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 this episode of the podcast I want to discuss a FIVE things that will KILL your tax sale business. Over the years, I’ve heard all of the stories, the horror stories, that is that people have faced. I’ve even been through a couple myself. I’ve also been very fortunate to have been able to spot many of these situations over the years at the last possible second.
Now, before I begin, I don’t tell you these things to scare you. I tell you all of these things to educate you on what you should be looking for to make sure you don’t make a horrible mistake. So let’s go over a few things that can kill your tax sale business.
The first one is liability. When you own real estate, you own potential liability. The house that I live in – my primary residence, my homestead, whatever you want to call it. It is a potential liability for me. If one of my son’s friends comes over and breaks their leg, playing in the yard, that’s on me. Now, I have insurance of course and hopefully something like that never happens, but the point is that it very well could. Your personal residence, the vehicle you drive daily, these are things we think about daily. We wouldn’t intentionally be negligent with these things.
But how about that tax sale house? The one that you got at a discount because it had boarded up windows, a sagging foundation, maybe some rotten decks . . . are you really going to be thinking about that every single day? I saw someone who purchased a tax sale house before that had some sort of structural issues. One of the walls actually ended up falling off of the side of the house. And it didn’t just fall, this was a zero lot line type house. The wall literally fell into the neighbors house and it did quite a bit of damage. Imagine waking up to the phone call that the wall has fallen off your house, and by the way, you also now owe your neighbor 20 or 30 grand for repairs. My advice is to not just go blindly into buying properties – think about the chances of the structure damaging someone or something – maybe it’s not the wall, but maybe it’s a child who hurts themselves. Liability isn’t a concern of many people, until they get sued. Be proactive and think about it today, before you buy your first or next property.
The next one is, well, jail. It’s pretty hard to operate your business from jail. And I’ve actually got a couple of my own stories about this one. I bought a few properties at a tax sale auction in a northern state. Now, being from Florida, I don’t typically have to deal with snow. But the area where I bought these properties has their fair share of the white stuff. Part of dealing with that snow is the requirement to remove it from your sidewalks. This prevents people from having to walk around your snow pile, into the road and is generally a safety issue. It’s not just a requirement, it’s actually a city law. And when you don’t do that like you’re supposed to the city will mail you tickets. And when you don’t deal with those tickets, they’ll send you more tickets. And when you don’t’ deal with all of those tickets, they’ll send you a summons to appear in court. And when you don’t appear in court, they’ll threaten to arrest you. All because of the snow, which no longer exists, not being shoveled from the sidewalk. I went through the same situation with tall grass too. Now, luckily I wasn’t arrested and I’ve dealt with these issues. But it was obviously something that was stressful at the time. And the circumstances could have been much differnet. I’ll admit that I made a number of mistakes and those nearly cost me my business.
Take the time to learn the laws that apply to you as the owner of real estate. Especially when it’s a building and especially when you’re an absentee owner. Many of the properties at a tax sale auction have been eye sores for years and they’re on the county or city watch list. The moment you don’t do something that you have to do, they’ll be after you. So make sure you’re a responsible property owner and that you don’t break the law. Because no one wants to end up in jail.
The next major potential issue are properties that get demolished. I remember speaking to a brand new investor many years ago because she sank her entire savings into this tax sale house. Then she got a letter the following week informing her that the property was scheduled to be demolished in 10 days. She was trying to figure out a way to save the property from demolition or to get her money back. IN the end, neither option worked out. The city had torn down the home she bought just a couple of weeks prior and she lost her savings. Such a sad, sad situation. But it was something that could and should have been avoided. Once she provided the address, it was quite literally 10 seconds and three mouse clicks before I found out the history of the property, including that it had been scheduled for demolition for more than a year, and the actual date of demolition was scheduled for more than 6 months. This was the same exact information that she could have found in ten seconds. And it would have saved her the issue of dealing with the demolition.
Something else to note is that in some areas, if YOU are the one who owns the property during the demolition then you will also get that demolition bill. So tack on $10-15,000 to that already terrible investment that you made. And when you don’t pay, many cities or counties will refer you to collections who will take you to court. This could literally bankrupt many people. Know what to research. Know how to research. And most importantly, do that research.
The next one are governmental liens. And I’ve got a YouTube video coming out on this one here in the next week that shows a crazy example on how this will kill your business. So, the tax foreclosure process will generally wipe out all liens and encumbrances, with the exception of governmental liens. In other words, if the one governmental department puts a lien on your property, the tax collector isn’t just going to come and wipe it out. That’s silly. So those governmental liens will remain. Unfortunately many people don’t understand this or they simply don’t take the time to research this. What I usually see happen is a fairly nominal lien for something like trash on a property or tall grass or whatever. Probably for just a $100 or $150. And it will be part of an administrative order by the code enforcement department. Then they’ll give the owner a set period of time to correct the issue. And then if they don’t correct the issue, they issue another fine as motivation to make the correction necessary – clean the yard, board the windows, mow the grass, whatever. That motivation will come as a daily fine. Maybe $25 or $50 a day. Then after a set period of time that daily fine might increase to $150 or $200 a day to put even more pressure on the owner. Now, if the owner ignore all of this stuff. That $200 per day fine adds up to $6,000 a month. Since it usually takes a couple of years to lose a property in a tax foreclosure, you could easily have $100,000 plus in fines that are owed to the county. So, that incredible deal you got and stood to make say $40,000 off of, will now actually end up costing you $60,000 when you go to sell it since you have to pay of the city or county lien. See how this can be a bad situation? Again, know what to research. Know how to research. And most importantly, do that research.
The last one I want to address that will kill your business is refusing to pivot. I’m guilty of this as are many others. We often get stuck in our routines. We have our own little way of doing things. But this isn’t something where we control all of the variables. If you brush your teeth one way, you tend to your garden one way, you cook your steak one way . . . .whatever it is, good for you. You can do it however you want when you control all of the variables. As tax sale investors, there are other players involved. The defaulting owners, the tax collectors, the competitions, the buyers, the properties, the market, all of these are fluid. They change constantly. What works today might slowly stop working. Or it might stop working altogether tomorrow. I am not the same investor I was 10 or 15 years ago. Heck, I’m not even the same investor I was 2 or 3 years ago. I change strategies, I change processes, I change approaches.
I certainly wasn’t always like this. I’ve discussed the struggles I had starting in 2008 when I refused to change my strategies despite the market changing. But at that moment is when I learned that my lack of desire to pivot the way I run my business is what was going to put me OUT of business entirely. You must pivot, and you must pivot quickly or you’re business will die.
So, there it is. Five ways that you can put yourself out of business. There are certainly many others, but these five are issues I’ve seen happen time and time again. And I truly hope that this video has helped you and has served as either a teaching lesson or reminder of what NOT to do.
Thanks so much for listening ot me on today’s episode. If you enjoyed this podcast episode, do me a favor and leave some positive feedback for us on whatever podcasting platofmr you’re listening to us on today. I notice every single five star rating and I’m so thankful for those who have taken the time to do so already.
And if we can help in any way, be sure to check out the link in today’s show notes including the link to our primary site at TaxSaleAcademy.com.
Take care a make it a successful day. See ya.