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.
Alright, today we’re going to be discussing one of my favorite topics. OTC or Over The Counter Investing. Specifically, we’ll talk about a few of the reasons I like it personally as well as some of the reasons I like it for some of my academy members too.
Alright, so first things first, if you’re not familiar with OTC investing let me catch you up to speed. So every state in the country has some sort of tax delinquent system. Liens or deeds or a variation thereof. So, you have a property owner who has failed to pay their taxes on time. The property will go to the tax sale. BUT, instead of selling at the tax sale the property goes unsold. In other words nobody bids. Their could be a number of reasons that no one bids on a property, not what they’re looking for, opening bid too high, bad property and many other reasons. Now, what happens in this situation is you have a property that no one purchased and it sits under the ownership of the county in most areas. BUT . . . the county is not in the land ownership business. That’s not where they make their money. They make their money with taxes. And when they own a property, they can’t pay themselves taxes. The need these taxes to cover their budgets which provide fire, police, roads, schools and tons of other stuff. So they need to sell the property.
And they’ll sell these properties over the counter or OTC for short. And over the counter is just like it sounds. In many sitautions you will literally walk in, tell them the property you want and you’ll pay over the counter. There won’t be an auction format or anything like that and you’ll know your price. In some situations the price will be the amount of the opening bid that they failed to get, which is usually the back due taxes, interest and fees that were owed. Sometimes these prices will decrease. It might be a situation where it drops every six month or a year. Or it could even be a situation where you make an offer. Simply put, you have a list of county owned properties, you choose the one you want, walk in and buy it. Pretty easy process.
Now, before I continue I want you to know that I absolutely love all tax sales. And truthfully, I have no favorites on the purchase method or strategy. Tax liens, tax deeds, auctions, OTC…just different approaches. And there’s nothing wrong with any of them. So don’t think this is the ONLY way to succeed in the tax sale business because it is NOT. Just putting that out there.
Alright, so what are a few of the reasons that I enjoy OTC sales:
The first one is that there is a set price. At tax sale auctions, it’s literally an auction. The price is set dependent on the amount of competition. If there are two people who want to purchase a property, then the person willing to pay the most will be the one who buys the property. Obviously, there are plenty of ways around this competition and there are plenty of properties where there is no competition, but the price always remains a mystery until the property is sold. With OTC investing, the price is set. In many places, they’ll provide a very thorough breakdown of any extra expenses involved with the transfer too. It might say back due taxes, transfer tax, deed prep fee . . . I’ve seen them be very itemized and down to the penny on what you need to pay for the property. Simlpy go to the bank, get a cashier’s check for the exact amount and then walk in to buy the property. Knowing what you’ll pay makes it very easy.
Along the same lines, not only is the price a set price but it’s also typically a low price. You won’t need to worry about that competition bidding the price up on you. I’ve seen some OTC properties sell for less than $100. So this is going to be one of the best ways to get into this business with a very limited budget.
Another benefit is guaranteed inventory. These are properties where the redemption period has expired and usually, at this point, there is no chance of a redemption. This is unlike many auctions where the delinquent tax payer is able to come in just before the auction, pay off the delinquent taxes and fees and remove the property from the auction. Imagine researching a property, digging up everything you can find, then becoming attached to something or excited about something online to have it pulled from auction at the last second. And many times, it’s truly the last second. I’ve seen properties get pulled at 8:59am when the auction starts at 9 o’clock. With OTC investing, the propery is guaranteed to be there provided no one comes in and buys it just before you. But outside of other’s buying the property, it’s going to be there for your purchase. This means you can invest the time necessary into due diligence, research and figuring out everything possible without fear of wasting time on a property that will be removed at the last minute from the auction.
The next benefit kind of ties into it being guaranteed inventory. And that’s the fact that you’re able to buy on YOUR schedule. Most tax sale auctions are held at certain times – it could be once a month, once a quarter, once a year, that kindo thing. But with OTC investing you can invest on YOUR schedule. And this one can benefit so many investors, often without them even realizing it. If you’re in an area where they hold auctions maybe once a year or very infrequently, then you are able to buy during the non auction seasons. Another example is perhaps you have a very limited budget, you can buy one property, sell it, go back buy another and so forth, opposed to waiting for the next auction. And for the very active investors it can be physically impossible to go from auction to the next auction and buy everything you want. There are a number of toher advantages to this as well, but the important thing here is that you can buy when you want. You don’t have to show up on the second Tuesday at June to the county courthouse at 9am. What if you have something important scheduled that day, right? Your schedule. Great benefit to that.
And the last benefit I want to discuss, certainly not the last benefit of OTC sales, but the last one I’ll discuss today and perhaps the most important benefit to many is that you have the ability to prearrange your buyers. And this is something I teach in my academy. With auctions, for the reasons we’ve already discussed like price, competition, possibility of redemption and a bunch of other stuff, we don’t really know what properties we’ll be able to buy until we pay for them. All of that is out of our control. When it comes to OTC investing, we know what we’re buying and we know the price we’re buying at ahead of time. The only problem we might have is if someone buys it before us, right? But, by knowing the price we’ll pay and knowing the property we’ll buy, we essentially have the cheat codes to this investing game. When you have this information up front, you’re able to shop for your buyers BEFORE you buy the property. You’ll prearrange your buyer ahead of time for one price, buy the property for another property, then resell it the day you purchase it and move on to the next property all while collecting your profits and holding on to virtually zero risk. Obviously, there is strategy involved here, but it’s certainly an incredible way to leverage OTC properties into success.
So as you can see OTC investing has quite a few benefits that come along with it. There are saw drawbacks, such as a higher percentage of worthless properties to filter out, but with the right strategies OTC investing is an incredible way to make money in this business. It’s also a way to bridge your income from auction season to the next or to start immediately in the tax sale business, even if there are currently no sales scheduled. For many years I’ve been going from OTC list to another across the country, picking the best properties for me and essentially making money on demand.
So, the next time you see an OTC list do your research and figure out how YOU can profit from those properties.
I truly hope you’ve enjoyed today’s podcast episode. If so, please don’t forget to leave us some positive feedback on whatever podcast platform you’re listening to us on.
And if we can help you with your journey to tax sale success, there are a number of links in today’s show notes. One of those links will take you to our class specifically for OTC investing, which is at OTCClass.com. We also have a link to our main site, TaxSaleAcademy.com where you can grab a copy of my free book if you just cover shipping, or you can even join the academy which includes all of our trainings, including OTC Class.
Thanks again for listening and don’t forget to make it a successful day. See ya!