Transcript:
Hey there, it’s Casey Denman here with TaxSaleAcademy.com. Thanks so much for joining me for this week’s tax sale tip video. Now before we get started with this week’s tip, please be sure to hit that subscribe button that way you don’t miss out on future tax sale training videos.
Alright, so earlier today I was looking at a tax sale list and notices that there were lots and lots of properties available in ONE subdivision. I’m talking hundreds of properties in one specific subdivision. And this is something that’s always such a HUGE caution sign. As you’ll see, this doesn’t always mean that I must run the other way, but it should make me slow down and regain focus on what I’m doing.
So, when you’re reviewing a tax sale list one of the first things that I do is scan through the list of properties. I’ll look at the legal descriptions to see if how many properties are in the same subdivision. And while it might sound easy, this can become pretty difficult, especially in the areas you aren’t familiar with.
The simplest form, of course, might be something like Flower Hill subdivision. Go through the list, see 100 properties in Flower hill subdivision and that’s obvious. But it can get more and more complex. A variation could be Flower Hill Subdivision Section 1, Flower Hill Subdivision Section 2 and so forth – still pretty obvious so far. But you could also see seemingly related subdivision names like Flower Hill, Flower Mound, Flower Garden, which are all under the Flower Subdivision name. And then you could have a bunch of random subdivision names that are still part of an overall master subdivision. The point, of course is that you have to use your head a little bit when you’re doing this research, since it’s more than just looking for the same exact name.
Now, we have established that the list has many properties inside one subdivision.
When we usually work through the research side of our list, we’ll go property by property. When you see multiple properties in one sides, instead of researching every single property, we’ll first start with researching the subdivision as a whole. There is no reason to research every single property, if we can first research the entire subdivision and make the decision that we don’t want to invest there. This can save us a substantial amount of time.
The first thing we have to figure out is why these properties, in this one specific subdivision are available at in the first place. Most the reasons are going to be bad, but a few could present opportunities so it’s important to perform proper due diligence and NOT to automatically discount them or skip over them.
Let’s go over a few potential reasons – obviously, this is not an all encompassing list but it should help provide some ideas.
One reason is that the subdivision might have never been developed. This is something that I see from time to time. Many decades ago, the local governments didn’t’ have the same restrictions on developers that they do now. Back then, it was just a matter of having a large piece of land, paying a surveyor to divide it up and selling the lots. What happens in some cases is the developer leaves the project half finished. So, in this situation you could actually have a subdivision, platted lots and sold lots . . . at least on paper. But, the finished product in person, such as roads cleared doesn’t exist. So you’re essentially stuck with a large parcel that is broken into many smaller parcels that you can’t access. In this case, not much exists except for a tax bill.
Another reason is that the subdivision is just undesirable. There is no interest in that subdivision – and ultimately, no buyers. I’ve seen a number of subdivisions, completed subdivisions with roads, where the lots might have been sold 50, 60 years ago, but those owners haven’t been able to sell them since. They eventually end up into a never ending cycle of tax foreclosure. A lot of these are in areas in the desert or are otherwise so isolated that no one would have any desire going there.
On that same token are supply and demand issues. I’ve seen subdivisions that were somewhat desirable, but the problem is there were 2,000 lots currently available on the market for sale. If the absorption rate is one every other day it would take ten years at that rate for all of the lots to be sold, and that’s IF no new lots came on the market. That’s the big issue with a lot of these huge subdivisions, again, many of them developed decades ago. So just because it seems like a somewhat desireable neighborhood, be sure to check the supply levels.
Another one are the subdivisions that are not buildable using standard measures. This could be because the sites require a septic tank but the soil does not perc. Or it could be that the property is not serviced by water wells, but the county code prohibits wells on properties less than a quarter acre, which includes all lots in the subdivision. Maybe the lots are small 25’ lots and you’d need multiple lots to build. Now, all of these aren’t always bad provided you can get creative enough with your marketing efforts to sell these properties. Selling lots as recreational or camping lots is one way to go, provided the margin is there of course. If the subdivision is labeled as not buildable using standard measures, do a little more research, see if there is any way around these hurdles and press forward.
The last issue, and a VERY common one are subdivisions that have high HOA fees. And there are a number of different angles to this. It could mean high in an actual recurring fee – a $500 per month HOA is pricey, but not unheard of in some areas. It could also mean high in relation to the value of the property, a $1500 vacant lot with $200 monthly HOA fees doesn’t make much sense since you’ll burn through your margin very fast. It could also be a situation where you’re forced to become a dues paying member of an association or country club – where you could be sent a 20 or 50,000 bill. Obvisouly, these are huge issues. Now, if you have plans in place ahead of time it’s possible to overcome these obstacles.
Now, these are just a few reasons why you’d have one subdision name frequently appear on a tax sale list. As with everything in this business, don’t rush to make a decision without first doing proper due diligence. Do that diligence while asking yourself how you can make this a successful investment. There have been many times when I’ve been the ONLY purchaser in a specific subdivision that everyone else avoided, and I did very well there because of the strategies I had in place. And of course . . . . there have been many subdivisions I’ve also avoided like the plague.
I truly hope that today’s video has helped you out. If you did enjoy this video, be sure to hit that thumbs up button just to let me know.
And if we can be of any additional help of your quest for tax sale success, there are a bunch of links down below in the video description, including one to our primary site at TaxSaleAcademy.com.
Take care and we’ll see you next time!