Tax Sale Investing Isn’t Pretty

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 a subject that many people might not understand completely. That is, until they start in this business. The title of this episode is Tax Sale Investing Isn’t Pretty.

Tax sale investing is a subcategory of real estate investing. It’s an extremely lucrative subcategory. But investing in tax defaulted real estate is far different than investing in any other types of real estate.

Television shows like Flip This House, Fixer Upper, Flip or Flop, and about a thousand other shows, while possibly intriguing to many, are far from reality in many situations and while they don’t attempt to portray the properties as tax sale properties, the situations on these shows are far from tax sale investing. Then we add in social media, where we have investors driving Lamborghinis, walking around with girls in bikinis and supposedly making hundreds of millions of dollars flipping homes.

These things often give beginners the perception that you need to have your hair done, nails painted, wearing $500 shows and picking out Italian imported granite if you plan on succeeding in this business.

Unfortunately, when we combine all of this we get a false sense of reality – our expectations are not aligned with the real world. While I’m not knocking any of that stuff, it’s important to have realistic expectations and have an understanding of what you’re getting into. Too often, I hear from investors that tell me the properties, in quote, aren’t in very good condition. Or that there aren’t any homes in this area or that area. They come up with a bunch of crazy reasons why they’re not succeeding, and many seem to come from their perception of this business.

One thing I want you to understand right of the bat, is that you must think about what’s going on here. The properties that you’re purchasing at tax sale auctions are, well, tax defaulted real estate. These are properties that the owner didn’t pay the taxes on. These are not the multi million dollar mansions in your exclusive country club that you’ll be buying. These are properties where the owner didn’t want to or just couldn’t pay the taxes.

Now, obviously, there are many incredible properties. I have seen some in exclusive country clubs, but by and large, these are not going to be properties in great areas in great condition. And that . . . is perfectly, OK.

I remember the first time I took at friend to driveby some properties with me. I think he was expecting some properties that needed the grass mowed and then we could flip them and make money. I really don’t know what he was expecting. But as we drove by the very first property, he said, wait, you’re going to buy that thing? Yes, I sure was. And if everything turned out ok, that thing represented around $15k in profit. Eventually, he became an investor himself.

The last thing I want to happen is for your perception of this business to be wrong. I don’t want you to expect something and then quit when it doesn’t happen exactly that way. Because when this happens, you’ll exit the business soon after getting into it!

My entire academy teaches off of my almost 17 years of experience, showing you the reality of tax sale investing and how you can be successful. I’m not the type to blow smoke and tell you that you’ll be buying mansions for pennies. Not happening.

Let’s look at a five points when it comes to the large percentage of tax sale properties and how we can compare them to conventional real estate investing. Again, not all of them are going to always apply, but these are a few things you need to keep in the back of your mind.

1. Deferred Maintenance is a common theme. Many of these properties have actually had zero maintenance in many, many years. In fact, many properties have been vacant for a number of years. The worst thing for a home is for it to sit unused for an extended period of times. The end result is usually some mold, maybe some leaks, mechanicals that are missing or don’t function and lots of other fun little surprises. Tax sale properties won’t come with those nifty little home warranties, so be prepared to spend a few bucks repairing or replacing stuff if your goal is to remodel and flip. Deferred maintenance scares many beginners; overcome it and you’ll have a leg up.

2. Cleanliness. When someone loses their home to tax foreclosure, they usually won’t vacuum the carpets and sweep off the front porch on their way out. Cleaning it so that you’re not inconvenience won’t be on their mind. Likewise, while some banks might take the time to clean out their REOs, the county isn’t going to care if the former owner left their trash in there. And by trash, it could mean just about anything. I’ve seen homes that had the power shut off with refrigerators full of food, that then sat that way for a year or two all sealed up. Pro tip: Don’t open refrigerator doors regardless of how curious you are. I’ve also seen hoarders walk out and leave all of their goodies for you to dispose of. I’ve even seen dead animal carcasses before. Solution: Flip it before cleaning it, wear a mask or hire a crew to do it for you.

3. Tax Sale properties are frequently damaged in some way or another. A common problem I’ve seen are broken windows or doors. You can see these usually when you driveby the property to take note if they are concerning for you. Other less obvious issues might include damaged pipes with leaking water. Interior wall damage. Kitchen damage, or a common one seems to be the kitchen missing in it’s entirety. Most of these issues can be fixed fairly easily. It becomes a little more difficult when a tree has fallen through the house, when foundation issues are obvious or when a wall is buckling. All in all, the expensive stuff can usually be avoided with proper due diligence.

4. Another one are legal type issues. Most real estate investments, like bank owned properties are going to come with a clean title, title insurance, no liens, no issues or anything else of real concern besides perhaps the condition. Tax sale properties usually come with clouded title that puts a lot of people off. New flash: It’s not a big deal once you know how to deal with it . . . but you should definitely let your competition continue to blow it out of proportion. In addition to that, there could be governmental liens that we must deal with. There could also be code enforcements or citations that relate to the properties conditions. All of this stuff scares your competition. Learn how to push past it, which is easy, and then press forward.

5. Another difference is that tax sale investing can actually be more paperwork than anything. I’ve bought and sold properties before without leaving my desk. I literally spent more time preparing and filing paperwork than anything else. This is usually MUCH different than conventional real estate investing – in many conventional transaction, you might sign contracts and closing docs and that it. For many of my tax sale properties, I’ll buy them, market them, sell them, prepare all the paperwork, send it out, get a check and then move to the next property. And I’ve been able to do this without leaving my office in many situations. And you better believe that I am more than happy sitting in my office preparing docs for a couple of hours in order to make a few grand every single time.

Obviously, there are so many more differences. These are some of the most common ones that shock people.

What I really want you to realize with today’s episode is that tax sale investing is different and it isn’t as glamorous as many people think. This isn’t your typical real estate transaction or real estate flip. There are so many aspects that differ from the convention type real estate and there are so many different avenues and strategies you can use for tax defaulted real estate that it makes it an absolutely incredible business. And in fact, tax sale investing often is not pretty. It’s not the granite countertops and fancy open houses. But, as you probably know by now, it can be extremely lucrative with the right approach.

That’s it for today. If you’re interested in leverage our years and years of experience in this business, just head to taxsaleacademy.com and click on join and become a member of our academy where we’ll show you the step by step process you’ll need for your desired tax sale success.

Thanks so much for joining me on this episode.

And as always guys, these episodes are completely free of course. In exchange, we absolutely appreciate you taking the time to subscribe to our podcast, and ask that you leave a 5 star rating and some positive feedback.

Take care guys and make it a successful day.