No generation in American history has ever experienced the number of foreclosures and defaulted mortgages as is happening now. But smart real estate investors are turning these ‘lemons’ into ‘lemonade’ in an incredibly profitable new way.

‘Bulk REO Investing’ is the name of the new strategy, and it’s captured the attention of many well-heeled investors.

Take a just a minute to consider the basics of this highly profitable business.

To understand Bulk REO investing is to understand the foreclosure process.

Mortgage lenders faced with a non-paying home owner send a large volume of threats, warnings and documentation to the borrower who is late. Following a period of time determined by the lender, formal foreclosure proceedings begin. ‘Pre foreclosure’ is the name given to the time between implementation of the foreclosure proceedings and the public auction.

The defaulted property is ultimately auctioned, thus completing the foreclosure process. The lender regains ownership of the property if there are no buyers at auction. The lender then categorizes the property as ‘Real Estate Owned’ – or ‘REO’ for short.

REO properties are usually listed for sale with local real estate agents. But as a consequence of the weak economy, lenders are frequently selling their REO properties far below their actual value. This happens because the buyer of the REO is required to purchase multiple REO’s in a single transaction.

These REO packages represent the potential to acquire huge amounts of equity for savvy real estate investors. REO packages are easiest to buy and sell with a well regarded source of financing in place. Some sources of funding for these transactions are: personal funds, hard money lenders, commercial lenders and non-conventional sources such as private investors and hedge funds. Additionally, one man is becoming very well known in the field of bulk REO investing, and his name is Sal Buscemi of Dandrew Capital Partners, a New-York based hedge fund.