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 today’s podcast episode, we’ll be talking more about investing out of area. This is a two part episode, and today we’re on the second part. If you haven’t yet listened to the first part, I encourage you to go back and listen prior to joining us today for part two.
Last week, we discussed some of the benefits to investing out of area. The ones we discussed were preference (liens, deeds, etc), cost, selection, competition, and frequency, although there are countless other benefits. I think it’s important that you understanding all of those things specifically can really help us out as we start discussing the more tactical stuff in today’s episode.
Now we have hours of training inside the academy on this exact topic, but once you understand the benefits of investing out of area, it’s time to move forward and get started.
Alright, so where to go now? One of the toughest questions for me to respond to is along the lines of “what the best state or area for me to invest in?” I wish it was really black and white. I wish I could tell every single person that asks that question to go this this county. You’ll be able to make loads of money there. But the fact is that every single person’s best area to invest in will be different. There is not a one size fits all answer. The best area for you is likely not the best area for me and vice versa.
Let me give you an example: Someone investing $4,000 and is looking to snag a couple of $2,000 properties will have completely different objective than someone investing $5m. That $5m investor probably won’t want to deal with lots since he’d have to somehow manage 2,500 of those $2,000 vacant lots.
And it’s not just about money either. A few years back I spent over a month on the road going from auction to auction. It was a very unique approach that many people can’t do because of outside factors, job, kids, family, other obligations.
Or maybe you’re trying to limit liability, don’t want any risk, want a lot of risk, are shooting for a certain percentage return, are investing other people’s money, have experience, lack experience . . . there are so many factors it’s not possible to tell you exactly where you should invest.
Instead, here’s the process I suggest and a lot of it will be putting the information we discussed in the first part of this series to work to make the decision on where to go.
First you must determine the system you want to invest in. I’ve got a few videos on this on YouTube and I also have a great resource for this. It’s completely free and you can find it at TaxSaleAcademy.com/stateguide – there’s a link in the show notes, but super easy to remember – TaxSaleAcademy.com/stateguide. This will provide you with a color coded breakdown of states and systems. Choose the system you want to invest in. If you want to invest in multiple systems, fantastic, but for now choose one. Just by this very act of choosing a system you’ll be cutting out roughly 2/3rd to ½ or the states.
The next step is to continue narrowing it down. Look up each specific state and determine their process to make sure it sits well with you. All Tax Liens states are not created the same. All tax deed states are not created the same. There are specifics in each of the states that you must become familiar with. Don’t want to worry about other liens – don’t invest in New Mexico for example where all other liens remain after a tax sale. Don’t want to have to send letters to the owner? Don’t invest in Montana. Obviously, these are two examples and can both be fine states to invest in. But the reason I bring these up is that every state is different. Understand that.
So you’ve now narrowed down the systems, then the states, now it’s time to look at the counties. This will take more effort. Generally speaking, as I’ve mentioned before, I don’t invest in the largest counties in a state. They usually have the highest amount of competition and end up being a great way to waste time. I also usually don’t invest in the smallest counties, where the population is like 117 or something.
So, this still leaves a good number of counties. What you want to is start your research of those counties. Go to each county that might have potential and look at their website or place a call if you need to. Take a look or ask questions about their auctions. Look at the process, the frequently asked questions, the future sales lists, and most importantly the previous auction results page.
From there, you need to determine the answer to a few questions . . .
First off, how often do they hold the sales? If their tax sales are once per year and it just happened last month, then you should probably mark it on your calendar, come back to it in 9 or 10 months and move on for the time being. If they take place monthly or weekly, determine when exactly they happen. When is the next one, when it the next one you could attend? Does the frequency make you happy? Answer that question with a no, and move on to another area. Answer that question with a yes and it’s time to continue.
The next question to ask yourself is what is required. And there are so many parts to this question and one usually leads into another and another . . .
How are the auctions held? Can you attend online, or do you need to be there in person. Pros and cons to both of these of course. But if you work 50 hours a week and have numerous other daily tasks, then it’ll be difficult to attend an auction and you should focus on areas with online auctions.
If you do need to attend in person and you physically can, how will you get their logistically? Driving a few hours is one thing, but spending $500 on a flight, $300 on a hotel and $200 on a rental car has quickly eaten up $1,000 worth of profit before you even get started. I’ve spent much much more than this traveling to and from auctions, so it isn’t a big deal if you’re prepared for it and if that expense is mitigated by the potential of the auction. At the very least, the expense to get to that auction needs to be in the back of your head.
How many properties are typically sold at an auction? Remember that in some areas, properties can get redeemed up to the last minute. And there are areas notorious for having 85-90% of the properties redeemed at the last possible second – so be sure you’re looking at the sold auction list, the previous results, and not the upcoming list to give you a better indication of how many properties are sold. If it’s one property, then you might want to rethink that county, especially if travel is necessary.
What about costs? Take a look at the opening bid amounts, and make sure they’re well within your budget. Then review the previous results lists to make sure the actual selling prices are also within your budget. We need to make sure that you can afford to invest in this area before continuing farther.
If you’ve made it to this point, one final thing we should mention are the property types. What kind of variety is there? I’ve invested in some counties and have done phenomenal, then the adjoining county has nothing but junk so without do a little research you won’t know what type of variety is available. It’s time to dig in a little bit, take a look at the legal descriptions, do a little surface level research and see what exactly is selling. The last thing you want to do is spend six hours researching only to realize that every single property is worthless.
Once you’ve answered these questions, you should have a better idea if you should be investing in this area or not. As you can see, we’re essentially creating a funnel that drops out only the best counties for you. We start with a wide target, which is the entire country, narrow it down to some states, narrow it down to some counties, narrow it down to fewer counties, until we’ve finally narrowed it down to just a handful of counties we should be investing in.
This right here is the answer to the what’s the best area question. Go trhough that entire process and boom, you suddenly have your best areas. You’ll have essentially created a concentration of areas that work best for you based on your objectives, finances, abilities and personal life.
At this point, it’s just investing like anywhere else. Now, odds are it’ll require quite a bit of effort to do it efficiently. You won’t know the good areas, bad areas, the subdivisions to steer clear of, the local laws or codes, you won’t know how to operate all of the various websites, or research properties efficiently. You’ll have to relearn all of this information for every single area that you invest in. That’s the tough part. The good news of course, is that once you’ve done it in a few different areas you’ll become familiar with the learning and beginning process in a new area and you’ll get better and better at it for each area you go to.
Then of course, based on what you’ve learned about the area, it’s time to start buying and selling.
So THAT’s how you invest out of area. So many people are intimidated by the thought of investing out of area. Unless you’re just dominating your local market area, the truth is that at some point in order to grow, most tax sale investors will need to explore other areas some. I’m not saying you too must invest in a dozen different states – maybe you only invest in just another county or two, but whatever the case, by focusing ONLY on one local market area, you are putting a ceiling on your business, your income and yourself.
These last couple podcasts hopefully opened your eyes to the possibilities that exist if you venture out slightly. I truly hope you enjoyed these episodes and I’m so grateful you took the time to learn from myself. If you have a few seconds to spare today, we’d really appreciate it if you took the time to leave us a positive review on whatever podcast platform you’re listening to us on.
And as always, if you’re looking to learn more about investing in tax defaulted real estate, including a significant amount of training on out of area investing which I’ve been doing for many many years now, just head to taxsaleacademy.com and click on join. Again, that’s taxsaleacademy.com and click on join.
Have a wonderful day. Take care, bye bye.