At present, all of the “gurus” are aggressively promoting a new course on REO investing. The problem with this is that those who are doing so seem to suggest that REO Investing is “a smart thing to do” in the present economic environment.
But is it?
I’ll answer that question for you now: REO’s can be a really great way to create profits. So who should invest in REO’s right now? I think there are a few requirements you should meet before investing in individual REO’s:
- You should be relatively cash-rich
- You should be capable of carrying your REO properties for several years in order to ride out the current economic storm (do not rely on the hope of “flipping” your deals – that’s a recipe for disaster)
- You should be very adept at analyzing properties (in fact, getting input from a professional real estate analyst would be a really good idea considering the market we’re currently facing).
If you can do all of those things, then investing in individual REO’s might make sense for you.
…There are some reasons that REO investing may *not* be right for you. So I’d like to take a moment to educate you about REO investing from an honest perspective, and to give you a very low-risk alternative strategy.
So to begin with, an REO is a property that’s been foreclosed by a lender. There are lots of these available right now. Millions, in fact. So there’s not exactly a shortage.
In fact, I suspect there are more REO’s available right now than ever before in the history of our fine country. Is this a good indicator for you as a potential REO investor?
I suspect not. The mere presence of a record-breaking number of REO’s doesn’t inherently mean that the average REO deal is a good one. In fact, lenders are very motivated to do all they can to recoup their losses in any way they can. And for them, one of the best ways is to sell off their REO’s to wide-eyed investors who think they’re at the start of the next gold rush.
However, let me be clear: I do believe that REO’s can be good money makers. Recessions are wonderful things for people who have investment capital available. But if you think you’re going to make a fortune in the REO business without having some serious “skin in the game”, you need to think again (regardless of what any promoter tells you).
A better alternative is to focus on cash-generating strategies that don’t require your money or your legal liability. What you need is MONEY, not equity. Equity feeds nobody, particularly during a recession.
So here’s the smart way to play REO’s: (1) Never use your own money or credit; (2) Never accept any legal liability for any REO deal; and (3) Only get involved in deals with very high profit potential.
So how does a person do all of these things simultaneously? I can tell you this much: It’s not by diving in head-first into individual REO’s. I don’t care how good the deal looks. In this economy, a property you buy for “50 cents on the dollar” today could very easily end up being a property you sell for “30 cents on the dollar” tomorrow.
All I’m saying is this: Be smart. Use your God-given talents and abilities to make money from REO’s in a way that’s safe and smart.
The smartest alternative I’ve seen to the promise of REO Investing is to do “Bulk REO Investing” using funding from a third party. In fact, I have a friend who runs a hedge fund in New York, and that’s what he does: He works with individual investors (like you and me) who fundamentally serve as “bird dogs” for finding packages of REO deals. My friend’s hedge fund then purchases the REO packages that make sense and the individual investor gets paid an immediate (and significant) cash payment as a finder’s fee.
And the numbers are pretty big. By my calculation, a reasonably conservative payout received by individual investors (like you) when they bring a package deal to my friend is between $30,000 and $50,000. And you make that money without assuming any risk in the transaction, and without using any of your own money or credit. What’s more, he teaches you how to find these package deals from 3 separate sources that are totally “off of the radar screen”, so to speak.
I was astounded at what I learned in the webinar he did with us a few weeks ago. I mean truly astounded. I’d never heard anything like it in my life.
My friend’s name is Sal Buscemi. He runs a very successful hedge fund in NY, and that webinar was one of the best-received pieces of educational content we’ve ever offered. What I and the other viewers of Sal’s presentation learned was truly a new and fresh approach to REO investing in the mortgage meltdown era, except all of the risk is literally eliminated from the start.
For a moment, let’s circle back to the top of this article where I mentioned to you the aggressive promotions going on right now for the latest “guru course” on REO investing. I suspect that many people will get caught up in the frenzy of that type of promotion without really thinking about other alternatives to accomplish the same thing, but without risk and without using their own money.
That’s why I’d like to offer two highly valuable resources:
First, I strongly recommend that you watch the webinar that I did with Sal Buscemi. That webinar is recorded and available for you all of this week at this link:
Second, I’m having a very special question and answer teleseminar with Sal on Thursday night. Of course, the teleseminar will be 100% free and I would truly appreciate your suggesting questions to me to ask on Thursday night. (Note – I’ll send you the telephone number for the teleseminar tomorrow via e-mail if you’re on my email list.)
PLEASE NOTE – I strongly encourage you to watch the Bulk REO Investing webinar that we recorded a couple of weeks ago. You are, of course, welcomed to get on the Q&A teleseminar on Thursday night regardless of whether you’ve already seen the original webinar, but I know for sure you’ll get a lot more from the Q&A session if you’ve seen the webinar. I’ll leave the webinar up for you to watch this week, but I strongly recommend that you watch it TONIGHT (Tuesday, March 10) at 9:00 PM ET. There will be some special content available this evening.
So, that’s all I have for you right now: Just think a little about whether REO investing makes sense for you right now. If you’ve got a lot of money stored away, maybe it does. But if not – and if you’d like to come out of this recession with a bank account that’s much fatter than when the recession started, I strongly recommend you take a look at the Bulk REO Webinar and join us for the Q&A session this Thursday evening.
If you’d like to suggest a question for the Q&A session, please do so in the comments area below. As always, thank you for reading http://RealEstate.BryanEllis.com!