Winning & Losing With Tax Foreclosures

I was beep bopping along on my way home a couple of weeks ago, listening to the latest and greatest top 5 on the radio. In between the music there were the obligatory radio ID markers, and commercials. I was about half way home when I heard the most amazing commercial (sarcasm).

"If you want to make money in real estate, just try our program risk free (there is a catch). Learn how to buy properties in Texas for pennies on the dollar. We will teach you how to buy properties over the counter tax deeds in your neighborhood."

Hold it! Wait, wait, wha???

Did this fool just advertise misleading and plain outright wrong information? Better yet, how come I as a tax office DEPUTY have never heard of this in Texas? Why, as an investor, am I not already doing this?

Well the answer is two fold. As a deputy, it can be perceived as unethical for me to participate in the purchase of tax foreclosed properties; even though civil service rules state otherwise. Secondly, where do they sell tax deed properties over the counter? It's not out of my office, nor the county clerks office, and not out of the constables office. So what the hay? This guy is full of it, selling his items (had harsher terms originally), based on a system that works in other states.

By the way, if you bought the program; you might want to reconsider where you try the methods described in it (like Idaho). Now, this doesn't necessarily count as losing, because I do know that in Idaho you can buy tax deeds over the counter. But in Texas, following this program does lean you toward losing far easier than it does to winning. Why? You didn't do your homework before you bought the program.

If this is any indication of how you conduct business, I have some Ocean Front Property in Iowa for sale. Rule number one in order to be successful at Texas tax foreclosure auctions: Do your due diligence! Rule number two: repeat rule number one! Here is why I like rule number two. I'm lazy and will often hire a title company who will provide title insurance to me to stand behind the fact that they are not like me (lazy).

To lose investing in Texas tax foreclosed properties, there is just one rule. Don't follow rule number one, and definitely don't even consider rule number two. It is that simple, not following the rules will cost you thousands!

Don't worry, I will give you examples of winners and losers (even some verifiable data to back me up on the winners). I am not going to post the peoples names, even though it is public information. But I won't stop you from looking either. (Evil Grin)

Winner: Man attends May 2013 tax auction, buys a golf course for $1250.00. Ok the club house and first 10 holes, but hey turn #10 into a driving range and operate a 9 hole course. Actually, this is a really bad way to win a great property. He has had to make multiple trips to a court room to keep the property (5 to be exact), in Denver. Total after cost profit: $800,000.

Golf course data link

Loser: Woman buys a .06 acre lot, no street access, in undeveloped, and unincorporated area at the same sale. In the lot sits a full septic tank, that was used by the prior owner for a condemned house that was on an adjacent lot. Lot value $100.00 she paid $4200.00 before draining and removal of said tank. Total loss: $10,000

Septic Lot Data

Winner: August 2014, man buys a model home for $77,000 does $5000 in necessary repairs and places the home on the market for $175,000. Total profit: $93,000

Loser: August 2014, man buys a lot which was supposed to process a mobile home built in 2003. Man goes to inspect the lot after the sale to find that there isn't a mobile home on it. Total loss for man: $38,000

Winner: Woman buys a vacant lot, with royalties for minerals for $6000.00. Learns that prior owner did not ever sign a lease agreement with an extraction company. They drilled anyways. She signed a lease agreement 6 months after tax sale, and received a $40,000+ check for unpaid royalties. July 2012

Loser: December 2013, man pays $47,000 for land and improvements. Shortly after deed was filed, man received condemnation notice from city of Fort Worth. Man had to pay for demolition and removal. He now owns the vacant lot. His loses and costs in excess of $50,000. The land is currently valued at $5000.00

As these people come back in to my office, I will get more supporting information and links for data.

I hope it appears as painfully obvious which ones did their homework, and those who didn't. My advantage as deputy is learning from others mistakes. And so far, if learned from these lessons to the tune of an average profit margin of 233% cash return on investments. And note, it would be much higher if I didn't want to mow 80 acres of golf course grass.