Whale Hunting & Other News

Happy Wednesday! Last night we found out that we picked up a little house in Angier, NC. More on that in a minute.

Today, one of our Realtors informed us that a more expensive home that we have been watching is indeed a "good deal" if we can get it under a certain price. This "whale" is a little tricky because it is what the industry calls Occupied Foreclosed. In short, this means that if we do buy the house, we might have to go down the eviction highway. This also means that the risk goes up. However, so does potential reward.

In this case, greater reward does not necessarily mean higher immediate ROI. It could, but it also means (provided we get it ) that we ante up a bigger chunk and possibly get our return quicker (provided it is priced correctly) in shorter time.

Consider the typical rehab process: purchase, rehab, clean and market. Then repeat. Lesser priced properties mean that one goes back to the well more often VS once on a larger project. 20% on one hundred thousand in 120 days or 10% on two hundred thousand in 90 days? Which one is the better deal?

Of course, the risk is compounded on bigger whales. To mix metaphors into the realm of the more relevant ( from poker in the third paragraph) to fishing; would one prefer a sailfish, or would one like a whale? Different equipment, different rewards, and different fish.

Here's to Whale Hunting!

Now, concerning our little property in Angier, here it is:

Angier

What excites us about this one is that we got it well below the bank's reserve. We will caution that this doesn't necessarily mean that it will be profitable, but it sure helps.

Recall that our BATNA (Best Alternative to a Negotiated Agreement) is to rent if we can not sell at a profit. At the price we paid, and the cost of repairs, we are looking at an estimated annual return of around 12-13% -which is fairly respectable for properties that are in good shape. Of course, we would rather sell it and keep those dollars working while inflation is low to non-existent currently.

For more on this, see our strategy page. (Contact us for a password.)

Until next time, keep your oars in the water and your harpoon ready, Ahab.