We all know that whales are mammals that roam the seas and are generally very large. The size of aquatic whales is all they have in common with “land whales.” Land whales were originally designated as high rollers in various casinos around the world. They are generally big only in the sense of the large sums of money they spend in the game.

Similarly, in real estate investing, whales are investors who are highly capitalized and are aggressive buyers of property. They can purchase these properties at courthouse foreclosure auctions, as bank-owned (REO) properties, or from other investors as wholesale deals. Wholesale pricing means that the buyer is paying well below market value because they will be rehabbing the property and selling it at Fair Market Value (“FMV”).

Defining how many properties these big investors buy each month depends on where the properties come from, such as REO or foreclosure auctions directly from banks. It should also be taken into account whether these whales are using their own money or other people’s money (“OPM”). However, as a generalization, to be considered a whale-sized buyer, you need to buy 5-10 properties a month.

If we look at what these people are doing with their properties, the first and most common use is to rehab the properties and sell them to the retail buyer’s market. As a general guideline only, these investors will not rehab or sell a property for less than $40,000 to $50,000 net profit after all repairs, transportation and closing costs. If they believe that the expected profit will be less, they will transfer the property or buy it and sell it wholesale to another investor.

Rarely does a whale buy property directly from the owners because of the time it takes to get and close the deal. These types of purchases are left to individual investors or “baby whales” who purchase one to three properties per month. Still, even a baby whale is a desirable catch for an investor looking to wholesale his property to these repeat buyers.

Another distinctive feature of whales is that they do not like the spotlight. Remember, they may be making millions of dollars a month, so why should they need someone to find out how they’re doing? “Only a fool part easily with his money” as someone in history said and it is very true with them. If they are in the spotlight, other investors will quickly move in and try it for themselves and probably ruin a massive source of income for themselves.

Whales can be found in foreclosure auction sales. Since they have had a history of literally controlling sales prices through sometimes unfair bidding practices, many counties turn to online auctions to avoid this problem. However, they will still be looking for bids outside of auctions and this is your chance to attract them. They can be found, despite their best efforts to remain anonymous, by searching public records for transfers of ownership.

As a side note, you won’t find them at public auction very often. These are auctions held by national auction houses that sell “troubled” properties that failed to sell on the MLS® and are often owned by banks (REOs). They won’t be there because the heated auction atmosphere all too often causes properties to sell well above wholesale prices. Since a high percentage of these sales do not close, there is another opportunity to purchase these properties when they return to MLS® at lower prices than before.

In summary, whales and whale calves in real estate investment are almost mystical characters but they really exist and make a fortune in a very select niche of real estate investment. If you find them, which is easy, you can be hitched for a ride by coming to them with viable wholesale deals.