The weakness of the U.S. economy has given rise to the largest epidemic of foreclosures in American history. Yet as always, this challenge has given rise to a huge new opportunity for alert real estate investors.

That opportunity is called Bulk REO Investing, and the opportunity is huge.

Let’s take a moment to analyze the basics of this incredibly lucrative business.

You can’t understand Bulk REO Investments without understanding the process of foreclosure.

As a borrower becomes increasingly behind in his mortgage, the lender regularly calls and writes the borrower with default warnings and threats. 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.

To complete the foreclosure process, the property is auction to the public. Ownership of the property is returned to the lender if the property is not sold at auction. Such a property is then classified as an ‘REO’ (Real Estate Owned) by the lender.

Lenders have no interest in owning property, and thus usually opt to list their REO properties with a local real estate broker in hopes of a retail sale. But as a consequence of the weak economy, lenders are frequently selling their REO properties far below their actual value. The trade-off is that the buyer must purchase multiple REO properties in each transaction.

There is huge profit potential in these REO packages for qualified real estate investors. The most successful Bulk REO Investors will have a well-respected source of funding for their transactions. There are many sources of funding for these transasactions including: hard money and commercial financing, as well as non conventional sources such as hedge funds and private investors. Additionally, one man is becoming very well known in the field of bulk REO investing, and his name is Kenny Rushing of Rush Capital Partners, a Tampa-based hedge fund.