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.
On today’s episode I want to discuss what you sould do when tax sale investing doesn’t work . . . for you. The tax sale business dates back to the early Roman empire days. It’s been around for a very long time and simply puts, it’s a business that works. Now, in some situations, it might not be as desireable as you or I would wish. There are certainly plenty of tax sale properties that sell for too much money. In fact, this is one of the biggest concerns I hear from new investors. The issue is often that the investor has tunnel vision of sorts and needs a new angle. If you’re struggling to gain traction in this business, hopefully the five points we’re about to discuss will help put you on the right path.
The first one is to acknowledge that whatever you’re doing isn’t working. There are plenty of variables here but it could be the area you’re wanting to invest in, the specific property type you’re looking for, the margins you want, the capital you have available, whatever it is acknowledge that something isn’t working. This is, by far, the easiest for new tax sale investors. In fact, as we’ll discuss later in this episode, many new investors jump to this conclusion that it’s not working far too soon. On the opposite end of the spectrum as a seasoned investor or even one with perhaps limited success under your belt, this is something that you must always be conscious of. Far too many investors get stuck in their ways of what’s worked in the past, to realize when change is needed. Most commonly this is in times of market cycle changes – I can’t begin to tell you how many people have gone into financial ruin simply because they tried to force the same things that were working in a great market in a lousy market. Things change and it’s important to accept and understand that fact.
Alright so once you acknowledge that whatever you’re doing isn’t working, it’s time to look at your expectations. Are they realistic? For new investors, the answer is commonly no. I’ll get emails from frustrated new investors who have been to one auction, or one series of auctions or complain because properties are selling for too much money. All of the issues are subjective to the investors but are typically the result of unrealistic expectations – they think properties will sell for much less than they do, they think success will come much sooner than it will, they think they’ll only need to attend one or two auctions, maybe they try to stay in one state or with one specific strategy that doesn’t work. Now, I’ll be the first to admit that I’ve got videos that detail how I purchased a building for one cent, how I bought a house for $20. And I’ve got tens of thousands of views on these types of videos – but on each of those videos I tell the viewer that they’re very very rare opportunities. These types of deals are once in a lifetime type things. So don’t expect that type of deal.
People tell me that a property sold for too much – when I probe them, I realize what they mean is that a property sold for more than they wanted to spend based on their budget and or their expected margin. An example might be a lot worth say $10,000 and their max bid was $2,000. The winning bidder’s purchase price was $6,000 or three times what they wanted to pay or what their budget allowed. Does this mean it’s a bad deal? Of course not. The buyer made $4,000. I’ve gone through auction lists before where, in quote, “everything sold for too much” and I’ll easily identify a number of deals where the investor made a substantial profit. It’s important to understand that while something might not work FOR YOU, that doesn’t mean it doesn’t work. Be sure you have realistic expectations.
Once you’ve acknowledged that something isn’t working and you’ve aligned your expectations with reality, it’s time to analyze what exactly is going on. This is the step that so many people struggle with. What is really going on? Why is it not working for YOU? If everyone seems to be paying too much, why not analyze that? Are they REALLY paying too much? What are they doing with the properties? Research a tax sale results list from six months or a year ago, pull up the property and see what they’ve done with it – who is the investor that purchased it? Are they making any money? If so, how? Can you use that approach?
If every single person is buying properties and losing money in your area, then it’s pretty obvious that it’s not the area you want to be investing in. That’s just the competition side of things. In addition to analyzing the competition in that area, you’ll also want to analyze your budget and strategies. Determine exactly why these aren’t working for you, based on realistic expectations.
After that, it’s simple. Make the necessary changes. And this is where it requires effort and in some cases, quite a bit of effort. If your budget is too small, raise capital somehow – maybe it’s through a bank local, credit cards, a HELOC, a loan from friends, or finding a partner. Yes, all of these take effort, but if you need more capital, then that effort is required. Perhaps the area that you’re investing in just doesn’t align with your investment objectives.
I can remember for the first few years of my career I ONLY invested locally. Eventually, I realized that I had a ceiling on my income and need to make a change. That change eventually led me to attending dozens of auction, spending over a month on the road driving from one state to another and buying countless properties – I did extremely well with that approach. Thankfully, with the power of the internet nowadays your effort might not need to be that extreme. Another example are the property types: so many people want your single family home that you can put a fresh coat of paint on, plant some flowers and make some money. That just doesn’t exist in many areas. And that’s ok, provide you make the necessary changes in your strategy. Allow your approach to this business to remain very fluid at all times – never resist making changes when necessary.
Then the last thing you must do is have patience. The patient investor will be the successful investor in the long run. Let me tell you quick story: There is a member in The Tax Sale Academy who joined, went through the training, even asked a few questions. He started going to tax sales and then nothing. For a very long time. Like OVER A YEAR. To be honest, I was starting to think that this investor had unrealistic expectations, when he was actually the most patient investor I had ever met. After a year, a number of things began to click for him. Within two months he purchased two properties. One he flipped within a matter of weeks and made $16,000. The second was purchased for something like $10,000 – he decided to keep that one as a rental and it brought in 500 or 600 per month. The fact is that this person was patient and waited for the right opportunity. Now, it will rarely take a year, but the point is that you must be patient throughout this business. This isn’t one of those get rick quick deals – it takes time to learn this business, to research properties and to successfully find the best ones to deal with. But your patience is often rewarded with substantial monetary gain.
So, there is it. Acknowledge that something isn’t working, insure you have realistic expectations, analyze what should be changed, make that change, and have patience throughout the entire process.
Listen, I truly hope that today’s episode will help you if you come to a point in your tax sale career when something isn’t working exactly like it should.
If we can assist you on your quest for tax sale success, just head on over to TaxSaleAcademy.com, become a member of the academy and get started today.
Thanks so much for listening. We’ll see you next time right here on The TaxSale Podcast. See ya!