Investor · Pittsburgh, PA · Member since 2015 · 17 posts · 3 votes
Hey guys,
Husband and I are super new to real estate investing, first of all. We went to the judicial sale (free and clear) sale today and spent $10,750 total. We spent $2,000 on a half duplex in a decent area about 20 min away from us and another we bought is a home on 5 acres with a lovely creek bordering the property. We spent $8750 on it.
Now, the house is AWFUL and so is the half duplex. But does it sound like we made a bad investment?
Happy ending to both stories so far, thank God! We knew the duplex was a problem as soon as we saw it. We were new to investing and didn't check things well out enough, but boy have we learned! :)
We bought the duplex for $2,000, and before even putting in our names (which would have cost $800 just to transfer the title and fees) sold it for $1,200 and let the buyer pay the $800 to transfer it. It was well worth it just to get it out of our hair.
The 5 acres, we paid the executor of the estate of the prior owners $500 to sign a confirmatory deed, clearing the title for us to sell it. It is currently under contract for $37,500. We've been experiencing some minor issues getting to closing (turning the electricity back on, the water, etc.) but feeling somewhat confident that we should be able to close. If not, we will find a cash buyer and turn it for a quick profit and put that money into other rentals.
We've actually acquired 1 duplex, 2 single family houses, the 5 acres, and just bought another last month at the judicial sale ( a lot more informed this time around lol) so we've gotten 5 properties total this year, hoping for another 5 next year. We are loving this real estate game, lots of work but it's been totally worth it for us. We really enjoy doing it together and love the way real estate offers such profit margins when you buy right, renovate on a budget and rent. We use the BRRR strategy and love it so far!
Just wanted to give everyone an update, thank you so much for your advice and caring enough to lend your knowledge, BP has been a huge part of our success so far. We hope and pray for more blessings and good deals on RE to continue!
@Jordan DeGusipe Did you look at the properties you were going to bid on before the day of the sale at all, try to look through the windows, etc? Did you do your due diligence, search the properties on-line, records, anything?
The home condition is our main concern, because all windows were boarded up, we weren't able to see inside. The home bordering the creek is hoarded and seems to have some floor sloping with mold on carpets and a falling in attached garage, but the property is beautiful and overlooks a very nice creek. (I'll attach photos when I can at
our home computer.)We are just hoping to atleast be able to fix them up and make a profit, but the properties both are in bad shape.
@Jordan DeGusipe Ok so they need lots of renovations or are the building falling apart?
It is usually the case with some properties sold at judicial/tax/auction sales. You need to remember that you are buying these properties at a discount without seeing the interior and there will be things to be fixed. It might be the whole house is gutted, or the roof is really bad and destroyed the interior etc.
Or you might be lucky and get a great deal on a property that just needs updating.
There's a reason you paid only 10K for 2 properties.
Try and upload some pictures, those will give a better idea to everyone about the state of the properties.
Did you try to calculate the ARV for any of them before the sale, how does that look for each?
Tax sales are fun, if a little nerve wracking. What is the projected resale on the duplex property? Sometimes even $2K is too much to pay if your are looking at a $40K rehab on $40K property. What does the other side look like and what are the rents?
I'm going to a deed sale next week and this is making me nervous! Haha. Looks like overall you probably got a good buy, but some repairs are probably expected.
both properties are in some serious need of work, were gonna see what is best options and roll with it. We will let everyone know the outcome. Nervous and exciting decided to jump in and take a chance.
Properties that go to the judicial tax sale in PA are often in terrible shape, so that comes as no surprise. They were passed over at the upset tax sale for some reason - it could be that there was a mortgage in place (upset sale is "subject to"), it could be some other big liens, it could be the run down condition.
Now, if it was due to mortgages that would remain, @David Krulac can relate some stories regarding mortgages that were supposed to be wiped by the judicial order but we're not due to errors in the process. So if a mortgage was supposed to be wiped but instead remains in place, that would probably be a loser.
Property near a creek could be in a flood zone, and flood insurance prices could make that less desirable to buyers when flipping. Check out the flood mapping there.
Properties that go to the judicial tax sale in PA are often in terrible shape, so that comes as no surprise. They were passed over at the upset tax sale for some reason - it could be that there was a mortgage in place (upset sale is "subject to"), it could be some other big liens, it could be the run down condition.
Now, if it was due to mortgages that would remain, @David Krulac can relate some stories regarding mortgages that were supposed to be wiped by the judicial order but we're not due to errors in the process. So if a mortgage was supposed to be wiped but instead remains in place, that would probably be a loser.
Property near a creek could be in a flood zone, and flood insurance prices could make that less desirable to buyers when flipping. Check out the flood mapping there.
As someone who works properties that have lots of complications that deter other buyers, I am a believer in not paying attention to the general consensus. However, really dilapidated properties sold at tax sale, especially at the judicial tax sale like you have in PA, is a pretty good indicator of a likely dud. The tax sale arena is filled with real players who know what they are doing. They didn't buy a $2500 half a duplex because they couldn't see profit there. And they know how to get it done cheap and fast and how to get it rented. They've seen the worst case scenarios, dealt with the munis. If they could buy at $2500 and make a profit they would.
Should you buy something that no one else will? Of course, when you can see the exit and understand the risk. But buying it and then making a plan is the best way to lose your purchase money IMO.
Happy ending to both stories so far, thank God! We knew the duplex was a problem as soon as we saw it. We were new to investing and didn't check things well out enough, but boy have we learned! :)
We bought the duplex for $2,000, and before even putting in our names (which would have cost $800 just to transfer the title and fees) sold it for $1,200 and let the buyer pay the $800 to transfer it. It was well worth it just to get it out of our hair.
The 5 acres, we paid the executor of the estate of the prior owners $500 to sign a confirmatory deed, clearing the title for us to sell it. It is currently under contract for $37,500. We've been experiencing some minor issues getting to closing (turning the electricity back on, the water, etc.) but feeling somewhat confident that we should be able to close. If not, we will find a cash buyer and turn it for a quick profit and put that money into other rentals.
We've actually acquired 1 duplex, 2 single family houses, the 5 acres, and just bought another last month at the judicial sale ( a lot more informed this time around lol) so we've gotten 5 properties total this year, hoping for another 5 next year. We are loving this real estate game, lots of work but it's been totally worth it for us. We really enjoy doing it together and love the way real estate offers such profit margins when you buy right, renovate on a budget and rent. We use the BRRR strategy and love it so far!
Just wanted to give everyone an update, thank you so much for your advice and caring enough to lend your knowledge, BP has been a huge part of our success so far. We hope and pray for more blessings and good deals on RE to continue!