Real Estate Under $100

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’re talking about buying real estate for less than $100. In this episode we’ll discuss if it’s even possible or if it’s just a scam, how to leverage this approach, and then I’ll throw in a few traps behind this approach.

Cheap real estate is always an incredibly popular topic for obvious reasons. First off, let’s talk about the possibility of buying real estate for less than $100. Is it even possible? Or is this just some sort of scam or gimmick?

The answer is yes, it’s absolutely possible. I’ve done it countless times in my career. I’ve got a few podcasts about this and a number of videos on YouTube. I even provide a copy of deeds in many of those videos for the naysayers. I’ve purchased real estate for literally $.01 before. No joke, no gimmick, no lies . . . one cent. And if you listened to the podcast episode title best day of my tax sale life you know that I’ve purchased multiple properties for $20 in just one day.

So first off, while it is possible, it is NOT possible in every single state and every single market. It IS a rather rare occurrence. But here’s how it happens. In some markets, tax defaulted real estate is offered for the amount of back due taxes, interest, penalties and fees. There are situations where no one wants to bid this amount – it could be the property isn’t desireable or maybe even a case in economically challenged areas where tax rates are so high that the bid amount might be more than what the property’s worth.

When no one bids it could go to an OTC list or it could be reauctioned or sold in another manner. Before I continue, we must remember that the county sells tax defaulted properties for two reasons: the first is to recoup the back due taxes. The second is to return the property to the tax rolls in a positive revenue producing state. They must have these taxes to meet their budgets, right?

So if it doesn’t get sold at auction for what’s owed, this is where the properties can start coming down in price to virtually nothing. At this point, the county has the understanding that it wasn’t possible to get back the previously due taxes. Now, they are just looking to get the property back on the tax roll to produce that tax revenue once again. A property should produced no taxes doesn’t do anything to help meet their budgets when they’re relying on that tax revenue.

In the case of a reauction, this is where it goes to a second auction and in some areas the opening bid will be for a nominal amount. It could start at a 1 cent no reserve auction. In other areas, it could be $20, $50 or $100.

If it’s not reauctioned, some areas allow you to make offers to purchase the properties. Usually these offers must be approved by the county commissioners or real estate department, but the acceptable offer amount might surprise you. I’ve purchased ten properties at once using the offer method for $75 each.

Those are going to be the two primary ways – the no reserve reauctions or through a negotiated sale or offer process. Search around your state to learn about the specific process used. You can also click the state guide link in the show notes that will take you to our site for more state specific information.

Now, as mentioned these aren’t offered in a lot of areas. And even when you do find this type of process, it can still be rare to actually get a property for 1 cent or $20. Because, well, there are other people that want that 1 cent property too. BUT, and this should be your big takeaway to execute this strategy . . . if you see enough properties sold in this manner, in a variety of areas, you will come across one sooner or later. The reason I’ve been able to buy so many cheap properties is simply because of the number of properties I’ve seen sold. I’ve been going to auctions for 17 years and have seen billions of dollars in real estate auctioned off. I can’t even imagine the number of parcels I’ve seen get sold. It truly is a numbers game with this approach.

Now, how to actually use this approach successfully. If you buy a $20 property, that’s cool. But it’s completely pointless unless you can actually sell it and make some money. Now, if you buy a $20 property and sell it for $200, you’ve turned your money over 10 times. That sounds good on paper, but you invested quite a bit of time for $150 in profit. Instead, you need something that can offer you exponential returns. Now, you’re not going to get a $20 property that will sell for $50,000. We have to be a little realistic here. The 1 cent deal I referenced earlier, I sold for around $1200. Obvosuly, $1200 for real estate is still cheap, but that’s a pretty good return in my book. I’ve also done this many times where I’ll go from a $20 or $50 investment to 100 to $800 or $900. Not huge money, but certainly good returns depending on the amount of effort required. You have to remember your goal shouldn’t simply be to get cheap real estate. It should be to get cheap real estate that you can sell and make money off of.

And that’s a great way to move into a key traps I want to point out. Some people think you should be any real estate you can get your hands on for less than $100. Don’t ever believe this. You should NEVER EVER buy real estate just because it’s cheap.

Here’s an example for a few weeks ago:
There’s a parcel of land for $100, with a large old commercial building on it. Simple so far. Well, that old commercial building used to be a manufacturing facility that produced chemicals of some sort. Unfortuantely, the owner of that plant decided to dump many of the biproducts from those chemicals directly into the ground. Now, when you buy that property, you immediately have a HUGE target on your back. The EPA knows about the facility. And they look forward to you buying that property so you can clean up the contamination. And if you don’t, you might just be held personally responsible, both financially and criminally. So have fun with your $100 purchase, right?

That’s obviously an extreme example, but there are many others. Maybe buying an old house that’s on a demolition list, then getting hit with the demolition bill. Perhaps it’s a property that’s known to the city as a place vagrants hang out and you’ll soon start receiving citations on a daily basis.

Other example could include ridiculous HOA fees or membership fees upon purchase. Or even extremely high taxes.

Obviously, you want to research the property to know what you’re getting yourself into. Buying properties just because they’re cheap and ignoring everything else, is a great way to get yourself into trouble. Some states allow HOAs and cities to go after you in court or to assign debt collectors if you owe them money. It’s a very slippery slope.

So, as we mentioned, yes you can absolutely purchase real estate for $100 or less at tax sales in many areas. But you must understand it’ll take a lot of effort to pull it off successfully, you’ll have to attend a lot of auctions or submit a lot of offers to actually be able to buy the properties, and you’re goal should be to grow your money exponentially, not just 10 or 20%. And at the end of the day, PLEASE know exactly what you’re buying and never buy because of cost alone.

That’s it for today’s episode.

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. 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.