Purchasing houses at Tax Sale & Tax Deed auctions definitely has its’ advantages and disadvantages. We discuss a few of each in this video!
Transcript:
Hi there! Casey Denman here with TaxSaleAcademy.com. In this video, we’re talking about the pros and cons of buying homes at tax sale auctions.
Earlier this week, I did a video about the pros and cons of buying vacant land at tax sale auctions. If you haven’t yet checked that video out, it’s an awesome video. So find that video and check it out, either on YouTube or on TaxSaleAcademy.com. But like I said, this video is all about buying homes at tax sale auctions.
Let’s first talk about the pros or the advantages. The most obvious one is the one that people think of, and that is because there is loads of equity in these homes. At tax sale auctions, you can buy homes for just a fraction, just a fraction of their true and fair market value, so there’s certainly a lot of money to be made here.
The second advantage is that you have the ability to choose from lots of inventory relatively easily. If you’re looking in a certain area to buy properties, you’re thinking, “Well, let me look at bank-owned properties first and let me look at some possibly wholesale properties or something.” Well, you’re going to spend a lot of effort looking around. You’re going to have to contact a lot of different real estate brokers and a lot of realtors and a lot of people in the business to finally narrow down the properties to some you might be interested in. And even still, you might only have one or two that could pique your interest.
Well, when it comes to tax sale auctions, depending on the area and depending on how many auctions they have each and every year, a lot of times, you’re going to have a concentration of all these properties right there in one spot. So while you might have to do some more due diligence all at once or something and it might be a little bit more effort when it comes to the research side of it, you are going to have a lot of pieces of property; just a great concentration of properties for you to select from, at these tax sale auctions.
And the third advantage or the third pro that we’re going to talk about is there is less competition than the open market. Everybody knows about bank-owned properties. It’s all over the news. You can buy bank-owned properties for this and for that. Everybody knows that there’s a lot of opportunity to buy these bank-owned properties.
Tax sale investing is a niche. While some people do know about tax sale investing, there’s very, very few people that truly understand how to utilize the tax sale investment arena to become very, very successful as a real estate investor. So when it comes down to it, there’s just a lot less competition. A lot of people know about bank-owned and that kind of thing, but not that many people know how to truly and successfully invest in tax sale properties.
Now, let’s talk about three cons or three disadvantages of buying homes at tax sale auctions. One of the big ones here, and a lot of people don’t understand this, is that you can’t inspect the properties before bidding. And this applies just about 99% of the time. There’s a very, very, very small fraction where the county will sometimes offer open houses. But for the most part, probably 99%, 99.5% of the time, you aren’t able to see the inside of these homes. If they’re vacant, you can potentially peek in the window and hope they are vacant. Otherwise, you might end up shot. But you won’t know if there’s any issues on the inside. A beautiful house from the outside could have a load of hidden problems on the inside. So you know, it’s kind of a grab bag. You’re kind of bidding blindly, if you will, for some of these properties when it comes to the inside condition, the interior condition of these tax sale properties.
The second thing is that you must maintain these properties. Now this obviously applies to every real estate investment that you make. But it applies more so to tax sale properties here. You have to remember that some of these properties have been sitting for two or three years, a lot of times vacant, or if they have been occupied, those occupants obviously didn’t pay the taxes. So more than likely, they aren’t going to pay to maintain these properties as they should be maintained so you are going to have some deferred maintenance to deal with. And that lies on you as the investor or as a purchaser at a tax auction. That is all on your shoulders and that’s something you must take care of immediately after purchasing it. Otherwise, it’s going to fall in disrepair and you could potentially look at code violations and all sorts of other issues.
And the last disadvantage here is that it does require capital to start. In the other video about vacant land, obviously, everything requires capital just about nowadays. But vacant land requires just a little bit of capital. When you’re buying houses, houses do sell for more money than vacant land so it is going to require more capital and more out of your bank account or wherever you fund your purchases. It’s going to take a little bit more effort to come up with this capital to purchase those homes at tax sale auctions.
So, there you have it. The advantages and the disadvantages of purchasing homes at tax sale auctions. I really hope you’ve enjoyed this video. If you’d like to see similar videos, head on over to my website at TaxSaleAcademy.com, which you can do by clicking the blue link right here next to my head. Again, it will take you to TaxSaleAcademy.com. Hey, once you get there, download your free copy of my e-book, The Tax Sale Investing Blueprint, and you’ll be on your way to a very successful tax sale investing career.
Have a wonderful day, folks! Bye-bye.