Transcript:
Welcome to the Tax Sale Podcast, where tax sale investing is made easy.
I’m Casey Denman, a tax sale veteran, expert, and trainer, author of the tax sale playbook, founder of the tax sale academy and your host here on the tax sale podcast.
Thanks for joining me on today’s podcast, and as always, at the conclusion of this podcast, if you’re looking to learn more about investing in tax defaulted real estate head to taxsaleacademy.com. That’s taxsaleacademy.com.
So, you’ve learned about this business. You’ve absorbed all of the knowledge and training that we offer. You’ve done your research, learned the process, the laws, done the drivebys, attending practice auctions and everything else we recommend. So,you’ve done everything you’re supposed to up to this point right?
Now, it’s time to buy your first property. But where do you even begin? Just today I was researching a newly posted tax sale list. 74 . . . there were 74 properties in one county that were being auctioned off. They were in a number of different areas, at different price points, different product types and different opportunities. As I started to prepare for this podcast episode, I was really trying to put myself into the shoes of a brand new investor who would be staring at that same exact list.
The result came down to one word: overwhelming. And this is something that’s expressed to me time and time again. I’m ready to pull the trigger, but when I look at that first list to choose a property, wow. I don’t even know where to begin. Even after I’ve researched the entire list, I still don’t know which property to choose.
So in today’s episode I want to help narrow down your search some for you. I want to discuss the ideal characteristics of your first property. What exactly SHOULD you be looking for when choosing your first property.
Now before I continue, I want you to understand that the truth depends on the specific person. What we’re about to discuss can vary some. You’re free to modify this to fit your specific skillset.
I’m going to break these down into a few different categories for us.
The first one is price. And this is likely the most obvious one. If you’ve ever searched for a car, a hotel, airline ticket, whatever it is, you’ve probably used the price as a filter a time or two. One major way to waste time and kill momentum is to spend hours researching properties you can’t afford. Sure, if you want to do basic research to figure out what is selling, that’s great. But don’t spend all afternoon trying to figure out the age of the airconditiong unit on that property that’s 37 times more expensive than you can afford. One thing you can do right away is go through the properties and cross of the ones you can’t afford the moment you review the list.
Now, we’re not just talking about what’s out of your budget, but what about the properties below your budget? When I’m searching for a hotel, I’ll often ignore the hotels that are the absolute cheapest. If the average hotel cost if $150 per night and I see a hotel offering rates of $29 per night, then I probably won’t give that hotel much more than a glance. Obviously, the properties that are much much lower in cost than the rest of the properties could very well be good deals and they are probably worth some sort of research. But don’t get too excited because they will likely require a very specific strategy.
On that same note, if your budget is $4,000 and you buy a property for $3,999, then you’ve left yourself $1 as a a buffer. Congtratulations – you now have some issues if things go wrong. And there’s a much higher chance something could go wrong on your first auction than subsequent auctions.
The ideal price point is something that is well within your budget. Ideally you’ll be able to buy it, not stress over those funds and have margin for any potential issues like title clearning, cleanups and that kind of stuff. Again, just to reiterate . . . this should not be a stressful situation because of the capital you have tied up. You shouldn’t and don’t need to spend you last dime trying to buy a property. Find something well within your budget.
Next – keep it simple. That vacant acreage that had entitlements to be developed back in the 80s, but now has a rare gopher tortoise living on it that must be removed and you’ll have to appear in from of the board of commissioners to get the entitlements back in place, plus you’ll have to negotiate with the county water and sewer department to extend line . . . where you could potentially make millins of dollars. Yeah, that type of situation. That’s exactly what you should avoid.
Keep it simple. For your first property I usually recommend the most boring basic thing in your area. This could be that simple little single family house that’s 800 sf, two bedrooms and one bathrooms. Or it could be a ¼ acre vacant lot. Don’t get in over your head. Pick off that easy stuff where you can get in, get out and move on with your business.
The next one, get something that is sellable. Buying that 800 sf house that I mentioned or even the ¼ acre vacant lot doesn’t do you any bit of good of it isn’t sellable. Obviously, this is something that you should learn why you’re doing your research and due diligence for the area, but at the end of the day you need to be able to make the decision that, based on the simplest form of economics, supply and demand, will you be able to sell that property? And can you sell it as quickly as you want to?
When you’re just starting out, it’s easy to get focused on the wrong thing. Most people can talk themselves into nearly anything when theyre excited enough. The ideal property is something that you can easily, without a bit of any doubt whatsoever sell very quickly and for the price you’re extremely confident in. Because odds are, especially your first deal, you’ll overestimate just how quickly you can sell a property and you’ll overestimate it’s actual value. It will likely take longer to sell and it will sell for less money that you desire. But that’s ok as long as you’re number were somewhere in the ball park. Make sure that the demand for your property is there before you buy it. If you have any doubt, just keep it moving.
The next ideal characteristic is a property that fits your specific strategies and objectives. Now I’m not saying that your strategies should never change and should always be rigid. That’s ridiculous. Of course they need to be flexible some. But don’t modify your strategies so much that you are completely breaking every single one of your own rules for investing. If you’re looking for a vacant lot in the county that you live in, where you can make a 80% ROI after you sell it within 60 days, that’s fantastic. But if you have those objectives and you happen to stumble across a house that’s locate three states away that will take 6 months to sell and might next 40%, then that’s not going to fit anywhere in your plan. And your strategies shouldn’t adjust for them.
If you need to make minor tweaks to your objectives that’s ok. But make sure you do it in a manner where those tweaks come from educational decisions instead of emotional decisions. If there aren’t any of those small homes you are looking for and you need to transition to vacant lots, then do your research, figure out exactly what you need to know and proceed accordingly with your tweaks. But in the end, the ideal property should fit your strategies and objectives pretty closely.
And the last one I want to disucss really kind of sums everything up today. The primary ideal characteristic of your first property is one word . . . easy. It should be an easy property to buy. And easy property to hold. And an easy property to sell. I get YouTube comments, DMs and other messages all the time from people who give me the A + B – C + R Q and J what if type scenario. Listen, if you have to find a way to justify it to make it work outside of the typical due diligence that we use, then it’s probably not for you.
Sure, there are plenty of ways to make money that required quite a bit of effort. And the truth is that many of the returns on these types of properites can be insane. But at the end of the day, we must remember this is your very first property. If you don’t make a 3,000% return, that’s ok. You should be focused on making some money, using this as a learning process, and then growing and expanding from there. Again, your first property, most importantly should be easy. Everything about it needs to be easy to build the momentum for your tax sale business.
If you have any doubts or questions, go back and ask yourself these questions. Does the cost fit my budget? Is it going to be a simple transaction or will it become overly complicated to make it work? Is it sellable – quickly and easily? Does it fit you, your strategies and objectives? And most importantly . . . will it be easy? If so, then that property has hit the desireable charactertiscs for your first property.
If you’re looking to learn more about investing in tax defatuled real estate, including tax deeds and liens then there are a bunch of links in today’s show notes that can really help you get started. And when youre ready to go all in and take the advanced and comprehensive step by step training that we offer, just head to taxsaleacademy.com and become a member of The Tax Sale Academy.
I truly hope you enjoyed today’s episode. If you did enjoy this episode of any of our other episodes, please take just a few seconds to leave us positive feedback on whatever podcasting plkatform you’re listiening to us on.
Thanks again for listening.
Take care and make it a successful day!