Should you invest in homes or vacant land at tax sale auctions? Which one is more profitable? Watch this video to find out!
Transcription:
Hey guys, it’s Casey Denman here from Tax Sale Academy.com
Thanks so much for joining me on today’s livestream.
Let’s get right to it . . .
Today we’re comparing homes vs land when it comes to tax sale investing.
It’s the age old question in this business. Should I focus on homes? Should I focus on land? Which is best? Which one will I make the most money with?
These are questions I get very frequently.
So… let’s go over both of them.
First off, let’s talk supply. If it isn’t there, you can’t buy it, right? The deal is that there will be much much more vacant land then there will be homes. Of course, this can vary from area to area, but I typically see 7, maybe 8 vacant properties for every one improved property.
Again, some areas have lots of homes too. But on average, when it comes to supply levels, vacant land, will definitely be more readily available at tax sale auctions.
What about acquisition costs? What will it cost you to buy the properties? Vacant land will typically be much cheaper than homes. The tax bill and subsequently the delinquent taxes are less, it’s worth less, it only makes sense that it sells for less money. Homes are going to cost more most of the time. Every now and then there are exceptions, but land is going to be cheaper the majority of the time.
Moving on . . . what about maintenance? Maintenance will mostly be a concern for improved properties. But all properties will have some sort of maintenance required. Yes, even vacant lots have maintenance in some areas. For a vacant lot, this could be keeping the weeds trimmed or clearing the sidewalks of snow. For homes, this obviously, means much more. Depending on what you’re doing with the property, you’ll at the very least, want to make sure the basics are covered – Doors shut properly, windows present, no water leaks, weeds mowed, that kind of stuff. Homes are generally going to require much more effort to maintain than vacant land.
What about carrying costs? The maintenance costs we just discussed can be included in this as well. In addition to those maintenance costs, you’ll also have taxes and any insurance you deem necessary. Taxes and insurance, of course, will be higher on homes and because of this, improved properties, of course, will have much higher carrying costs than vacant properties.
Now, let’s move on to selling these assets and this is really where the roles are reversed. So far, it seems like vacant land is the overwhelming favorite.
Let’s first talk demand. In most situations, homes will have higher demand than vacant lots. More people typically want homes than land. They’ll be easier to sell since you’ll have a much larger audience. This can obviously vary from one area to the next, especially if you’re experiencing building booms in your area, but more often than not, your homes will be in much higher demand than vacant properties. So you’ll be able to sell them much faster and you’ll be able to move on to another investment sooner.
Now . . . Let’s talk potential profit. This obviously varies for every single property you’re buying or selling. I can’t tell you that you’ll make more money with lots, or acreage, or homes or commercial structures, or whatever else you decide to buy. On specific transactions I’ve made more more from lots than some homes, I’ve made more money on homes than some lots . . . but here is what I can tell you. Generally speaking, you’re going to have a higher profit margin on homes than on vacant land. Now, again, I don’t want anyone to misunderstand me here. But from my experience, I’ve made more money, on average, off of a home investment than a vacant land investment. And the reason is quite obvious; they sell for more money. I can invest $1,000 into a lot and sell it for $3,000 or I can invest $15,000 into a home and sell it for $30,000. Same transactional work. Yes, the home has more carrying costs, maintenance, risk, and it’s just requires more attention, but you can make more money as a result.
One can also argue that since you have a higher margin dollar wise, it can be less risky. That same $2,000 you grossed on your vacant lot can be gone very quickly if something goes wrong. Whereas, the $15,000 you grossed on the home will take more problems to burn through.
But, here’s the deal. Most of my career, I have invested heavily, in get ready . . . vacant properties. Sure, I’ve bought many many homes. But a large percentage of all my investments have been vacant land.
It’s not nearly a “sexy” as homes. It’s not as glamorous or prestigious. Heck, maybe it’s not even “cool” to many people, but vacant land has provided me with a large portion of my income for many years.
The deal is that what you invest in will depend heavily on the areas that you’re located in, your available capital and what you’re comfortable with. A lot of people start with vacant land because the barrier to entry, that is, the acquisition cost is low. And that is perfectly fine. Others are only interested in homes, and guess what? That is fine too.
When you invest in tax defaulted real estate, there is no perfect investment or a perfect route to take. Instead, you need to take advantage of the opportunities that come before you. Figure out what works best for you and then pull the trigger. I’m not going to sit here and tell you that vacant land is best for you. Or homes are best for you. Because every deal, every person, every area, and most importantly . . . every single investment opportunity it different.
The important thing is that when the right opportunity arises, for the right property, at the right time, you need to move forward.
So, Vacant Land vs. Homes.
So, who wins?
Wells, Sorry to ruin it for you guys. . . it’s a tie in my book!
You can make money with both vacant land and homes as a tax sale investor!
That’s it for today! I hope you’ve enjoyed today’s livestream.
As always, for more information be sure to head to TaxSaleAcademy.com. While you’re there you can also register for your free book. Just take care of shipping and we’ll get it in the mail to you.
Take care folks.
See ya!