Tax Delinquent house that's been vacant for 5 years.

3 Replies

Hey guys this is my first post on here.  I'm a beginning real estate investor located in Virginia, and am looking at a house that's come up on a local county tax delinquent property sale.   I've determined that the house has been unoccupied for 5 years, but I also was able to get into it and look around.  It is still fully furnished, with lots of cobwebs, dead insects and some water showing in the basement.  I've researched what to look for in properties that have been vacant for a while and got some good ideas there, and now am trying to determine what my top dollar should be when I go to the auction.  At the very least it will need major cleaning, and some mold remediation.  Maybe some new kitchen appliances and possibly some plumbing as well.  The buy who owned apparently got sick one day and went to the doctor for a checkup, and never came back (died).   So it still looks like he just left for the afternoon.  But in the year or so leading up to his death, there had been a number of improvements including vinyl siding, vinyl windows, water heater, finished basement, and maybe a little before that a heat pump.  The house looks good on the outside (and the neighbor has been mowing the .25 acre lot) and it's in a decent neighborhood. 

How would you go about determining a max bid?  Realtor.com and Trulia show estimates around $95-$100k, which of course would be a habitable house, which this is not currently.  County tax assessment is $73k.  Similar size houses within a few blocks are listing for $95k-$115k.  I know it will need a roof in the not to distant future, and who knows what else you'll find when you turn on the water and electric.  Any ideas?

You'll have to work backwards from after repair value. Assuming you are able to eventually sell for 105k, then subtract ALL the costs of rehab, holding, financing, paying realtors, back taxes, etc... and your desired profit, you'll arrive at your maximum offer price. Read up on some of the flipping blogs here on BP to get a better idea of estimating ALL the costs of rehabbing and selling a property. 

If it was my decision, I would be cautious.

https://www.biggerpockets.com/renewsblog/2013/02/19/tax-sale-properties/

If everything goes right, I could end up owning a house for pennies on the dollar. But if something goes wrong, I could find myself making many posts on the Tax Liens, Notes, Paper, & Cash Flows Discussion Forum.

https://www.biggerpockets.com/forums/70-tax-liens-notes-paper-cash-flows-discussion

@Benjamin Harris I can't comment on a max bid as I have no idea about your local market. I will say that you should check to see if the home has all PVC plumbing (drains) or if they are the old cast iron pipes. If they are cast iron then I would just plan to re-plumb the entire thing. 

As a home sits the inside of those pipes will rust. When you turn the water back on the pipes will just collapse and fill up with rust.