My first Tax Auction(Wayne County MI)
Over the last several months I have been researching and preparing for the local Wayne County Tax auction. The Auction wrapped up yesterday and when it was all said and done we only purchased one property. Here is a quick rundown of my experiences.
Preparation started back in March-April with a list of the properties scheduled for foreclosure in the local legal news. I was also able to pull an excel spreadsheet from a local website that details property/parcel data. We spent a lot of time looking through these properties. Sorting them. Rating them. Driving by. I even ran a direct marketing campaign to some of our favorites on the list to see if I could maybe get them before the auction. If I could do it all over I would not start researching nearly as early as I did, because over the last several months many of the properties that we were interested in were pulled from the auction for one reason or another. We spent A LOT of time researching properties that we never even had a chance on bidding on. Lesson learned? The city/county government does not want to take back the homes and they give many opportunities to homeowners to redeem before their homes go to auction. Don't spend too much time worrying about which properties you want to bid on until the auction is fairly close. That being said, don't wait until the last moment either, as you need to research the properties and do drive-by's before bidding on the properties.
For financing we decided to pull some equity out of some of our rental properties that we own free and clear. It took a lot of calls to different banks to find one that would work with us for what we were trying to do. That being said, once we found the right bank it was fast, easy and we got good rates. I honestly probably spoke with more than 20 banks before finding the right fit. And I was actually referred to them by another bank that we had stopped in. I was close to using hard money, but I am glad I did not. My rates are very solid and the junk fees were very low. Lesson Learned? Start this property early and cast a wide net. Just because one bank says no, does not mean there is not a good fit out there.
When it came time to prep for the auction, we created excel spreadsheets of the areas we were interested in with all of the properties that fit what we were looking for. We drove the neighborhoods, rated the houses, checked values in the areas and made assumptions for rehab costs. We assigned a max bid to all properties and we determined which properties we were interested in bidding on. This turned out to be invaluable information. I think the only thing I would change is the organization of the information. Because Wayne County had so many properties that they were auctioning auction was split into lots of 140 properties that ended in 15 minute increments. Also, the lots had properties from similar areas gathered together. This meant that we had some auctions that had 10-15 houses we were interested in ending at the same time..... It was hectic. Lesson Learned? Gather information and keep it organized. When you looking at a list of 10 properties that you want to bid on and you only have a couple of minutes to make a decision it is important to be able to find notes.
As the auctions were ending we noticed that many of the houses were selling for way more than we were willing to pay. There were houses that sold for 175k that had (My guesstimated) ARVs of 185k. We had intended to pick up 2 rentals and a possible flip. Unfortunately most of the houses went higher than we can find on the MLS and with MLS listings we can inspect the property. Lesson Learned? know what the houses are worth and what your maximum bid is and stick to it. No deal is better than a bad deal and from what I saw there were a lot of (possible) bad deals going on.
When it was all said and done we ended up with one property. A $1000 Sq/ft ranch for 30k. We have not been able to inspect the inside the home yet, but it is in good condition externally. It is in an OK neighborhood in a pretty solid Detroit Suburb. It should rent for $950-$1050/mo and if we can be all in for less than 45k we will consider it a win. I will update once we have received the deed and we are able to inspect the inside of the property.