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.
Alright, so today I want to do something a little bit different for today’s episode. As we’re starting to wrap up 2020, I wanted to take a look back at all of the questions that I received this year. I went through all of them in YouTube, on Instagram and through email and in this episode I’ll be answering the ten most commonly asked questions. Now most of these I have a more detailed response either on this Podcast or over on YouTube, but this should be a great episode to get some questions you likely have answered rather quickly. And I’ve tried to group these together the best I can, but they’re from across the board.
Alright:
What should I invest in, tax liens or tax deeds?
So without going into detail a tax lien is a lien against real estate for failure to pay property taxes. This lien provides a return to the investor in the form of interest in most situations. If the property doesn’t get redeemed after the redemption period is over, the lienholder can foreclose the lien and become owner. A tax deed is where the actual property is sold for delinquent taxes. So, knowing that it depends on what you’re looking to do. A tax lien will generally provide a lower return, but will require less work. This is because most tax liens are redeemed, so you will realize your profit in the form of interest when you receive a check in the mail. Mailbox money, very easy to collect. A tax deed will generally produce a higher return, all things equal, but will require more work since you must sell the property – without putting forth the effort to sell the property, you won’t make a dime. So that’s the short of it. It really depends on your personal objectives.
Alright, next one. Homes or Land?
The answer is, it depends. Both can be incredible investments, when done properly. I’ve invested in both throughout my career and I’ve done well with both. Now, I’ve probably invested in more land than homes, but that’s simply because many of the areas that I invest in have a higher concentration of land available than homes. The available properties will really have the most say on what you invest in – if there are any homes sold in your area, then you might need to invest in land or vice versa. With that said you also need to factor in your risk tolerance as determine how that impacts the specific property. Homes will usually require more effort – you have to secure them, maintain them, insure them and perhaps even cleanup or remodel them so it’s important you also factor in your time. Something else to note is that whether or not you’re local to the property is a big factor – buying a house many states away can be a much more difficult proposition. So in short, both can be great investments. I wouldn’t shy away from either one provided it fits your specific investment objectives!
Another common question from this year:
What is the best state to invest in?
This one depends entirely on your investment objectives combined with your available capital, and time, and the value of your time. The truth is that there are incredible deals in nearly every state. Now, some come with longer turn around times than others so it depends on what you’re looking to do. Such as a tax lien state compared to a tax deed state. My suggestion is to take a look at our state guide – there is a link to it in today’s show notes section. This state guide starts with a color coded map then we break down all of the details in each state. Figure out what you want to invest in, find your state then browse the listings in the area you want to invest as well as the results. This will give you a solid indication of the profit margins, property selection and required capital, then you can make a decision whether it’s a good area for you or if you need to keep looking.
Another common question is where to find out about auctions?
The county is the best resource for this. Go directly to the website of the department responsible for handling tax sales in your area – it could actually be a wide variety of departments, perhaps the tax collector, the treasurer, the clerk of the court. If you don’t know the name of the department that handles sales in your area, then call your tax collector’s office and ask them. Once you find the department, locate their website and browse it. It will likely have a wealth of information for you!
The next question: What’s the deal with OTC sales?
First off, OTC sales are not offered in every state so keep that in mind. But when a property goes to a tax sale and goes unsold, the property is then available for OTC or Over The Counter purchase. This is where you simply walk in, give them acheck and you walk out as the owner of the property. It’s a very simple process and a great way to create a near on demand income stream when done correctly. To find out more about OTC sales, simply contact the county department in your area that handles tax sales and ask them what happens to unsold properties. I also have an entire course I built just for OTC investing at OTCClass.com if you’re interested in learning my strategies.
Another common question revolved around researching properties faster.
My suggestion here is to learn how to properly utilize your research tools. Go through the property assessor’s site, the GIS and every other site you utilize and become ultra-confident with using them. Then develop a fool proof work flow – picture a funnel. All of these properties go in the top of the funnel and each layer of that funnel are set criteria you look for and the result are properties that you buy that end up at the bottom of the funnel. For example, I always start by making sure the property is in my budget. Then I’ll see how big it is. Then if it’s landlocked. What you want to do is start with the biggest red flags that cause you to skip the property. And the moment you see one of those, you skip it and move on. If you can’t afford it, don’t research it. If it’s landlocked press forward. If it’s a sliver of land keep moving. Develop a process where you go down a checklist that starts with the biggest issues and then as it passes the major stuff you keep working on your research until you determine how much you’ll bid.
Another common question this year was whether title searches should be done prepurchase? The answer is I do recommend you learn how to search the title yourself. You can do this through public records available online in most areas – this will help you determine which liens will be on the property when you acquire it. I do not recommend hiring a title company and paying $75-150 to run a title search for every single property you’re interested in. That will get expensive real fast, especially when you don’t win those properties.
Now, speaking of that another common question this year is what liens stay?
So, when a property goes through tax foreclosure and you purchase it, the liens on that property area extinguished – with an asterisk. So, first off, in order for those liens to be extinguished the lien holders must have been provided the proper notice as required by state law. If the county didn’t send the notice, they might not be extinguished. Secondly, and most importantly – private party liens are extinguished, liens attached to any branch of the government are not – this includes federal, state and local liens. Those will remain and will be your responsibility to negotiate or pay after purchase.
Another question I got a bunch this year was whether or not someone can file a suit to quiet title lawsuit themselves.
So when a property goes through a tax foreclosure, that foreclosure clouds the title which makes it difficult to get title insurance. There are multiple ways to deal with this, but one is to go through a suit to quiet title. This is a lawsuit that goes before a judge. So, can you file it yourself? The short answer is that it depends. If that property is in a corporation or LLC, it’s unlikely you can unless you’re an attorney as you’d be acting as an attorney since you’re filing it on behalf of a separate entity, which is your company. Now, even if it’s in your personal name can you? Well, perhaps but why? Typically it’s to save money. So hear me out – every single lawsuit, whether filed by an attorney or pro se, must meet the same standards. Just because you file it yourself doesn’t mean that the judge will give you any slack. When you make a mistake, you’ll have issues. So unless you are very well versed in real estate law and specifically, how to file a suit to quiet title, it’s best to let the attorneys handle it. Not to mention that whether you file it or an attorney files it, you still have quite a bit to spend in filing fees that the court will get so you might not save all that much money in the long run, especially when you factor in your time trying to play figure out how to play attorney.
Next one: I’ve been to an auction but everything was too much, what should I do or some sort of variation of that question.
The absolute key to success in this business is patience and exposure. You will not and should not expect to find the success you desire at the first auction. Or maybe even the first five or ten auctions. But be persistent. To this day, there are sometimes months that past between the time I buy properties, simply because nothing meets my objectives. You must be patient. It takes time. Secondly, exposure and what I mean by this is exposure to as many properties being auctioned off as possible. The more properties you see auctioned off, the better your chances of success. See 10 properties sold and you have 10 chances to get a property you want. See 10,000 sold, then you have 10,000 chances. Simple math. Patience and exposure.
And the last question and the most common is the impact of COVID on the tax sale business. This could be an entire episode by itself, but I’ll try to summarize it in a few sentences. The major impact short term, at least, is that many counties transitioned to online sales. This was a trend that had been in the works for at least a decade and many counties hit the fast forward button once they realized that in person auctions weren’t allowed in some areas. So there are definitely more online sales be it good or bad depending on your stance. Some areas did actually cancel their sales or postpone them. So that obviously has an impact on us as investors, but there are many, many counties that continue to sell properties every single day and the postponed sales will be held at some point so don’t worry about it too much.
Some states did also push back their tax due dates slightly. But it’s important to realize that that tax revenue is needed by the counties to operate their budgets, and state law dictates what they must do. Much of this includes set timelines to meet when taxes are considered delinquent and ultimately when properties must go through tax foreclosure. And that’s a very long process – it’s a number of years before a property is lost through tax foreclosure– and ultimately a few months’ delays here and there won’t have much of a noticeable impact long term on us as investors. As far are tax delinquencies as a result of COVID that could lead to a potential surge or foreclosures, that remains to be seen. In many areas, there is no difference in the property tax delinquency rate as of right now, while others have seen minor upticks. The long term impact on the tax sale business is something that won’t reveal itself for at least another year or two.
So there it is – the ten questions that I was asked most often this year. Hopefully you’ve learned something new in today’s podcast.
And listen, I truly want to be able to help you get started in this business. I’ve got a number of training resources available to you. This podcast is a fantastic resource, as is our YouTube channel if you’re looking for our free trainings. And if you want more detailed, step by step training, then you’ll want to join the tax sale academy for access to everything that we offer. And there are links to all of today’s show notes.
Thanks so much for listening and we’ll see you next time right here on The Tax Sale Podcast. See ya!