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.
Today I want to discuss often overlooked tax sale money makers. So, many people get into the tax sale business or even the real estate investment business in general with preconceived notions about what real estate investing is – and we’re often programed to want to invest in what we know. A lot of this is subconsciously formed over the years simply out of being familiar with certain types of properties and maybe even hearing about what we “should” invest in. The single family home. The one in a decent working class neighborhood, in fair to good condition, that’s of average size, average amenities that we can get slightly below market value, sell at market value and move on.
And obviously the same can be said about the area that we invest in – most people invest in what’s close to them simply because that’s what they are familiar with.
So, I’m not one to discourage you from investing in what you want to invest in. If you’re able to find that typical single family residence that you’re able to buy under market, by all means you should go for it. In fact, if you can find that, I do actually recommend it. Those are the simple deals most of the time that don’t require to much effort.
But what happens more than not, is that is what everyone focuses on. So you have substantial demand for that specific property type. In some areas, their tax sale lists just simply do not have that many typical single family homes that fit the bill. In the county I live in for example, it might be one for every 30 properties sold. This isn’t an economics class, but when we have high demand and low supply, we have an increase in price. Yes, even at an auction.
If that’s not the case in your area, great. But that entire situation is what leads me to today’s podcast. My hope is that you will see these three examples and begin to think outside of your simple single family box. Sure, that’s the easiest in many cases and for some people who aren’t comfortable with anything but single family homes, then stick to what you’re comfortable with. But for those looking to invest and have been patiently waiting without success, here are three overlook money makers.
The first is something I’ve discussed many times before: Vacant Lots. But not just any vacant lots. Sure, if you can find the vacant lots that are in a developing neighborhood that are easy flips, then go for it. But I’m talking about the vacant lots that just aren’t all that valuable. These could be mobile home lots, campsite lots, lots that are plentiful in certain areas – whatever it is, the lots in the $1,000 to $3 or 4,000 price range. And sure, these don’t exist in every single market, I get that. But they certainly do exist and are extremely plentiful in many areas. For many years, this was the bulk of what I did. I’ve been to numerous areas where I was the only person buying properties in certain subdivisions. Obviously, that was a little concerning at first. But, over time I became more and more confident in my ability to quickly resell these properties. I’ve sold to every one from very seasoned investors, to new investors and even owner users. Much of my ability to resell these so easily revolves around the price of the properties – at just a few thousand dollars you open up your buyer pool tremendously. Simply put, for many people investing in a vacant parcel usually isn’t a huge risk – it’s not going to take up a large percentage of their net worth. For some, it’s even an impulse purchase. And the good thing about most of these cheap vacant lots is that the holding costs are very low, so not only does the buyer not have too much capital invested, but their holding costs, if they decide to hold onto it long term, are minimal – some of the tax bills are crazy cheap, well under $100 per year.
The general process is that I’ll identify an area with properties that I find suitable – properites you can legally and physically access, are cheap and have some sort of desireability hopefully beyond the price. While resell price is the usual motivation for the buyer, I always like to have the lots close to recreation, within 10-15 minutes of a city, something along those lines. Then I’ll send them out to my buyer’s list for similar properties and they’ll sell very quickly. If you don’t have a buyers list, these are the perfect types of properties to help you create one. You can get in cheap, advertise like crazy on every free website you can find, gain attention as the person with the cheap land and then do it all over again, leveraging each property into many potential buyers. Eventually, of course, you can work your way up to bigger properties if you don’t want to deal with cheap lots forever. But this is a fantastic way to start.
Another one that’s overlooked in some areas are mobile homes. Now, obviously, there are a number of classifications of mobile homes. I’ve seen mobiles sell for hundreds of thousands of dollars – that’s not what I’m talking about since those are obviously desirable and will garner lots of attention. What I’m talking about are the smaller, simpler, cheaper mobile homes. Just like cheap land, there is a market in most areas for cheap homes. A single wide mobile home that’s livable will sell easily in most areas. Now, you might need to get creative with your financing options and you might need to think outside of the box, but it will be sellable one way or another.
Now, there are two issues with mobiles that some people might think of: The first is that it will be removed prior to the auction. And I’ve seen this happen many times. There are certainly ways that will clue you in on the removal about to happen, but this is and should be a concern. Secondly are the mobile homes in poor condition. You obviously want to be careful not to get yourself into code violation and a local government fine situation so don’t buy overly dilapidated mobiles. But you can deal with either the mobile being removed or an older condition mobile the same way: Focus and buy as if you were buying those properties as being vacant. If there is a septic and/or well then that’s even better. You can sell the properties as they sit, or you might even be able to sell the mobile as a haul away depending on it’s condition. Mobiles get overlooked by many, so just make sure you don’t automatically pass them up.
The last one that is overlooked are the odd parcels. And this is more of an advanced tactic – it’s probably not something you should go into day one, but I did want to include this on today’s episode just to get you thinking outside the box. I’ve seen quite a few examples of this over the years and I’ve been involved in a few. Essentially, you’re taking the properties that won’t get much attention because, their, well, odd . . . and then you put some form of marketing plan into place or you develop some specific strategy.
The specifics can vary widely, of course, so let me provide a few examples that I’ve seen over the years:
I’ve seen four condo units get sold in a four unit building that didn’t exist. It was an established complex and it was actually very nice – the developer died before building this last building, his estate lost the condo units due to taxes. Buying condo units in a building that doesn’t exist is usually a huge waste of money. UNLESS, one person buys all four units. And that’s exactly what happened. He bought each one for nearly nothing with plans to build the condos like they were originally planned.
Another example involves two unbuildable 50 foot wide lots. It just so happens that there were two 50’ lots owned by separate parties. The investor bought one from a private party for virtually nothing since it’s not buildable, then bought the second at the tax sale for virtually nothing. Combined the lots for a 100 footer and now it’s buildable and much, much more valuable.
I’ve seen plenty of folks buy unbuildable 20 and 30’ wide lots that they successfully sold by marketing them to RV owners, outdoor camping store and the like. I’ve seen people buy marina slips that served to be very profitable. I’ve seen people buy unusable lots in a community, solely to have access to that community’s amenities – one situation involves a retention pond someone bought, solely because owning it would provide a membership into the $50 per year association and access to a boat ramp on the otherwise private lake. Now, resell value might not have been there, but it was useful for that avid fisherman.
What I really want you to get from this episode is that there are an infinite number of ways that someone can profit from this business. And they don’t need to be as complex as some of the examples I’ve given here. I’m all for doing what’s easy and what works, but there are certainly times when we focus on the wrong approach when there are many other approaches just as easy, once we think of them. You can easily create simple, sustainable strategies very easily OUTSIDE of the basic single family home.
Keep it simple, but think outside of the box when necessary. Then take that strategy, that niche and work it for all it’s worth, while continuing to develop other strategies in your business.
I truly hope this helps you out today. I really appreciate you taking the time to listen and I’d be so grateful if you’d please just take a couple of seconds and leave a positive review for us on whatever podcasting platform you’re listening to us on.
And if we can be of additional help, there are a bunch of links down below including one to our primary platform at TaxSaleAcademy.com.