banks and asset managers. We own and control the product; there are no brokers and no "daisy chains". We even allow you to "cherry pick" from out tapes of REOs and NPNs, you can take down 1 house or the entire tape. This is very rare and hard to find!

Unfortunately, you can not say the same of most "companies" out there. All they are doing is misrepresenting product and trying to broker these tapes and participating in never ending daisy chains. There is no $0.30 on the dollar product unless you're taking down huge multi million dollar tapes at the Buffett level.

Bulk REO Bank Tapes will never be this cheap, stop your "smoke and mirrors treasure hunt" and take action now. If you keep waiting for that magical tape, you will be missing out on the biggest opportunity to make money in our nation's history.

Keep waiting and you will miss the Money Train...