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 today’s episode I wanted to talk about my personal favorite type of tax sale property and the reason why. Now, before I begin this episode I really want you to take the time to listen to it all and to form your own opinions. Copying this exact strategy just might not work in the area you’re investing in. Anytime I mention a specific strategy, I’ll undoubtedly get someone from somewhere that says it won’t work from some reason. I don’t discuss these strategies so you copy every single one because they’ll work in every single area. Instead I discuss specific strategies so you will hopefully be able to use one at some point in your career. So hopefully it will open your eyes to the possibilities that exist. So it will give you ideas that you can then generate your own off of. Every single investor has different objectives. Determine yours and determine which of the strategies I discuss can be utilized.
When I look back at my career, I have realized that the majority of the investments I’ve made have been for vacant, unimproved real estate. Now, some of this could date back to my beginnings in real estate. If you know my story, then you know that I started out as an agent. Since I was just a teenager I couldn’t get the big buyers and sellers. Instead I focused on what the veteran agents didn’t want to list or sell, simply because the commissions were low, which was the cheap vacant land. I sold hundreds of little lots all around my county and eventually transitioned into investing.
Many of the first tax sale deals I did were very similar to the vacant lots that I had previously sold for others. The reason for this was two fold: there was an abundance of vacant lots in the area I was investing and it was very familiar to me.
As I moved out of my local area and into a number of other states and hundreds of different markets, for one reason or another I always had my eyes set on vacant land. It was most likely due to inventory and familiarity.
But don’t get me wrong, the number of homes I’ve purchased is well into the hundreds. I’m not just a “vacant land” guy. I’ve got more experience in homes than most, but I’ve certainly done my fair share of vacant land transaction.
So let’s look at a few reasons why I invest in vacant land:
One of the reasons is something I’ve mentioned. In many of the areas that I invest in, there is an abundance of vacant land available at auctions. As you begin researching tax sale lists, what you’ll find is that some areas will have a solid mix of houses and land. Other areas will have predominately land and others will have predominately houses. Now I have been to areas where there are homes and I’ve purchased homes. But it just so happens that the majority of the areas that I personally invest in happen to have an abundance of vacant land. So, it’s difficult to buy a house is there isn’t one being sold right? And… since I do well in those areas, I don’t really have the time to expand.
Land can also be slightly easier to research. When we’re researching structures, we’re not just researching the structure, right? We have to first research the land that the structure is on. That’s one set of research. After that we have to research the structure, which can be an entirely different set of research efforts. With vacant land, we can stop once we’ve finished the land research phase.
Another is the capital requirement. When I was first starting I simply didn’t have enough money to buy a house. So instead, I bought a vacant property. It was well within my budget as a new investor and I tend to find other new investors see it the same way. When we work backwards, we have to remember that improved real estate will have higher taxes since those improvements are taxed in addition to the land. This means the opening bid amounts will also be more expensive since they’re typically a combination of the bad due taxes, interest and fees.
Vacant land is a good way to get your feet wet without investing a substantial amount of money. And even with experience and capital, I’m able to buy many more vacant properties than improved one
Which leads me to the next factor which is hedging your bets. If you spend $50,000 on a house, you’ve got a lot tied up in one property. If you buy 5 $10,000 lots you’re hedging your bets. Since vacant lots are generally cheaper, it’s obviously easier to hedge your bets. This isn’t that big of a deal if you’re confident in your investments, but for many it can certainly help and was worth mentioning.
Another thing I like about vacant land is that it can be low maintenance. In most areas that I invest, there isn’t a single thing that needs to be done in order to maintain vacant land. Just let the grass and trees grow, and you can own the property as long as you want to pay the tax bill. Of course, there are some rural areas that aren’t too concerned about the condition of structures, but generally speaking, you will at least have some sort of laws around dilapidated or abandoned structures. At the very least, you could get an upset neighbor that files a complaint. With all of this said, there are some areas, especially in the city limits or in HOAs that have maintenance requirements for everything. I’ve told the story before about how I’ve been cited for failing to cut my grass and failing to remove snow from the sidewalk in certain cities. But even when if we were to compare the laws in that same city, if you had a property with a structure you’d have the laws that apply to the land AND the structure.
Along those same lines is the liability issues. It’s a lot easier to get sued or have someone hurt at your structure than it is on your vacant land. Many years ago I had some neighborhood kids break into a home of mine to smoke cigarettes and probably more. This was a property that was not vacant to me, and I only found out when the Realtor I hired had walked in on them. Long story short, it had me a little concerned about the liability. Usually not a big deal, but it’s certainly a bigger deal when you have a structure than when you have a vacant lot.
This also brings up another point in that in addition to low or no maintenance or liability, at least when compared to a structure, vacant land usually doesn’t require much in the way of improvement. In many situations, it basically is what it is. It’s land. When we compare it to structures of some sort there might be the requirement or at least desire to make some sort of improvements. This can often lead to expensive remodels that can run up costs and holding periods substantially.
The last one I want to discuss is the buyer audience. I personally believe that vacant land is, in many instances, easier to sell than improved properties. The argument here is that you can use or lease structures. But if you build a buyer’s list and strategize correctly you’ll find a number of buyers, nationally and internationally, who won’t think twice about buying vacant land and they’ll buy it very quickly. And much of their decision goes back to the points we’ve already discussed: cheap, low/no maintenance and liability, along with low holding costs. We’re simply the middleman that buys it from the tax sale and then resells it.
A lot of new investors tend to overlook vacant land as a viable investment, at least when they start. And truth be told, it does take a certain amount of strategy and planning in order to execute the strategies correctly. But if you have a plan of attack as you start investing, you’ll find the vacant land is not only a very viable investment, but it might become your preferred investment.
Again, this episode is not to say that houses, commercial buildings and other structures aren’t good investments. But instead, hopefully it will open your eyes to the possibilities that exist out there when it comes to vacant real estate.
I truly hope you’ve enjoyed today’s episode and you’ve potentially discovered another angle to tax sale investing.
If you enjoyed this episode or any of our other episodes, please take just a second to leave positive feedback for this podcast on whatever podcast platform you’re listening to us on.
If we can help in any way, there are a number of incredibly useful links down below in today’s show notes, including one that will take you to our primary website which is TaxSaleAcademy.com. When you get there you can get a free copy of my book, The Tax Sale Playbook, we’ll ship you that free copy if you cover the nominal shipping cost. Or if you’re ready to learn in a detailed and step by step manner we highly suggest joining The Tax Sale Academy.
Thanks again for listening.
Take care and make it a successful day.