Transcript:
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.
In today’s episode, I want to discuss preplanning your exit strategy. This is such a powerful, powerful approach that will allow you to not only make money, but it’ll allow you to do it faster, and more often.
So, we essentially have three ways to plan how we’re going to sell our tax sale properties.
The first one is to not have any idea whatsoever. I’m going to go ahead give you a spoiler alert right now: the folks that take this method are the ones who lose money. Nearly every single time.
Ok, so with this approach you’re going to an auction and buying a property. That’s about it. You have zero foresight, zero future planning and zero thought about how you’re going to get your money back. Sounds silly, right? This actually happens much more than you might think believe it or not. People will hear about an auction, go buy a property and then try to figure out what to do with it. Or, my personal favorite, they’ll buy a property, then turn to their neighbor at the auction and ask them what they just bought.
Without some sort of planning, any kind, you’re going to fail in some way or another. You might luck out and be that extremely rare stat that happened to blindly pick the right property, but I wouldn’t’ take those odds. It’s 99 to 1 that you’ll fail if you have no plan at all. Please do everyone a favor and don’t buy a property unless you have at least some idea of how you’ll be profiting from it.
The second type of plan is to have some sort of idea on how you’ll be selling your tax sale property, but you have not dialed in the specifics yet. This is the most common approach amongst the average investor. In this type of approach you’ll buy a property based on potential profit. That profit is, or should in my opinion be, the difference between the capital required for that investment including costs and ongoing expenses and the sales price less closing expenses . . . and here’s the most important part, WITH the time value of the money and opportunity cost to you factored in. This is one point that many people tend to overlook – you shouldn’t overlook the potential value of the money that’s invested while it’s sitting there. If you put in $10m and in 10 years, you’ll get back $11m your profit is a million bucks. But what happened during those ten years? Maybe you had the chance to get that same 10% per year return instead of over that ten year period. And this is obviously something that we can’t quantify, instead it must make you happen at the end of that investment. But just keep it in mind.
So back to this plan – you’re essentially buying a property with some sort of plan to sell it. The most typical approach is you buy something less than market value, you price it at market value and you walk away with the difference less expenses and what not. This is the approach 90% of the people at the auction will be taking. They have a plan to sell the property, it’s not hyper specific, but they do have a plan.
This can be a good enough approach – many people have made lots of money with this type of plan. I’ve invested this way and still do as a matter of fact for some of my investments. What I don’t want to happen, however, is that you get tunnel vision and think this is the only approach that will work.
Much of what I do at The Tax Sale Academy is open my member’s eyes to a different way of doing stuff. I want to bust through the norm, I want them to understand there are other ways – sometimes they’re better, sometimes they aren’t as it depends entirely on the situation.
And that brings us to our last approach which can produce the fastest turn around, highest annualized ROI, and least amount of risk if you do it correctly. And that’s to have a very specific exit plan for your property. In this type of situation, the investor knows what type of buyer will be buying the property, they know the specific amount it’ll be selling for, where it’ll be selling and they might even know who the specific buyer will be. This all sounds fun, right? And it is. But this approach takes time to build up and time to perfect. I’m laying it out in this episode because I want you to have a goal to work towards this. Obviously, this is something that we discuss in depth inside the tax sale academy and it’s something we’ve touched on in a few other podcasts and YouTube videos.
There are a number of ways to take this approach – it could range from sending an email out to your buyer’s list and choosing from the handful of people that respond and want to buy the property or you could post it to your preferred auction site where you know what it’ll sell for based on your experience or you could simply send a text message to one or multiple people that says “I have this specific property, do you want it?” and then wait until someone replies with a yes. And obviously there are lots of other different approaches as well.
But the entire idea around this process is to build in a marketing arm to your investment business. Many investors, especially new investors, fail to realize that you should be a marketer just as much as you are an investor. You can invest all you want, but if you can’t market to get a buyer for your product, your investment business won’t ever be profitable. My suggestion, from day one, is to design your business as an investment slash marketing business.
Go 100 MPH from the gate to market your properties and your company to as many people as possible. The start is what matters the most here. Get started on the right foot, take the right angle, the right approach, do it correctly and reap the benefits for years and years to come. It’s such a snowball effect.
Here are two completely different scenarios:
Imagine that you’re researching auction properties. You see a couple of small homes inside an up and coming section of the city. Because of your previous experience there, you have accumulated a number of buyers interested in homes in that area. You know that because of your previous efforts, you will have zero, that’s right, zero marketing expense. No ad costs, no flyers, no commissions. Zero. So you’re ahead of everyone else right out of the gate. You buy the homes, open your laptop, send out information and have a contract within hours for both homes. Yes, you can absolutely do that, I certainly have.
Let’s say you’re old school and don’t’ want to use the internet: Let’s imagine you start with some borrowed funds. You buy the mobile home lots that most other investors don’t want. You then place a small black and white sign on them advertising them with no credit check owner financing. The down payment makes up a large portion of what you have invested in that property, so your borrowed funds are quickly paid off. Then you keep doing this over and over again. Eventually you’ve spent the last 30 years making huge returns, collecting a monthly cash flow and have essentially played with the houses money. You’re the go to guy for mobile home lots in the area – in fact, most of the mobile home dealers in the state send buyers to you when someone wants to move there. You’re the mobile home lot guy. There’s an investor I know well who does exactly this.
It all comes down to preplanned exit strategies. You can go at it without any sort of plan and your results will likely be lousy. You can go at it with an idea of what you want to do and you’ll likely get average to decent results most of the time. Or you can go at it with a very specific idea of what you want to do and you’ll likely get good results.
The purpose behind this episode is to really reemphasize the importance of a preplanning how you’ll be selling your property. If you take the time and put in the work up front, you’re going to have a much smoother route as you move forward.
That’s it for today.
If you’re looking to learn aboiut the specific selling approaches I use and about the tax sale business there are a bunch of links in the show notes, or just go to google or your favorite search platform, type in tax sale academy and you’ll come across some of our free training videos. If you’d like to learn in a much more detailed, organized and comprehensive step by step A to Z manner, just head to tax sale academy.com and become a member of the academy.
I am so grateful for the opportunity to serve and teach you about this life changing business and I am so hopefuly that you found this episode helpful. If so, please just take a few seconds and leave us a positive review on whatever podcast platform your listening to us on.
Take care and make it a successful day.