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Transcript:
Welcome to the Tax Sale Podcast, where tax sale investing is made easy.
I’m Casey Denman, a tax sale veteran, expert, and trainer, author of the tax sale playbook, founder of the tax sale academy and your host here on the tax sale podcast.
Thanks for joining me on today’s podcast, and as always, at the conclusion of this podcast, if you’re looking to learn more about investing in tax defaulted real estate head to taxsaleacademy.com. That’s taxsaleacademy.com.
Alright guys, today we’ll be talking about investing in multiple states. If you’ve followed me for any period of time you know my story. If not, let me recap it quickly to set the tone for this video.
Back in 2002 I got started in real estate. After being an agent for a while, one thing led to another and I began investing in tax defaulted real estate. Did very well investing in my hometown, but eventually became capped. There were only so many properties that were offered. Then I begin to expand to another county, then another and another.
Eventually, I realized that I needed to go out of state in order to see the level of success I wanted. So one year in June, I hopped on a plane to Oklahoma and bought some properites there. Ended up selling them and doing well. Then I was off the Mississippi, then Michigan, then Arizona, then Texas, then many other states over the years. As you might know, my favorite and most successful strategy is to cherry pick the most profitable properties for me. Now, this doesn’t mean they will be the most profitable properties for everyone, but they are the most profitable for me personally based on my specific investment objectives in that area. Obviously I’m not going to get involved in a huge remodel job on the other side of the country where I don’t know a single person. Instead, perhaps, I’ll get in flip a few lots and get out.
My experience has ultimately led me to where I am today. I’ve invested in countless states and have held an interest in over 1,000 properties. I still attend auctions in my hometown from time to time, but the large majority of the properties I purchase are from out of state.
I get emails, Facebook comments and YouTube messages all the time that will say something like “Will this work in Texas, or Pennsylvania or wherever?”
Here’s the deal. Tax sale investing works, in some fashion, in every single state. Every single state and every single county rely on the taxes that are created by real estate in order to meet their operating budgets. You know, the stuff that pays for things like police service, fire fighters, schools, parks, roads, bridges, libraries, the list goes on and on. If someone fails to pay their taxes, the county is forced to do something.
As we discussed what exactly they do can vary from one area to another. They might use a tax lien system, a tax deed system, a redeemable deed system or perhaps even a hybrid system. Whatever specific type of system they use, it has one primary purpose: To return that property to the tax roll as a tax revenue producing parcel. It’s not so you can make a million dollars. It’s to collect taxes so they can fund their budgets. You making money off the system is simply a by product.
So, again, where does tax sale investing work? It works in every single place where there is at least one person who has failed to timely pay their taxes . . . which is every single county in the country.
With that said, some areas might not meet your objectives as well as other areas. Some areas might not have as many properties, or perhaps might not have the specific properites you’re looking for. Some areas might be jammed packed with crazy competition. Some areas might have just horrible economies. Hopefully you get the point. While tax sale investing can work in every area, one area might not just meet your expectations for it. And that’s why we invest in multiple states.
So, how do we do it? I know, you understand your laws and your market where you live at. And it’s super convenient and drivebys are easy. I get it. But eventually, you’ll need to step outside of your comfort zone.
Let me discuss five steps to venturing into other states:
Before you move into another state, figure out your investment objectives. What exactly do you want to invest in. Do you want to buy and sell properties or are you more of a passive investor who wants to invest in tax liens and earn interest? This obviously will cut your choices of states by roughly 50%. Liens are better for some investors and deeds are better for some investors. Maybe you even want to do a combination of the two. Something else to think about is how much capital you have to invest. If you have $500, it’s probably not wise to invest in a state 1,000 miles away. So the first step is to figure out your investment objectives and then choose your next state based on those objectives.
Once you figure out an ideal state, determine if it’s viable to invest in that state. Do a quick Google search and look at a few of their tax sale auction lists. You might even need to do a little baseline research to figure out exactly what’s being sold. And do this for multiple counties, of course. What your looking for is the selection of properties. If there are only two properties offered in each county, then there just isn’t enough supply to justify moving forward. You also need to take a look at the specific property types and then confirm that your investment objectives are met. Perhaps you want to invest in only single family homes, and there is only vacant land available, obviously this will become an issue for you. So figure out the selection and then determine if it’s even practical to invest there.
Once you’ve determined that a state meets your objectives and that it has a decent selection, it’s time to research the laws in depth. It might be a tax deed or tax lien state, and while the process is typically very similar, every state has minor differences. This could include the time of the year when properties are sold, how properties are sold, the interest rates or minimum bid amounts, and all sorts of other requirements. This is the time to read through the laws in that state and really start to understand them, no matter how boring or mundane they might seem. It also the time to read through the rules in specific counties. Outside of the state guidelines, many counties have specific rules that must be followed as well. Once you’ve read through both the state laws and local rules, decide it it’s still the place for you. Usually it will be, but sometimes you might need to put the brakes on and adjust to another area.
After you’ve confirmed the area, it’s time to figure out the local market. The best way to start is the same way you figured out your hometown market. Be involved. I’m not saying join the PTA or something like that, but be actively researching your next potential market. Listen to what the market is doing. Know which areas are the best areas, the worst areas, which homes are selling, where the construction is, where the new starbucks is going, all that kind of stuff. The odds are that you are pretty familiar with your local market. Here’s what it boils down to: If you have seen success in your local market and you’re as familiar with a remote market as you are your local hometown market then you will be successful. Sure, it might take you some time to know all the street names and that type of stuff, but the interest is a powerful powerful research tool and you can expedite the process of familiarizing yourself with a market that’s not local to you. In short, know everything you can about every market before you invest in it!
Lastly, move forward. Once you’ve dialed in everything else that we’ve discussed up to this point, it’s time to press forward. Logistics can often be the most difficult part of investing out of area, so it’s important to think about that type of stuff ahead of time so you aren’t panicked the week of the auction. Do you need to travel to the area to bid? If so, can you attend multiple auctions and make the travel expense more beneficial. Exactly when are the auctions? Go ahead and put those dates on the calendar. What type of team will you need to assemble in the area? Go ahead and start assembling the team ahead of time or at least have their information ready to go. Think about everything you have in your local market and then figure out how you can put those same resources and that same knowledge into action in a different market.
I want to make it clear that investing out of area can have it’s challenges. BUT, it can also have it’s many countless advantages. If you decide to press forward, put in the work and the effort to invest out of area, you’ll eventually see much greater success than you would have sticking to just your hometown market.
So again, when it comes to investing out of area or out of state, figure out your investment objectives, determine if that new area is a viable option, research the laws, research the local market and then move forward!
Guys, that’s it for today’s podcast. If you’d like more information on investing in tax defaulted real estate, including trainings on how YOU can take advantage of investing out of state, be sure to visit us at TaxSaleAcademy.com. That’s TaxSaleAcademy.com.
And before I end, I’d like to ask for a quick favor from you. We provide lots of completely free training for you guys. All we ask is that you’ll subscribe to us and provide a like or positive rating to let us know you’re enjoying the content and you find it useful.
Take care guys and make it a successful day.
See ya!