Skip to content
Tax Liens & Mortgage Notes

User Stats

11
Posts
0
Votes

How do we get information about selling the properties we purchase?

Posted Dec 22 2023, 14:00


Permit me to introduce myself, as this virtually my first time posting on this forum. I am in the beginning stages of learning about investing in tax liens and tax deeds. I have been binge watching YouTube videos, in particular those put out by three particular companies. I take this very seriously and I really want to make this activity an integral part of my life.

I have identified one huge gap in the subjects they cover. They cover the auctions and otc sales in a commendably detailed form, but when the sequence reaches the point of making a purchase, the instructions stop. Nobody tells you how to achieve the second phase of the project, the sale of the property—which is the whole point of the exercise. That is a huge gap.

Among these instructors, there is only one who has made passing reference to selling your properties. He emphasizes the need to use social media rather than traditional methods. He points out that if you are buying lots that don’t cost very much and you plan to sell them fast for not a huge markup, realtors won’t put a lot of time into it. He recommends advertising your property yourself, using Craigslist and Facebook Marketplace. That is fine as a start, but only as a start.

I emailed one of these companies to point out that none of their Youtube material cover the sale of our properties. They politely wrote back saying this was covered in their mentorship program. That was a nice way of saying—you get that in our $5,000 package. I thought this was a lot of money until another of the companies told me they charged $10,000 for their instructional/mentorship program.

I guess it’s a deliberate decision to give us for free almost…almost…all the information we need…but not the last piece of the puzzle. Tied to this is the fact that it is very hard for us to make informed decisions about making purchases in markets we are unfamiliar with, given the normal ebb and flow of real estate activity.

That said, I am not raising this primarily to criticize these companies, but rather to focus on the practical effect of what they leave out. There is no way I am going to pursue making a purchase if I have no idea how hard it will be to sell it, what I might earn, and what process to follow. I am new to this, as I said. My primary educational resource has been YouTube videos, which I have watched for many dozens of hours. I need to shift now to having practice sessions in doing research and in watching auctions online. Can anyone here suggest how I can get comparable information on the last stage of the process? I have no problem devoting hours to research—hundreds if need be—but I really have no clue where to go.

User Stats

635
Posts
430
Votes
Melanie P.
Pro Member
  • Rental Property Investor
430
Votes |
635
Posts
Melanie P.
Pro Member
  • Rental Property Investor
Replied Dec 22 2023, 14:28

Practically what you will earn from participating in tax sale auctions is an interest rate of return. You will not wind up with any properties and if you do selling them will be tough because the property's title from a tax sale deed will not qualify for title insurance for many years.

User Stats

11
Posts
0
Votes
Replied Dec 22 2023, 15:02

Thank you so much for replying, Melanie.

Do you mean tax deed or tax lien? I know that with the latter what you get is interest unless the owner defaults.

I don't understand. If they are such a bad deal why is there so much buzz around them? This is a real question.

BiggerPockets logo
BiggerPockets
|
Sponsored
Find an investor-friendly agent in your market TODAY Get matched with our network of trusted, local, investor friendly agents in under 2 minutes

User Stats

635
Posts
430
Votes
Melanie P.
Pro Member
  • Rental Property Investor
430
Votes |
635
Posts
Melanie P.
Pro Member
  • Rental Property Investor
Replied Dec 22 2023, 15:14

They're not a bad deal. At the worst end of it you make double the market interest rate. Best case you get a good deal on some real estate. If you're looking to put your time into endeavors that will make more than double what you can make in interest then they're probably not right for most people. What state are you trying to do it in? That could make all the difference..

User Stats

4,505
Posts
3,872
Votes
Bruce Lynn#2 Real Estate Agent Contributor
  • Real Estate Broker
  • Coppell, TX
3,872
Votes |
4,505
Posts
Bruce Lynn#2 Real Estate Agent Contributor
  • Real Estate Broker
  • Coppell, TX
Replied Dec 26 2023, 05:44

@Sylvia Castellanos   You are correct about the videos.  Tax liens and deeds are very different than almost every other kind of real estate investing.  I think you can learn some general concepts from the videos, but will probably never learn all you need to learn.  I'm not sure which videos you are watching or what companies they are, but you're right in that it sounds like they're getting you interested to buy their "coaching" program....and $5000-$10,000 sounds cheap.  Some are $25,000-$30,000.   The real trick is that tax investing is really local to your market.  Almost none of the gurus are really knowledgeable about your specific market.  So just like the youtube videos you can pay a lot of money for their training and you're probably not really that much further ahead to invest in your local market.

If you tell us where you are or where you want to invest, we can perhaps point you to some better resources.  There are a few experts here on BP for a few states.  MD, SC, LA, TX, AL, OR and maybe a few others.  There are a few white papers for specific states for places like OH.  There are a couple of great teachers in I believe OH and FL and TX if that's where you are or want to invest.  Typically they are not really online teaching, but might hold a class or two here or there throughout the year.

I would also attend some of your local REIA meetings. Make it know that is what you want to do and ask for the local experts who might or might not be at the meetings. You may have to hunt them down. Also no better forum to learn in my opinion than go to your local sales. Network, ask questions, see who your local gurus are. That's who you want to learn from. If they will share with you. Some will, some won't.

I would caution about buying lots.  Know 99% what you are buying and what your exit strategy will be.  Do they have utilities or can they get utilities?  Are they in the flood plain?   Are they platted?  Are people building in the area?  Who will you sell these to?   How long do you need to hold them before reselling?  Is there a redemption period?   You are right that some realtors may not really want to help you with these.  Let's say you can get one for $50, and sell it for $1000.  Their expenses might be more than what it costs them to sell it...or what they will charge to make it worth their effort leaves you with no profit.  What expenses will you have while you are holding the property.  Insurance, Taxes, Mowing, Cleanup.  You also want to check the property before and after you buy.  Make sure no junk or environmental cleanup needed.  Make sure no one squatting.

I don't hear people talk much about OTC any more.  In my experience most of the OTC is junk.  There is a reason it didn't sell.  Couple of months ago at an auction with about 300 lots for sale.  Everyone sold and most for retail money, so don't expect bargains or flipping profits.  Possible gems here and there, but tax sales are no secret and there seems to be plenty of money floating around.  Another auction the next month, I see a nice property with $4000 minimum bid, sold for $400,000+  So you have to think if you have access to $400K in cash in the next 2 hours to pay for your purchase and then not be able to resell it for 2 years.

You might also want to read the book the 16% solution.  It does not detail every state, but also might give you an overview of the process and some idea about how things work in a few states.  Occasionally some places will also have a quick class that is an overview of how their system works.  Maybe 1-2 hour class, so check with your local authority who runs the sale to see if they offer a class.

Last thing to remember it is pretty much a cash business.  That means more or less you pay cash the day you buy.  No financing.  No delay in purchase.  There are some minor exceptions, but pretty much you pay the same day, and in some places like 5 minutes after the sale or you even pay up front before you bid and then get your money back if you don't win.

Good luck and best wishes....happy bidding.

User Stats

11
Posts
0
Votes
Replied Dec 26 2023, 10:52

Thank you so much for replying, Melanie.

Do you mean tax deed or tax lien? I know that with the latter what you get is interest unless the owner defaults.

I don't understand. If they are such a bad deal why is there so much buzz around them? This is a real question.

User Stats

11
Posts
0
Votes
Replied Dec 26 2023, 10:55

Dear Bruce,  Wow! What a thoughtful and detailed reply. I cannot thank you enough. 

For your reference, I am in the Philadelphia area.  

Your text deserves an equally thought-through answer, so I will be working on it tonight, when the activities of the day are behind me. I will be back in touch, and again thank you so much.

Sylvia Castellanos

User Stats

11
Posts
0
Votes
Replied Dec 26 2023, 17:02

Bruce, again, I want to thank you so very much for the time you have taken to make observations I need to be aware of. I am extremely appreciative.

You ask me what my goals are in terms of instruments and geography. Obviously everything I do is a function of what my goals are, and yet at this point I can only partially answer that question. I have gone from knowing nothing about this subject to immersing myself in a telethon of instructional videos. Still, I realize I have only scratched the surface, not to mention I am arguably using a source that may be misleadingly rosy. I got into this because of learning that with otc tax liens I could earn not 3 or 5% on my money, but even 15 or 20%. Then I started reading about tax deeds and auctions.

Then there is the question of buying properties with structures vs. parcels of land. The arguments in favor of land make a lot of sense. The absence of a house, with its many potential problems, is a great advantage, especially for a beginner. At the same time, I realize I may have been exposed mostly to its advantages. Do you have thoughts on this? I have also heard several presenters say that we are likelier to find bargains in smaller locations rather than cities. Makes sense, although it leaves me wondering if selling the property will also be harder.

In a perfect world it would be my preference to buy in a fixed price setting. While I would like to think I would not succumb to auction fever, I can envision enough bidders going crazy to make the auction a pointless exercise. Your example of the property that had an opening bid of $4,000 but finally sold for $400,000 conveys the same lesson. A realtor I was talking to was telling me that at tax auctions in Allentown, PA, the houses were going for full market value. Allentown is a smallish and not particularly vibrant community.

I guess what I am trying to say is that I am in the process of learning everything the gurus say, but I understand I need a parallel education in how things work in the real world. While going the otc route is my preference if this remains a viable activity, your experience seems to indicate this is no longer the case. On the other hand, auctions don’t seem to be a good route, either. Does this mean that the good times have come and gone, or that greater discernment and effort need to be brought to bear on the decision-making process? I would very much like your thoughts.

Finally, there is geography, which involves two separate considerations. First, there is the matter of which states’ rules are the most favorable. I am watching videos on the different states. I know some states are tax lien states and others are tax deed states, but I don’t know enough about it to have a preference yet. All things being equal, I don’t want to deal with redemption states. I think of Florida as being one huge, saturated real estate bubble, so that has no appeal to me. The second aspect is how viable it is for me to buy and sell in a particular market that is far away and where I’ve never visited. There is the matter of how I can learn enough about it to make intelligent decisions. As a separate matter, I wonder how effectively I can market properties in the absence of contacts in a given area. I guess what I am trying to say is that my “preferences, ” such as they are, involve practical considerations and not geographical preferences.

I was watching a video on tax sales in West Virginia (https://www.youtube.com/watch?v=t94wd3dyuqo) where the expert made an important point—he said it was important to have created contacts in the various regions to be able to successfully sell there. That makes perfect sense to me. The YouTube gurus make it sound like it’s as easy as picking up a property over the counter and selling it on Craigs List. I have trouble believing that.

They say you should start as close to home as possible, so you can attend sales and size up properties yourself. Although I live in the Philadelphia suburbs, there are many semi rural areas surprisingly close to me. In addition to Pennsylvania, my thoughts are exploring in the neighboring states—New Jersey, Maryland and Delaware. That does not mean I could not leapfrog this process if someone in a state farther away is willing to help me. Since you are in Texas, let me mention that I feel this state has enormous potential. I think of it as having a wealth of undeveloped land and lots of prosperous people buying whatever is offered. Am I engaging in appalling stereotypes?

By the way, I downloaded the kindle version of the book you recommended and I plan to start reading it tonight.

Thank you again for the question you asked and the interest you have taken. I would love to hear your thoughts and those of other people on this board.

User Stats

11
Posts
0
Votes
Replied Dec 26 2023, 17:14

After writing such a long post, could there possibly be something I forgot to mention? :) 

Actually there is. I have made a list of the treasurer's office in all the Maryland counties, and it is my plan to call them all tomorrow to see if they have any otc properties. I will be doing the same with Pennsylvania.

User Stats

2
Posts
0
Votes
Replied Dec 27 2023, 05:44

@ Sylvia, I think your plan to invest in MD and PA is solid. I am also researching properties in those areas. Glad to connect at at any time!

User Stats

11,413
Posts
13,437
Votes
John Underwood
Pro Member
#1 Short-Term & Vacation Rental Discussions Contributor
  • Investor
  • Greer, SC
13,437
Votes |
11,413
Posts
John Underwood
Pro Member
#1 Short-Term & Vacation Rental Discussions Contributor
  • Investor
  • Greer, SC
Replied Dec 27 2023, 07:06
Quote from @Melanie P.:

Practically what you will earn from participating in tax sale auctions is an interest rate of return. You will not wind up with any properties and if you do selling them will be tough because the property's title from a tax sale deed will not qualify for title insurance for many years.


 Not True.

I own a bunch of houses that I got from tax lien auctions. I get more every year.

User Stats

11
Posts
0
Votes
Replied Dec 27 2023, 12:56
Margaret, I am so glad you reached out. I will message you.  Great to know you are also interested in Pennsylvania and Maryland.

User Stats

11
Posts
0
Votes
Replied Dec 27 2023, 13:58

Thank you so much for replying, Melanie.

Do you mean tax deed or tax lien? I know that with the latter what you get is interest unless the owner defaults.

I don't understand. If they are such a bad deal why is there so much buzz around them? This is a real question.

User Stats

11
Posts
0
Votes
Replied Dec 27 2023, 13:59

John, how interesting. Can you talk more about this?

User Stats

4,505
Posts
3,872
Votes
Bruce Lynn#2 Real Estate Agent Contributor
  • Real Estate Broker
  • Coppell, TX
3,872
Votes |
4,505
Posts
Bruce Lynn#2 Real Estate Agent Contributor
  • Real Estate Broker
  • Coppell, TX
Replied Dec 28 2023, 03:21
Quote from @Sylvia Castellanos:

So first thing is that I don't know anything about PA tax sales.  Could be an expert here, but I don't remember any offhand.  

Here are some resources you might read for PA.

https://www.macdonaldillig.com/judicial-tax-sale
https://www.taxsaleresources.com/state/pennsylvania
https://www.legis.state.pa.us/WU01/LI/LI/US/PDF/1947/0/0542....
https://www.indianacountypa.gov/departments/tax-claim/proper...
https://www.biggerpockets.com/forums/311/topics/122546-aquir...
https://www.vinsko.com/blog/2022/08/tax-sales-sheriff-sales-...
https://phillysheriff.com/real-estate/conditions-of-sale-for...
https://www.curleyrothman.com/blog/how-do-tax-sales-work-in-...
https://www.legis.state.pa.us/WU01/LI/LI/US/PDF/1947/0/0542....

Here are some resources you might read for MD.

https://www.taxsaleresources.com/blog/expert-interview-with-...

User Stats

2
Posts
0
Votes
Replied Dec 28 2023, 03:36

Great resources, @Bruce Lynn. Thank you!

User Stats

14,301
Posts
11,576
Votes
Chris Seveney
Pro Member
#1 All Forums Contributor
  • Investor
  • Virginia
11,576
Votes |
14,301
Posts
Chris Seveney
Pro Member
#1 All Forums Contributor
  • Investor
  • Virginia
Replied Dec 28 2023, 05:05
Quote from @Sylvia Castellanos:


Permit me to introduce myself, as this virtually my first time posting on this forum. I am in the beginning stages of learning about investing in tax liens and tax deeds. I have been binge watching YouTube videos, in particular those put out by three particular companies. I take this very seriously and I really want to make this activity an integral part of my life.

I have identified one huge gap in the subjects they cover. They cover the auctions and otc sales in a commendably detailed form, but when the sequence reaches the point of making a purchase, the instructions stop. Nobody tells you how to achieve the second phase of the project, the sale of the property—which is the whole point of the exercise. That is a huge gap.

Among these instructors, there is only one who has made passing reference to selling your properties. He emphasizes the need to use social media rather than traditional methods. He points out that if you are buying lots that don’t cost very much and you plan to sell them fast for not a huge markup, realtors won’t put a lot of time into it. He recommends advertising your property yourself, using Craigslist and Facebook Marketplace. That is fine as a start, but only as a start.

I emailed one of these companies to point out that none of their Youtube material cover the sale of our properties. They politely wrote back saying this was covered in their mentorship program. That was a nice way of saying—you get that in our $5,000 package. I thought this was a lot of money until another of the companies told me they charged $10,000 for their instructional/mentorship program.

I guess it’s a deliberate decision to give us for free almost…almost…all the information we need…but not the last piece of the puzzle. Tied to this is the fact that it is very hard for us to make informed decisions about making purchases in markets we are unfamiliar with, given the normal ebb and flow of real estate activity.

That said, I am not raising this primarily to criticize these companies, but rather to focus on the practical effect of what they leave out. There is no way I am going to pursue making a purchase if I have no idea how hard it will be to sell it, what I might earn, and what process to follow. I am new to this, as I said. My primary educational resource has been YouTube videos, which I have watched for many dozens of hours. I need to shift now to having practice sessions in doing research and in watching auctions online. Can anyone here suggest how I can get comparable information on the last stage of the process? I have no problem devoting hours to research—hundreds if need be—but I really have no clue where to go.


 Are you saying if you get the property ? Then you are now a property owner, you sell it. What they do not tell you though is in some jurisdictions you have to do quiet title because it is not insurable. 

User Stats

4,505
Posts
3,872
Votes
Bruce Lynn#2 Real Estate Agent Contributor
  • Real Estate Broker
  • Coppell, TX
3,872
Votes |
4,505
Posts
Bruce Lynn#2 Real Estate Agent Contributor
  • Real Estate Broker
  • Coppell, TX
Replied Dec 29 2023, 02:05

Sylvia Castellanos
Response to your response.

I'm not sure how it works in other places, but here in Texas the videos you are probably watching will tell you that you can make a government guaranteed 25-50% interest on investing in tax deeds.  While somewhat true, the trick is that the former owner here only pays that if they redeem and almost no one redeems.  I'll bet less than 1% redeem, so you never earn that interest.   You need to investigate how that works in PA or MD or wherever you plan to buy.  In some states if the previous owner doesn't pay, then you can foreclose, but at that point you haven't made anything and then will have the expense to foreclose...and in some places you may also have to pay off all the years of previous liens.

Buying land vs houses.  Everyone has their preference and biases.  Can't say one is better than another.  However I do think you need to think about your exit strategy no matter what kind of investing you do.  Remember with land, often you may need to owner finance the sale and that cold keep your money tied up for years and create additional expenses.  Lots of people have dreams of buying land until it comes to financing.  Many land purchases require cash, not loans and most people don't know that...or if you can finance it, maybe a bank will loan 50% of the price...and seems like so many people don't have that 50% to put down.  Also interest rates are typically higher on vacant land purchases and that often surprises buyers.   You may have to do all the marketing for it, as some realtors can't really make the numbers work for you or depending on the value it's just not worth their time.   Ask 10 or 100 of your fiends and contacts if they have any dreams of buying land, and will act on those dreams this year, and if they have cash to do it?....you can quickly see how thin the market is.   Certainly people buy land all day long all over the world.   There are people with cash and resources, but it is typically not as easy and fast as youtube videos will make you think.

I do like going to smaller jurisdictions, competition is often less.  Again I know nothing about PA, but if the sale is public I would think you might see 500 people at the Philadelphia sale.  You might see 25-50 at a more rural sale.   I just think you have to be a lot more careful with land than houses and probably do a lot more research and probably have your money tied up potentially a lot longer if you are trying to turn your money.   If you're looking for interest I would just think that you have a lot better chance of someone paying off the lien if they live in the house, vs on a vacant lot for example.

You are right about resale. Rural areas may be harder to sell than in big cities.  Around me I see a lot of farmland that is no longer being farmed.   So if you buy 100 acres and no one has been farming it, who are you going to sell that to?   People do buy those, but it's not always a slam dunk.  About a year ago went to a sale where they probably had 50 city lots for sale for $50 starting bid. Maybe 5 people at the auction.  No one bidding on them.  I'm sure they would also sell those OTC.  The trick is no one has probably built a new home in that town in 20-25 years.  1/2 the downtown storefronts are vacant. People are moving away from there, not to there.  None of the lots were contiguous so can't patch 4 or 5 lots together to make a nice bigger parcel.   So who is going to buy those?   What if you owner finance them for $1000 on payments...now for the next 10 years you need to keep up with payments or if you turn to a servicer pay $17 a month to them.  What if the buyer stops paying after 5 years.  Now you need to foreclose and pay $2000 to an attorney to handle that.   Some people like messing with all that, but to me the return is pretty low and the headaches high.  Maybe 1 is easy and you get luck, but buy 20 and sell to 20 different people...and now you've created a job for yourself and a low paying one at that.   I wouldn't really say you're an investor at that point, you're a job creator.  You've created yourself a bookkeeping position.

You will see plenty of people "overpay".  Lots of times if there is time and people are friendly I will go ask why they bought this or that lot and what they plan to do with it.  Very high % of the time it makes sense to them to buy, but not for investor to buy.  It makes sense for them to "overpay" vs what my max bid is.  When you talk to them there will be stories like....I own the house on one side of that lot and my mom on the other, so now we'll own the middle lot and plant a garden or build a garage or something.   Or I wanted the lot behind my house so no one buys it and puts a mobile home on it.  Or I own all the other houses on that street and I just needed that lot to own everything on the block.   Makes big sense to them to pay good money, but for you as the investor wanting to resell it, you couldn't pay that much and make money.

Florida....just being devil's advocate...wouldn't you want to buy in a place that has high demand and the chances of selling or values better, than in the little town I described above where there is no demand and no growth?

OTC....I look at plenty of OTC properties...most are just junk.  Small slivers of land, lots too small to build on, no water, no power, landlocked, flood zone, dump sites, no sewer, but too small to add septic, around where I live counties require a certain amount of road frontage so people won't put mobile homes, so you can buy OTC without the required road frontage and lot could be more or less worthless....can't build on it,  and all other kinds of issues.  Saw a bunch of lots cheap one time in a nice subdivision near San Antonio, but when I started calling around ends up the water supply cannot add meters any more, not enough water in their well.  Lots are too small to drill wells.  I think they were .25 acres and you need minimum 1 acre to drill well.  Water Supply Company is private and owner doesn't have money to build more wells and is already in some big dispute with state regulators.   So buy those lots and I would say they would be super tough to resell.    I have bought a couple of places OTC that were just lucky....maybe the addresses were wrong and that thru people off, or just a lucky day, but I would say buying good OTC is way more rare than the youtubers would have you believe.

If you live in PA there is probably enough opportunity there and enough nuances between the different cities and counties that you can spend a lifetime investing there.  No need to learn and go to other states even if they are close.   Or if you don't like the system in PA, then see if one of the systems in the other states fits how you like to invest.

Plenty of people probably disagree with me, but I say go look at every property you plan to buy.  Know 90% what you are buying.  Know what your exit strategy is.  Do all this as close to home as you can.  People will tell you there are all kinds of shortcuts.  Just look at the property on google street view, you don't need to go in person, etc.  Do that an at some point you will end up buying a vacant lot that used to have a gas station on it, that still has the old buried leaking tanks and the oil change guys just dumped all their oil changes behind the shop, and you will now be responsible for EPA cleanup to the tune of 100Ks.  Google street view doesn't show you that....or ends up that street view picture was from 2013, and when you drive in 2024 you find someone has dumped 1000 houses worth of used shingles there.

Be careful and be smart.  There is opportunity, but it's not youtube riches opportunity.

User Stats

635
Posts
430
Votes
Melanie P.
Pro Member
  • Rental Property Investor
430
Votes |
635
Posts
Melanie P.
Pro Member
  • Rental Property Investor
Replied Dec 29 2023, 21:05

Raw land is often going to be someone who had excess capital to acquire the land and then at some point determined the taxes were worth more than the resale potential. I only look at improved parcels I can evaluate like every other rental property.