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.
On the next two podcast episode, we’ll be discussing out of town investing. In today’s episode will look take a look at the few major points you must understand before moving forward. On next week’s episode we’ll be discussing a few tactical suggestions to get started. Both episodes are of equal importance.
Before we get into a few details, let me walk you through a little of how I personally started investing out of area. I write about this back story in Tax Sale Playbook, so I’ll be brief in today’s episode. It’s just needed for context. In 2002 just after high school I got started in real estate. I discovered tax sales shortly thereafter and went all in. By early 2006, the housing bubble was in full swing and I was absolutely killing the game. I’m based in Florida and I was investing solely in my local market. I could sell as fast as I could buy one. I would routinely close five or six transactions in one meeting at my title company’s office.
Then the market crashed. All of that dried up and went away. I was left scrambling. The buyers I was selling to just ceased to exist. That’s when I had to take another angle. My local market was lousy. The truth was the entire US market was lousy. But I started to seek out markets better than the one I was in and markets where I could still make money. While that’s a story for another day, the result is that I started to go from one area to the next. I would buy the properties that fit my objectives in one county, go to another county, then another state and another. It got to the point where I was selling almost as many properties in the down economy as I was in the good economy.
That’s when I discovered that I was essentially going from market to market to cherry pick the most profitable properties based on my objectives and selling styles. And usually my approach was different from everyone else in the room. That fact was that I had determined that whether the economy is good or bad, I can make far more money investing in multiple markets.
So, let’s look at five reasons I suggest this to my students.
1. Preference. This one is probably the easiest to understand. If you live in a tax lien state and you want to invest in tax deeds, then you’ll need to look outside your local market. The same can be said for tax lien investors who live in tax deed states. Toss in hybrid state and redeemable deed states and you probably realize that there are a few different options for you. I’ve heard many times “but I live in this state and they don’t sell tax deed, liens or whatever.” Simple solution, go to another market.
2. Costs. I’ve got a video on YouTube that walks you through a transaction where I paid a penny for a piece of real estate. You heard it correctly, one penny. Now there were some other fees involved but I think it totaled like $20 or $20 and one cent or something like that. I’ve been to other markets where you need $50,000 to even place an opening bid. Obviously that are fairly extreme examples, but the point is that different markets cost different amounts of money. If you look at your local auction list and it’s priced out of your budget, then seek out another market until you find one within your budget. The opening bid amounts and selling prices vary so substantially from one market to the next that it’s important to actually put in a little effort and find the market that’s most suitable for you. Look around, look at auction results and histories, find a market that fits your budget, even if that means investing out of town.
3. Selection
The tax sales at my local market primarily consist of vacant lots. And those vacant lots are usually going to be located in just a handful of select subdivisions – the same ones over and over again. While I can make them work, I know that I have a much better selection if I invest elsewhere. Often times, if you review the previously sold properties in one area, you’ll discover that the large majority will be very similar. If I want a large selection of homes, there are specific parts of the country that I’ll go to that will have lists predominately of homes. If I want to create my own marketing plan and dominate a subdivision, I know that I can buy 50 lots for $50 each in certain areas. I also know that if I want acreage or commercial properties that there are areas for that as well. Until I started investing out of town, I hadn’t bought a single house at a tax sale auction. Then I started buying them buy the dozens. I also hadn’t realized the potential with lots valued at less than $2,000 until I had the opportunity to invest in them and follow a new marketing and selling plan. Whether you choose to diversify property types or you just want more of the same but at high margins, investing out of town makes this extremely easy.
4. Competition. This is a big one. The most common excuse I get from those who want to get started with tax defaulted real estate, but don’t ever end up doing it is that the prices are too high because of the competition. Or someone will tell me that they went to one auction or took a look at the results in one area or whatever and they know that there is just too much competition. And they are correct. In the specific area that they looked at there probably is too much competition. It’s funny because most of these areas are the most well known areas in the country too – did you really expect that the city of Houston Texas, with more than 2 million residents would have no competition? Of course it does. Usually the smaller the market, the lower the competition. Now, there’s a sweet spot between finding low competition and buying in an isolated area where no one has moved to in 50 yeas. But, it’s important to understand that when you invest out of town, YOU choose the market area, which means YOU choose the competition you face.
5. The last one I want to discuss today is frequency. In many areas, you have one shot at tax sale properties throughout the year. This means if you aren’t able to buy a single property you have to wait an entire year. Or if you buy everything you can and then sell it all, you have to wait an entire year before you can make money again. An example could be Oklahoma. They hold their sales in June. So, come June 15th, if you weren’t able to buy a single property, then what? Or Michigan, who hold their auctions in the fall? What do you do all winter, spring and summer? I could go on and on with examples. The point is that it’s difficult to grow your business when you only work one month out of the year. That’s like working one day every two weeks. That’s when you start investing out of area to fill in the gaps and to continually expand and grow your business. You can obviously invest heavy in your local market and then buy throughout the rest of the year in a slightly lighter fashion. But investing out of town gives us the sustainability and cash flows required to effectively operate and grow our businesses.
These are just a few of the reasons I enjoy investing out of area and suggest it to my students. Instead of tunneling yourself into one single market that you feel you must invest in, understand that there are thousands of properties sold every single day. Around 3,000 depending on where the stats come from. That’s a lot of real estate! Imagine what you’re doing to your business and your finances by simply focusing on one market. Sure, it’s what you know, what you understand and what’s convenient to you. BUT, if you make the effort to expand market areas and to learn how to invest out of town your business and income will grow because of t.
That’s it for today’s episode.
Join us again next week for some tactical information on how to get started investing out of area. And if you’re looking to dive in and learn about tax sale investing, including some comprehensive workshops on investing out of area specifically, we go into great detail on it in the tax sale academy, which you can learn more about by going to taxsaleacademy.com and clicking on join.
I really 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 – we truly hope we’re able to play a small role in your tax sale success.
Take care!