What are whales in real estate investing?

We all know that whales are seas roaming mammals and they are generally quite large. The size of aquatic whales is all they have in common with “land whales”. Land whales were originally rated as big gamblers in many casinos around the world. They are usually large only in terms of the large sums they spend on gambling.

Similarly in real estate investing, whales are high-capital investors who are aggressive buyers of property. They may purchase these properties at court closing auctions, as bank-owned properties (REO), or from other investors in wholesale deals. Wholesale in price means that the buyer is paying significantly less than market value because they are going to rehabilitate the property and sell it at fair market value (“FMV”).

To determine how many properties these large investors buy each month depends on where the real estate comes from such as foreclosure auctions or real estate opportunities directly from banks. It should also be taken into account if these whales use their own or other people’s money (“OPM”). However, as a generalization, to be considered a whale-sized buyer, he would have to buy between 5 and 10 properties a month.

If we examine what these individuals do with their property, the first and most common use is to rehabilitate properties and sell them to the retail buyer market. As a general guide only, these investors will not rehab and sell a property for less than $40,000 to $50,000 net profit after all repairs, carrying costs, and closing. If they see that the expected profit will be less, they will transfer or buy and sell in bulk to another investor.

Pisces rarely buy real estate directly from homeowners because of the time it takes to get the deal closed. These types of purchases are left to individual investors, or “baby whales,” who buy one to three properties per month. In general, even a small whale is a desirable catch for an investor looking to wholesale their property to these loyal buyers.

Another defining characteristic of whales is that they do not like lights. Remember, they could be making hundreds of thousands of dollars a month, so why would they need anyone to know how to do it? “Only a fool is easily parted with his money,” as someone said in history, and it is very true of them. If they were in the spotlight, other investors would quickly move in and try it themselves and potentially destroy a huge source of income for them.

Whales can be found at foreclosure auction sales. Since they have a history of actually controlling sales prices through sometimes unfair bidding practices, many counties go to online auctions to avoid this problem. However, they will still be looking for bargains outside of the auctions and this is your chance to get them involved. They can be found, despite their best efforts to remain anonymous, by searching public records of transfers.

As a side note, you won’t find them at public auctions very often. These are auctions held by National Auction Houses that sell “problem” properties that cannot be sold on MLS® and are often Bank Owned (REOs). They won’t be there because hot auction atmospheres often sell properties well above wholesale prices. With a high percentage of these sales not closing, there is another opportunity to purchase these properties when you return to MLS® at lower prices than before.

In short, real estate investing whales and young whales are almost obscure figures but do exist and make a fortune in a highly specialized real estate investment. If you find them, which is easy, you can take a ride if you come to them with wholesale deals applicable.

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