Transcript:
Welcome to the Tax Sale Podcast, where tax sale investing is made easy.
I’m Casey Denman, a tax sale veteran, the author of the tax sale playbook, founder of the tax sale academy, the leading tax sale expert and trainer and your host right here on the tax sale podcast.
Thanks for joining me on today’s podcast. This podcast is provided completely free to help teach you about tax sale investing and is made possible through The Tax Sale Academy. If you’re looking to learn about tax defaulted real estate, in a comprehensive, step by step basis then head to TaxSaleAacdemy.com and click on join. Again, taxsaleacademy.com and click join.
Today we’ll be discussing a subcategory of investing in tax defaulted real estate. I’m talking about OTC investing. This stands for Over The Counter investing. We’ve done an episode previously on the basics of OTC investing, but in this episode we’ll dig into it a little farther. I want to discuss how to PROFITABLY invest in otc properties, because the truth is that you must take a different approach than traditional tax sale investing.
I’ve said it time and time again that tax sale investing is an incredible business if you put forth the effort to learn it properly. When it comes to OTC investing, this is magnified. It can be even more incredible, at times, but it requires more effort to learn how to do it properly.
So, let’s review those basics real quick to get your up to speed.
When a property owner fails to pay the taxes on a property, that property becomes tax delinquent and begins the process towards tax foreclosure. Eventually, depending on the state a tax lien, which is a lien against the property, or a tax deed, which is the property itself will be auctioned off. If no one bids on the lien or deed to that property, it’ll go unsold and becomes available over the counter or OTC.
This means that OTC properties are tax defaulted properties that you can purchase without bidding on. The name implies and comes from the history of walking into the county office, buying a property directly from the county over the counter and walking out with that property, just like you were buying groceries. This is still mostly true in many areas. In other areas there might be a minor variation to the specific process. But the end result is that you buy properties directly from the county without bidding.
OTC purchasing allows you to take the time necessary for research, it allows you to buy the properties on your schedule, it removes the auction competition, and it allows you to really dial in your selling approach prior to your purchase. On top of all this, often times, you’ll be buying these properties for the amount of back due taxes or even less.
There aren’t many ways to get property for the amount of back due taxes, which is often a very small percentage of what the property is worth. For example, I’ve told the story before of purchasing ten property at $75 each. They were resold a short time later and I walked away with a nice little chunk of change.
Now, with all that said we must remember why OTC properties are on the OTC list. The owner failed to pay the taxes. Then, no one in the room bid on that property. So, we basically have two strikes against us right out of the gate. The reason that the owner stopped paying the taxes and no one wanted to pay even the minimum bid could very well be property specific. Which is what we’ll be diving into on today’s episode.
You must understand that when you look at any real estate, there are going to be plenty of properties that you’d rather not have. Maybe you’re on Zillow and a house is too small, in a bad part of town, it’s just not your style, whatever the case, there will be properties that aren’t worth the money to you. When you look at a tax sale list, that percentage of properties you don’t want is really going to increase. We never buy properties based on price alone. We must buy properties based on price compared to their value to us. Buying useless cheap properties is a recipe for disaster. So when we look at an OTC list, we must understand the approach we have to take. …there will be a high percentage of properties that you won’t want . . . at any price.
But the issue that I often see is people don’t know what they’re really even looking at, so they revert back to price and how cheap they can get it. Sure, it’s a vacant lot or a dilapidated house. It’s this or that. BUT . . . what is it as an investment? THAT is the most important question!
While it can work from time to time, OTC investing is MORE than simply reviewing the OTC list, finding the ten amazing deals, and reselling them without much thought, effort or creativity.
Instead, remember the ten properties I got for $75 each? These were properties that the locals thought were valueless. There was an abundance of lots in this specific subdivision on the open market. So, I created demand, prearranged my buyers, bought the properties and then resold them. Obviously, there is a lot involved in each of these steps, but here’s the point . . . I used STRATEGY.
In order to invest in OTC properties profitably and successfully, you must be diligent and creative in your efforts.
So many new investors want to just pickup a list of properties and choose the best one and make money without any real effort. And that might work in traditional real estate. Just pick the one that has the most profit. It can even perhaps work in standard tax sale investing. Go to the auction with your max bids based off the value you assigned to that house or lot, pick the property or multiple properties where you can make money and buy them up. I’m all about that approach. Do it over and over if it works for you.
Most the time, however, it’s not going to be as easy as simply choosing the most profitable property when it comes to OTC investing. Instead, you’ll need to review the properties, research them like we teach in the academy, then develop a strategy for that specific property. When you invest in OTC properties, there usually won’t be a clear cut winner.
I look at each one of the properties on an OTC list as a challenge. If it’s a landlocked 2 foot by 2 foot parcel of land, I ask myself how exactly I could make it profitable? Maybe sell it to a neighbor or perhaps there is something I can do with it to make it desireable? Obviously, this is on the extreme example, but what I’m trying to illustrate is that every single property becomes a challenge for me to figure out how to profit from
How exactly can I make money off of it? And again, it usually won’t be buy, put a FSBO sign on it and walk away with cash. Instead, it might require multiple steps and lots of effort. And that’s ok if the margin is sufficient for the risk required. But it’s important to consciously look at every OTC property with the mentality of what strategy could you use to make money with that property?
Your strategy might require that you market it to resell quickly with a thin margin or that you buy it to sell in a bulk package. I’ve seen some investors before that buy up every single lot available on an OTC list in one specific area, which could amount to dozens or hundreds of properties, that way they can control the marketplace for that specific property and then do what they wants with it. Maybe it’s a national campaign to sell them or they decide to develop the land, they find an approach that will make each property more profitable for them.
So, what I want you to do is the next time you look at an OTC list don’t just look at it to pick out the most profitable property. If you can, great, but as we discussed there’s a good chance it won’t just pop out at you immediately. Instead, as you review every single property, determine what your strategy could be with that property to make it profitable. Then, decide if it’s worth the money and time investment. If it isn’t then move on. If it is, then buy it up, execute your plan and make some money.
OTC investing is an incredible business if you approach it correctly. It does require a slightly specialized skill set to learn how to properly strategize for OTC properties. Over the last few months, I’ve been working on creating an OTC specific class that you will you the skillset required to successfully invest in OTC properties. It’s called OTC Class.
OTC Class is not an all encompassing tax sale investing class. Instead, it teaches solely on OTC investing. I’ve released it to Startup and Lifetime academy members as part of their package. It’s also available for purchase at www.otcclass.com if you’d like to get more information. I’ll also link it in the show notes.
Tax Sale Investing and OTC investing both are incredible business. If you’re ready to start or ready to grow your business please, always remind yourself to continue learning. To this day, despite my many years of experience, learning different strategies, process, systems, techniques . . . that has been the catalyst to the growth in my business.
I truly hope you’ve found this episode helpful and that you are enjoying my podcast. If you are, please consider taking just a few minutes out of your day to leave some positive feedback on whatever platform you’re listening to us on. It really gives us the motivation and desire to continue to expand our business on both the free and premium sides and we hope we’re able to have a small impact on your tax sale business.
Thanks so much for joining me on this episode.
Take care guys and make it a successful day.