Transcript:
Welcome to the Tax Sale Podcast, where tax sale investing is made easy. My name is Casey Denman, I’m a tax sale veteran, the leading tax sale expert, author of The Tax Sale Playbook, founder of The Tax Sale Academy and I’m your host right here on The Tax Sale Podcast.
Thank you so much for joining me on today’s podcast episode. This is a completely free podcast and is brought to you through and because of The Tax Sale Academy. If you’re looking to learn more about investing in tax defaulted real estate, just head to TaxSaleAcademy.com. Again that’s TaxSaleAcademy.com.
On today’s episode I want to briefly discuss three of my all time favorite tax sale deals. I’m always asked about some deals that I’ve done and I’ve got many examples. The problem is that most of them are pretty boring. Bought, sold, moved on. Not much of a story. So I wanted to discuss three that stood out. I’ll be going over each one of these and might be able to include every single detail, but perhaps you can use my examples to help your own business. It’s also worth noting that these are certainly not the most profitable deals I’ve done. In fact, any of the numbers that I provide aren’t really that impressive, but are included just for context. Also of note, that these are NOT typical in any way shape or form.
Alright, so the first deal to discuss is the 1 cent deal. I shot a video on YouTube about this many years ago, but I literally purchased a property for one cent. The 1 cent property was in an area that holds two rounds of auctions. The first auction begins at a minimum bid of the back due taxes, interest and fees. Depending on the tax rates, this can actually be a considerable amount in economically challenged areas. If the property fails to sell a the first auction, it will then go to the second round auction, which is a no reserve auction. The minimum bid is held at the discretion of the county and is commonly $500 or $100. For this particular property, the treasurer decided not to set any sort of opening bid. The bid started at $.01. This property was small commercial building that had been vacant for quite some time. It was ugly, needed loads of work, but I did my diligence and figured I’d bid on it just to see what could happen. This was a hybrid auction format where you have online bidding and in person bidding. I was bidding online so the moment the property was announced I hit bid to make the opening bid of $.01. A few seconds later, I realized that no one else was bidding. The screen flashed going once, going twice, sold.
Initially, I thought there was a glitch. Maybe the computer showed sold, but the high bid hadn’t been updated since it showed me name. Then I checked my email and realized I received an automated email, that said congratulations, you won this property. Then I began to panic a little, wondering if I made some sort of horrible mistake. So, I researched everything and everything was as it should’ve been. In the end, I actually ended up paying one cent for the property, plus a $20 deed processing fee. I resold it very quickly and moved on to the next property.
Alright, the next transaction was interesting on another level. In some areas, you’ll come across dozens or even hundreds of properties in the same subdivision. There are many reasons for this, but a common one is that the subdivision has high association fees. And these fees are often attached to vacant lots with absentee owners who have no desire or ability to use the amenities they’re paying for. This usually leads to fairly cheap properties that aren’t always desireable. This was the exact situation at one auction. There were a number of properties in one subdivision that were being sold with extremely low opening bids. BUT, when I did a little research I realized that there were tons of these properties available on the open market for $800-2,000. Yes that’s $800-2000. For hundreds of lots. I quickly realized this is a massive subdivision with huge supply and low demand. Regardless, I knew that if I could pick up a few lots at the opening bids of $120 or so, I could potentially undercut everyone and resell for $500-600 to make a quick buck. Now, the association fees weren’t crazy in most scenarios, but they were $50 per month. Which, when compared to my targeted selling price $500 meant I’d be losing 10% of my investment every month.
So there wasn’t much margin unless you purchased really cheap and you’re holding period was really short. Like, really, really short. So I bought many lots, but one in particular I paid $126 for. But that’s not the interesting part. I turned right around and sold it the very next week on eBay for $611. I was paid, recorded the deed, received a thank you email and was told that the buyer actually had plans to build on it which I thought was interesting. At that point, I thought the transaction was complete. Nine months later, I received an email from this genteleman. He told me that his plans had changed and he actually no longer had a use for the property.
He then told me that he didn’t want the hassle of trying to sell it himself, nor did he want the continued HOA fees which seemed to be the more pressing issue. Long story short, he asked if he could just GIVE the property back to me! That’s right, just give it back. I double checked the HOA dues had been paid up to date, did some research, prepared a deed and he gave it back to me! All because of those pesky HOA dues. Of course, I needed to resell it quickly again, which I did and the second time I got slightly more at $697.50. So, I sold the same property twice, within ten months of purchasing it, ended up making a decent ROI AND had a heck of story to tell.
And the last deal I want was actually one of the more interesting purchases I’ve ever made. Throughout the years, I’ve been involved in many facets of real estate, including home building, land development, and quite a few other things. So while reviewing a tax sale list, one property in particular realty caught my attention. The listing was for a subdivision. That’s right, and entire subdivision. Well, let me rephrase that a little bit. This was a four phase subdivision. The first phase had new townhomes built on them, it was not included in the sale. Phases two and three were fully developed, with streets, curbs, gutters and even sidewalks. The fourth phase had been cleared with roads cut but not yet poured. If you’ve ever been involved in a development project of any sort, you know the time, expense and effort it takes to develop properties. Ideas, plans, platting, county approvals, revisions, bids, surveys . . . and that’s before a spec of dirt is moved. Then the actual work begins. Projects can be extremely expesive. And this one caught my eye. For one reason or another, the develop was able to get through most of the project before he fell behind on his taxes. The property was foreclosed on and then here it was at the auction. The problem was that it still needed a few things done in order to make the lots sellable individually, and then you had the final phase that needed to be physically developed. Truth be told, it was a very intimidating piece of property. Not cut out for most people to purchase, and I knew it likely wouldn’t get too many bids.
And I was correct. I was able to purchase the entire subdivision for just a few thousand dollars. The fact was that this subdivision was useless as it sat. You couldn’t build on it or anything else until you finalized the development process. So, after purchase I had the decision to make. Do it myself or find another developer to do it. Since it was many states away from me, I made smart decision to sell it to another developer who knew about the subdivision, but not of the fact that it went through tax foreclosure. I made a few bucks off of it and he made plans to finish it. So, that’s the story of the time I purchased an entire subdivision at a tax sale!
I hope you have enjoyed these three stories. This was a little bit of a different episode, but I wanted to just give a few deals that I’ve been involved in over the years. There is a tremendous amount of opportunity available in the delinquent tax business, trhough both tax deeds and tax liens. As mentioned early in this podcast, these are not typical examples. I highly suggest you do your own research and learn what you’re doing before getting started.
If you enjoyed today’s episode, make sure to leave us some positive feedback on whatever podcasting platform you’re listening to us on. And if we can help you learn more about this business, just head to TaxSaleacademy.com. Once you’re there you can grab a free copy of my book, TaxSalePlaybook for just the cost of shipping, or you can join the academy for the most comprehensive step by step training we offer. Again, the site is TaxSaleAcademy.com.
Thanks for listening and make it a successful day. See ya!