Transcript:
Don’t Overlook Vacant Land
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.
When you’re looking at a tax sale list, you’ll certainly come across all sorts of real estate. I’ve seen some rather odd stuff at tax sales, old schools, abandoned hospitals, islands, lighthouses and all sorts of other interesting stuff. But the large majority of the properties offer fit one of two categories: single family homes or vacant land. Depending on the area you’re investing in, your specific county might have a significantly higher percentage of vacant land offered than homes . . . or vice versa.
Here’s something that I want to start this episode off with: You can make money on vacant land. And you can make money on homes. Either one is fine – provided you have the correct strategy of course.
Unfortunately, a lot of new investors are programmed to think that real estate investing means buying and selling homes. When you focus solely on homes you are severely limiting your income as you’re missing out of many other opportunities. Let’s a take a deeper look at the issues some people have with vacant land:
The first one I hear people reference sometimes is “it’s just land.” Almost like it’s some sort of second class asset. As in, why would I want to invest in just land? Like they are SUPPOSED to be investing in homes. Besides, when you drive down the road you notice the homes, the building, not, in quote, just land. Some people will even talk about vacant land is if it’s not real estate – just last week I got a question about clearing a title and was told it’s “just land.” The fact is that land is real estate too. At a tax sale auction, the county is selling the legally described real estate. That means you buy a legal description – that legal description describes the location, shape and size of the land you’re buying. If it happens to have a house on it, then you bought a house too. But understand you’re buying a legal description first and foremost.
Whether you decide to buy homes, vacant land, islands, boat docks or anything else if you’re an investor then your number one priority is to make money. If you’re buying something to use personally, that’s a different story. But if you’re an investor we’re looking to make money. That means you should approach every investment with the premise of whether or not you feel you’ll make money. Accordingly, you should remain nearly all emotional connection. An emotional investor is usually an investor that doesn’t make much money. When approached correctly, vacant land can be just as, if not more profitable than single family homes. Keep that in mind.
Another issue that some people have is that they’re concerned about the potential buyer pool. I hear it all the time: A house can be lived in, so someone needs it. Or they’ll tell me that land is the hardest thing to sell – because who wants it? Listen, I’ve sold land in good markets and I’ve sold it in bad markets. I’ve also sold it much faster than many of my homes. And I’ve got a buyer list that dwarfs the buyer list I have for homes. There is a market for nearly everything when you know where to look. Part of the issue that people have is that they themselves are only familiar with homes. It’s what they live in. What they see, what they use, what they might have been involved with when it comes to real estate transactions. What you might not know is that there is a massive buyer pool out there for vacant land that is waiting for you to tap into.
The desirability of land is directly in parallel to the desirability of homes or any other type of real estate for that matter. If you buy a home in a lousy area, then it’s a less desire asset and could be more difficult to sell. The same is said for vacant land. With either one, if you buy it in a desirable area OR if you’re able to market your property to the correct audience in perhaps a less than desirable area then you’ll have no trouble selling it.
Alright, let’s look at a few things now that many folks don’t consider when thinking about vacant land.
Maintenance. And this is really a BIG one. Many people fail to realize the maintenance required on tax sale homes. And this is one that really hit me as well. Tax sale homes are obviously homes that have not had their taxes paid. If those taxes, the very thing that says whether you keep or home or lose it, were not paid do you really think the property is going to be in decent condition? Of course not, these are far from move in ready homes. They stink, they’re wet, they’re moldy, that have plenty of issues. A home with issues is a maintenance heavy home. Most people don’t realize this because they aren’t used to these types of homes. We can make the comparison between the brand new vehicle you use everday and buying some old beatup car that smokes, leaks and shakes as you drive it down the road. Both are cars, but one is going to require substantially more maintenance. Even in the short term. Tax sale homes are not typical and as such you will need to be prepared to provide constant maintenance, even in the short term while you’re waiting to sell it.
Along with that maintenance comes liability. I did an episode a year or so ago maybe and the title was tax sale homes are a huge target. Tax sale homes are often targeted by neighbors and local governments as the subjects of complaints, especially after an investor has purchased one. Many areas have rather strict requirements – a broken window needs to be replaced, a rotten deck need to be replaced, any trash on the porch, you’ll need to remove it. The list goes on and on. And the issue is that when you buy a tax sale property with issues and the county notifies you to fix them, but you fail to do so . . . well, that becomes an issue. Eventually it’ll work it’s way into daily fines and could even become a criminal matter. While there is still maintenance required on lots in some areas, especially inside the city limits, that maintenance is much less intense.
Something else to consider is the turnaround. I know we partially addressed this earlier, but when done correctly, you can resell land much faster than homes. The issue with a home is that the buyer is taking over your responsibility of that home, which means they at least need to take some time to look into it especially if it’s an out of town buyer as many investors are. I’ve found that with land, it doesn’t take much thought – you either like the price and location or you don’t. It allows for an easier turnaround in my experience.
And the last thing I want to discuss is cost. You can simply enter a vacant land investment for a much lower barrier to entry than a house. I’ve been in many, many vacant parcels for less than $500, many for less than $100 even. Now, inevitably, someone is going to listen to this and make a comment about, well lots around here cost ten million dollars. I get it, prices vary all over the country. But when you compare the barrier of entry of a vacant parcel to a home, it’s cheaper to get into a vacant lot. For some that’s the difference between being able to invest and not being able to invest. For others, it means they might be able to hedge their investments some by purchasing multiple properties. And for others, it’s just a way to help minimize their risk. All of this is good on the buying side, but get this . . . all of it also passes to the selling side.
The number of potential buyers that can afford a lot is significantly higher than those that can afford a house. A large majority of the lots that I sell, I’m actually selling to smaller type investments who just want to be able to buy what they can comfortably afford and then turn around and see if they can make an eventual profit on it.
The fact remains that vacant land is a viable, profitbale investment. And it’s something that you should never overlook. Sure, it’s not as nearly as exciting as some other opportunities. In fact, one could argue that it’s boring. Well, at the end of the day, it doesn’t matter how boring it is as long as it’s making me money. So the next time you see vacant land on a tax sale list, don’t discount it, don’t skip it. Instead, dive into it, come up with a strategy to buy it and make money.
I teach about many of the strategies I use here on the podcast, on YouTube and of course I go into my most detailed and profitable trainings inside the academy. But do yourself a favor and don’t get caught up on just investing in single family homes – there is a huge opportunity out there for vacant land just waiting for you to take advantage of it.
I truly hope that today’s epsidoe has helped you. If so, please do us a huge favor and leave some positive feedback on whatever podcating platform you’re listening to us on right now.
And if we can be of any additional help, be sure to check out the links in today’s show notes including one to our primary site at TaxSaleAcademy.com.