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 want to discuss and compare online tax sales to in person tax sales. This is an extremely hot topic amongst new tax sale investors. When I got into this business in the early 2000s there weren’t any online tax sales. In fact, most of the laws required all sales be held in person. Over the years we’ve seen more and more tax sales go from in person to online. In fact, this last year we’ve seen many states fast track their transition from in person to online as a result of COVID-19. With that said, there are still many, many counties that only offer in person auctions. And many of these counties have no intentions to ever transition to online sales. During my career I’ve been to hundreds and hundreds of in person auctions and even more online sales and there are good and bad things about both.
In today’s episode, I want to go over a few points with you today to make sure you fully understand all aspects of both the in person and online sales.
One aspect that comes to mind is obviously the convenience factor. Online investing, by far, is much more convenient than in person investing. I’ve got plenty of stories where I’ve attended multiples auctions in one, where I’ve purchased properties from the middle of the Caribbean, from 30,000 feet in the air and from countless restaurants. That’s the great thing about online investing. As long as you have wi-fi, you can certainly invest in tax defaulted real estate.
On the contrary, I’ve traveled to many, many in person only auction. At times, I’ve driven thousands of miles, spent months on the road and slept in too many hotels to remember going from one auction to the next. I’ve also hopped on flights, rented cars, driven to one auction . . . where I didn’t win a single property and was forced to head back home empty handed afterwards – many, many times. Not nearly as convenient.
Now, I do want to note something that’s extremely important here. Just because you buy online does not mean you can do everything online. If you are actually doing the due diligence you should be doing, this will require a local presence of some sort. Sure, most areas that offer sales online also have the majority of their other departments online as well – including property assessor’s, building department, GIS and numerous other resources we use for our research. But if you don’t perform boots on the ground type research, you are gambling. Big time. That beautiful house you see online might’ve been burned to the ground last month or demolished or have a tree that fell through the middle of it. If you’re attending an in person auction it’s pretty easy to get there a day or a few hours early to do some drivebys, to see it with your own two eyes. It’s a fantastic insurance policy for knowing exactly what you’re buying. Obviously, there are methods that I teach where you can hire local scouts for virtually nothing to drive by a property, snap a few photos and you send them some lunch money. In fact, I have a number of scouts through many areas that I use on a very regular basis to help with providing the local knowledge, provide photos and other various tasks, so it’s not overly difficult.
Even with not being able to see something in person, the convenient factor is going to online investing. It doesn’t get much more convenient than opening up your laptop no matter where you are and buying some real estate.
Let’s talk about competition now. With that convenience factor of online investing, typically brings compeititon. If it’s convenient for you, it’s convenient for the rest of the world as well. Don’t be naïve and think that you’re the only person in the world that is going to show up for the auction. Online sales are, on average, more competitive. Now, two things to mention with that.
The first is that I have attended online tax sales where there wasn’t any competition. I was literally the only bidder – this was abnormal of course, but it transalted into literally the best day of my career. I tell that story on this podcast in an episode I recorded a couple of years back in episode 10. So it’s not impossible to attend an online sale with low competition, but it is difficult.
The second thing is that even if there is a higher amount of competition, you can turn it into a numbers game and potentially get the same results depending on your objectives, provided you have the time and effort efficiently and accurately research the properties. So, instead of attending one or two auctions per month, you can easily attend one or two auction per week or even an auction a day or every other day. This will substantially increase the number of properties that you see get sold, which in turn increases your odds of buying properties you desire with lower competition. Effectively, you’re turning it into a number game here.
When we discuss in person auctions, you’ll generally face much lower levels of competition. The same effort required of you to bid at a tax sale is required of everyone else – and in person sales take a lot of effort. When I travel out of state to auctions, I’m nearly positive that I’m the only person from out of state in that room. It took a lot of effort and time for me to attend that sale. Even on a local level, the folks in that room had to drive to the sale, stand in line to register, then sit there and wait for hours – often without leaving for lunch or anything. And I’ve sat on hard courtroom benches for ten hours a day for a week straight before and I can assure you that it’s not fun. It simply takes effort and the more rural the county it is, the less technologically advanced a county is, the more difficult often is to attend. I have been to auctions before where there was only three people at the so called auction. Myself, one other bidder there for one single property and the county official. Now, on the flip side I’ve been to auctions before where I was one of thousands of other bidders in large conference rooms where there were multiple bid spotters and it was absolute chaos in terms of competition.
On average, however, in person sales will have a much lower level of competition than online sales. Again, it’s much easier to attend online sales, so there is potential that the numbers game works in your favor for online sales, but when we look at just an auction vs. auction basis, online sales are much more competitive.
So, what does this mean as far as profitability? The fact is that either one can be profitable. As an online investor it comes down to the numbers game. I can’t tell you how many people come to me frustrated that they’re not seeing the success they want after going to one or two online tax sales. Unfortunately, that’s how it works. You can’t expect to go to one or two online sales and find the success you desire. Instead, you should expect that you’ll need to go to numerous sales in a variety of areas before you’ll find the success you desire. This is something that many new investors don’t want to face – it takes effort, it takes work and diligence and even more so when you’re investing in online sales so that you can overcome the curse of that convenience factor and subsequently competition. But all it could take it one single property to change the trajectory of your business of your year or even your life, so it’s worth attending as many sales as you can.
In person sales also require a tenacious effort. That effort might be directed differently, however so you can attend in person auctions. So instead of working so diligently to attend as many online auctions as possible, you’ll be required to work diligently to research and physically attend auctions. Different kind of effort, but effort nonetheless. And you’re definitely not guaranteed success just because you show up at an in person auction – there could be lots of competition, or there could just be one or two guys who seem to buy every single property. But on a per auction basis, if you’re diversifying areas, then you’ll likely find success by going to fewer auctions compared to online sales – of course, on a calendar that could take longer depending on when the sale dates fall.
So, what do you do? That’s the million dollar question that I, honestly, can’t answer for you. I can tell you what I do, however and what has factored into it. So I am right in the middle- I attend as many in person auctions that I can reasonably attend and I attend as many online auctions as I can reasonably attend. If an in-person auction is not convenient for me, I won’t attend. If I’m not comfortable with my research abilities in one area or I don’t like the properties being offered I won’t attend – no matter if it’s in person or online. Your goal should be to have a healthy mix of both – I’m not oblivious to the fact, however, that it’s likely easier for me than most because I am a full time investor.
For you, there are probably many things that should factor into it, with your schedule being at the top of the list. You must take into consideration the value of your time, compared to the potential value of your time less the expense traveling to auctions. If you’re a doctor in Los Angeles making $1,000 per day, then it’s likely not worth it for you to take off work to travel to the east coast to buy one lot that will only make you $1,000. Likewise, if you have time off and there is an in person auction nearby, then by all means go to that auction.
Obviously, capital factors into it too. It’s not cheap to travel to auctions, so we factor in expenses. And at some point you might just run out of money – it happens to just about everybody, so where’s that money best spent. If you’re limited on funds, maybe attend auctions if they’re local but forgo traveling to auctions and invest online instead, with the expectations that it’ll take longer and will require more patience.
The fact is that both online sales and in person sales have their place. You can be successful with either one. A healthy mix is ideal, but YOU need to make the decision on what works best for YOU. Noone can make that decision for you. It’s important to give both a shot, provided you can. Don’t get so focused on online investing or in person sales, just because you THINK that’s what you should do. Instead, go out there, get real world experience and then start making educated decisions on how to invest based on your personal objectives.
Listen I truly hope that this episode comparing online sales and in person sales has helped you to make the best decision for yourself, your business and ultimately your family. If this episode has helped at all, please do us a huge favor and leave some positive feedback on whatever podcasting platform you’re listening to us on. It means a lot to us and we’re truly grateful for those who have taken the time to do so already.
If we can be of any additional help, there are a bunch of links in today’s show notes, including one to our primary site at taxsaleacademy.com.
Take care and we’ll see you next time right there on The Tax Sale Podcast. See ya!