Transcript:
Hey there, it’s Casey Denman here with TaxSaleAcademy.com and thanks so much for joining me on this week’s quick tip. Today we’ll be discussing 3 tax sale purchases you’ll end up regretting! Before we get started with that, if you are interested in learning more about tax sale investing, be sure to hit that red subscribe button so you don’t miss out of future training videos.
Alright, let’s talk about 3 tax sale purchases that you’ll regret! So as a tax sale investor the selection of properties that we have to choose from are based on the properties that did not have the taxes paid on time. There are a number of reasons for this, but when we compare a list of tax sale properties to a list of any other sort of properties, the list of tax sale properties will have a significantly higher percentage of properties that aren’t desirable. Many of these properites are available at tax sales for a reason. It’s extremely important for you and I as tax sale investors to understand that our ability to accurately research these properties is one of the primary determining factors as to whether or not we succeed. It’s very simply. Your research equals your results. Want lousy results, do lousy research. And unfortunately it’s usually after you’ve made a mistake that you realize your research was lousy.
Now, I could go over dozens and dozens of different property types. Landlocked properties, swamp land, unbuilding strips of land, that kind of stuff. There are plenty of examples of that. And I actually discuss a few here on YouTube. So I’m not going to rehash that old information. Instead, what I wanted to do with todays video is provide three examples that often shock people. These are the things that you walk out of the auction feeling excited about . . . only to later realize you screwed up.
The first one is something a lot of people in this business refer to as an air condo. So generally speaking a condo or condominium describes a parcel of real estate that will include a residence or even a commercial space, like an office condo. When you own a condo you’ll own what the covenants say you’ll own in that subdivision or development. Typically this will be the specific unit, excluding the land it sits on, which is owned, along with the rest of the amenities by all property owners. So if there are 32 units, for example, you might own your residence and a 1/32 interest in everything else like the land, the pool, clubhouse, all of that kind of stuff.
What happens at tax sales, however, is that these air condos are sometimes sold. So, remember when I said in many condo owners don’t own the land they sit on? Well, envision this. You have a second story condominium. That building was demolished. What you have now is a box of air where that unit used to sit. That’s what we refer to as an air condo. And it might have turned into an air condo by a demolition, by a fire, a sinkhole could’ve eaten the building, so many scenarios. OR it might have never even been an actual unit to begin with. Maybe the developer ran out of money before he got to that building, but the parcels were already split up.
The end result is that you walk out of an auction proud of the condo you purchased. Only to realize that now you actually don’t own anything except for a box of air. That, by the way, you can’t build on or use, and it comes with a tax bill and possibly even an HOA bill still.
The next type of property to avoid are the timeshares. So timeshares are fairly popular in Florida and most real estate investors run from them. A timeshare is simply a unit where you own a certain amount of time. Typically you’ll have something alike a one bedroom, one bathroom unit on the beach that you own for week 32. So the 32nd week of the year you have the right to use your unit. The rest of the time is owned by other people and you can’t use it then. Timeshares are notorious for high maintenance fees. Depending on where you get your data, the average yearly maintenance fee is said to be $980 excluding property taxes. And the bummer here is if you don’t pay your fees, there’s a chance you can end up in court and the management companies can be ruthless. The end result with this situation is that you’ll walk out of the auction thinking you’ve won a beautiful beachfront unit that you are your family can use, that you can flip or you might even go the VRBO route. But then, you realize you can only use it for one week at the worst time of the year and you’re not on the hook for a crazy high yearly maintenance bill and your taxes.
The last one I want to discuss today are houses on demolition lists. Goodness gracious. I actually wrote about my personal experience with this in Tax Sale Playbook. It wasn’t fun. What routinely happens in many areas are tax delinquent homes have sat in disrepair for years. Some are obvious eye sores. Others might have issues that aren’t obvious to the naked eye – perhaps bad interior mold, foundation issues, that kind of thing. Many cities will begin with a warning. Take care of your property, make it safe, that kind of thing. Then a citation comes. Then many more. And eventually the property is condemned at which point the owner MUST do something to use the property. If it gets bad enough, the city will use their powers to demolish the property. Now, this is usually a pretty long process. It’s not like they drive by this week and see a run down house and they tear it down next week. What I usually see happening is somewhere between the time it’s condemned and when it’s demolished, it’ll end up at a tax sale. Then just before or sometime after the sale, the house is demolished by the city. That demolition bill, depending on who owned the property at the time, might fall into your hands. Now you can either pay their $10-12,000 demolition fee or get sued and have to fight it in court.
The end result here is that you walk out excited. You got the house you wanted extremely cheap. You’re so excited you want to start remodeling it for your flip. When your contractors arrive, they find nothing but a vacant lot with the remains of an old house. The city has demolished your house, so your investment now sits in the vacant land only. A week later you get a hefty invoice, followed by a debt collector and eventually a lawsuit. Now your investment got much worse that you ever thought possible.
So there are three examples of tax sale purchases that you’ll end up regretting. Every single one of these and truthfully every single possible issue is completely avoidable if you do the proper research. This is an absolutely incredible business if you take the time to learn. I get the “you told me so” emails all the time from people who make mistakes and buy the wrong properties without doing their research – some of these people have even taken the classes from the so-called experts out there. Sure, research might sound boring, but there’s a very, very good reason that I discuss it so often and teach it so thoroughly in my academy. Not only can it keep you out of situations like these, but it will also help you identify the best opportunities for you.
I truly hope that today’s video has helped you out. Again, don’t forget to subscribe if you’re looking to learn about this business. And there’s a bunch of links in today’s video description that can take you to the best places to learn, including our primary site at TaxSaleAcademy.com.
Take care folks and make it a successful day! See ya!