Took part in my first tax deed auction
Well, I took last Wednesday (10/18) off from work and sat in front of my computer for nearly 10 hours. My goal was simple, to snag up an amazing deal at the tax deed auction. Needless to say that did not happen. Although it was a great learning experience.
The first thing I learned was that over half of the properties will get redeemed, at least the ones that I was interested in.
The list came out about three weeks before the auction. There were around 470 properties. My first hiccup was that I couldn't figure out how to download that list to an excel format. So I paid our baby sitter $200 to go through all 37 web pages and put together an excel sheet based on the criteria I gave her (Opening bid, Address, Parcel #, Assessment, Avg comps of top 5 real estate sites, yearly taxes, etc...). I only had $50K to invest so anything with a starting bid over $50K was not recorded. I also didn't want to invest in the ghetto so anything with a county assessment less than $45K did not get recorded. That still left me with a list of around 129 properties. Out of those properties I narrowed it down to around 40 based on area and rental potential. I then spent Saturday and Sunday driving everyone one of those properties. THIS IS A MUST. Five of the houses that I was interested in had been demolished by the city. Even though Google Maps showed a house.
After two days of driving I had my list down to 15 properties. I then spent the next week reviewing the cases for each file. My county provides a wealth of data on each case (Title search, lien holders, etc...) Remember those 5 demolished houses. At first I kept them on my lists. They were in nice areas and if I could snag the lot cheap enough I should be able to do a quick flip on them...WRONG. Each one carried a demolition lien that ranged from $17K to $32K. Since it is a county imposed lien it would survive the tax deed auction. I sat in my chair scratching my head as these parcels got bid to ridiculous amounts. Either they did not realize the house was gone or maybe they didn't see the added liens. Either way, that would of been a costly mistake on my part.
The night before the auction I went through and reviewed the properties I was going to be bidding on and guess what.... almost everyone had been redeemed. My list was now down to 6. So all the time spent reviewing these properties and the money spent in gas and paying the sitter was a waste. I should of waited until about two or three days before the auction and then see what was still available.
But no worries. There were still 6 opportunities. As luck would have it one of the ones I was bidding on was on the first page. It was a decent 3/2 in a Class B neighbor hood with an attached garage. It was currently occupied, the landscape was in great shape, and from my external inspection it seemed like a great property. The county assessment on it was around $67K. The comps in the area were around $110K. The bidding began and before long I had reached my $50K budget. Moments later it sold for the mid $60Ks. The remainder of the properties I was interested in were near the last two pages. But I tried to review each property and get a feel for what people were paying. There were some homes that sold for under $10K. Granted I did not drive any of these so I can't speak to how great of a deal it was. They were small homes in the bad area of town with low county assessments.
I kind of had an idea of what was going to happen when the remainder of my properties came up... I would get out bid. And that is exactly what happened. Now granted the winning bidders got great deals but it was more than I had to invest.
I am now trying to adjust my strategy. I either need to save more to invest or focus on lower end houses.
There are some great deals at the tax deed auction. I saw one home that was a 4/3, 2855 SF, with a pool in an amazing gated community go for $205K. The Zillow value was around $360K. I tried to go inspect this one but the damn gate guard would not let me in.
I really want to buy my next property before 2018. It has not been easy but I will not give up.
Take care everyone.
Mike