Transcript:
Strategies to AVOID as a New Investor
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.
So, back earlier this year during episode 143 I discussed what to look for that is ideal when it comes to your first tax sale property. On today’s episode of the podcast I want to go over five strategies to avoid when it comes to your tax sale business. Between this episode and episode 143, along with every other video I produce and of course the entire academy, the entire idea is to get you started off on the right foot. To help you gain the momentum necessary to see success in this business. The worst thing you can do is start your tax sale career on the wrong foot.
Now, I’ve got a number of videos on specific property types to avoid. Knowing what you shouldn’t do is half the battle in this business. One of my favorite trainings is titled tax sale red flags that I highly recommend. This episode isn’t going to go over a specific properties to avoid – landlocked, demolished, that kind of thing. Instead, we’re going to go over five strategies to avoid as a new investor. These are often looked at by brand new investors as strategies they think they should or must do in order to see success. Again, it’s so crucial to get started off correctly. Alright, let’s discuss these five.
The first one is to take big risks. To some people, investing means risk. It means that they must make risky decisions where they’ll either win big or lose big. It’s like going to Vegas and putting it on black. The truth is that risk shouldn’t really even be a factor. The risk is extremely minimal when you have all of your cards lined up ahead of time. You know the process, the laws, what goes into it. You have your max bid amount, which will provide a profit when you sell utilizing the strategy that you know will work and you know will bring in a set price. There isn’t any risk there is there? The only risk is that you didn’t prepare correctly. It’s not like you should be going out and blindly bidding on properties – where you have no idea what you’ll end up paying or what you’ll end up binding. Sure, that’s risk. But when you’re prepared ahead of time, there is minimal risk. If you’re about to invest in a property and you feel it’s risky just before purchase, then you shouldn’t be investing in it. You should know what’s involved, you know your cost, you know the expenses and you know what you’ll sell for. At that point, it’s simple math, not risk.
Along that same line is something I see far too often and that’s going all-in as a beginner. And I’m not talking about with your effort, with your research, with the number of auctions you attend or that kind of thing, obviously I’m a huge fan of doing everything you can to prepare yourself for success . . . but, what I’m talking about going all in with your money right off the bat. You sink every dime you have into your first property at the point of purchase. Now, being confident is one thing. I want you to be confident. But even if you’ve prepared yourself fully, you still don’t yet know what you don’t yet know. In the event you need to cure title or otherwise spend a few bucks to make the property sellable, then you’re stuck. Now, I’ll be the first to admit that I’ve gone all in on properties before – but that was only after years and years of experience, and these were properties with multiple backup plans, when I was younger and more risk tolerant. But as a beginner, it’s a horrible idea. And what I often see, and please pay attention to this, is the beginner who feels it necessary to go all in, is often the same beginner who does so wrecklessly, without fully preparing themselves. Your funds should not dictate the amount of pressure you put on yourself to invest, although I find that it does for many new investors. The same person that won’t spend $5 to cover the shipping on a book to teach them about tax sale investing, is also the same person who will blindly invest every dime they have. Prepare yourself and build up to the point where you’re investing more and more when necessary. Don’t do it out of the gate.
Another common strategy I see amongst beginners and one that rarely works are the complicated schemes. Every week or so I’ll get an message about a so called cutting edge scheme that a brand new tax sale investor has come up with. Often a tax sale investor that has not done a bit of research, doesn’t understand the business and hasn’t purchased a property. But they’ll come up with some sort of strategy that they think is earth shattering. And at the core it’s often a strategy that is over complicated, unnecessary and doesn’t work. And I’ve heard it all – many that are immoral, others that are illegal and plenty that are just plain ridiculous. Tax sale investing is the process of buying and selling tax defaulted real estate. It’s pretty simple, obvious there are strategies to do it and, sure, some can get complicated. But leave the complicated strategies for the guys with years of experience or build up to that point yourself. If you need some sort of crazy and complicated scheme to get into this business, you likely don’t need to be in this business.
Another strategy that I see is a timeline. Many new investors will set a goal of buying a property within 30 days. I’ve even seen so called real estate coaches put timelines into place – buy your first property within two weeks. This is a very wreckless approach. Very. I am all for goals that you can control. I am not for goals that have so many outside variables that you don’t have control. For example, while you might desire to have your first property in a week, two weeks, a month, whatever it is . . . . you must understand that you don’t control when the auctions are. You don’t control the property selection. The market conditions. The competition and subsequently the price you’ll pay. You don’t control so many things. So how could you possibly make an investment in something, when you don’t know what you’ll be investing in, when you’ll be investing, how much you’ll be investing or what the potential margins are? Do NOT force yourself into any sort of artificial timeline.
The last strategy is what I like to refer to as the Fire, Ready, Aim strategy. This is where a new investor is so excited that they make the decision to buy, then they attempt to learn what they’re doing. And this is often the saddest, most financially severe strategy. It hurts me to read the stories about investors who make mistakes like this. So much of what I do is try to help new investors understand what they’re doing. I try to help them to be prepared to make the correct decision when the timing is right. Yet, a lot of new investors make either do no preparation or they do minimal preparation and then pull the trigger. This usually results in properties with lousy margins at best. And demolition costs, court fines, lawsuits and plenty of other fun stuff at worst. Taking action is great. But only take action, only move forward, only proceed once you are fully prepared and know exactly what you’re doing.
There you have it. Five strategies often used by new investors that will likely produce disastrous results. Taking Big Risks, Going All In, Complicated Schemes, Artificial Timelines and the Fire, Ready Aim approach.
I truly hope that this episode has been helpful for you. There are obviously many CORRECT strategies for new investors that we teach about inside the tax sale academy. I want you to do everything in your power to get started in this business on the right foot.
If you enjoyed today’s podcast, please do me a huge favor and leave us a positive rating on whatever podcasting platform you’re listening to us on today. And if we can be of any additional help there are a bunch of links for you in today’s show notes, including one to our primary site at TaxSaleAcademy.com
Take care and make it a successful day. See ya!