All Forum Posts by: Chad Clark

There was no mortgage on it.  It was held by the County and they just released it via quit claim deed.   The redemption was over for quite some time.   It had been owned by someone who passed away as well so there's that.  I won't mess with ones that still have a possibility of redemption.  Takes too long to acquire them, though I could imagine if you didn't mind the wait, you could make a decent amount since a lot of people would avoid it.   This one was a tester to see what I thought about tax sales.  It's not bad really.  A little confusing and there's little info, making purchasing one scary.  

Appraisal came in at $154k.   Not a bad guess on my part. 

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $42,000
Cash invested: $8,000

Tax auction special. Picked up for higher than normal (COVID made prices silly). Abandoned 5 years. 1 dumpster, biggest they had, filled. Repaired boiler system that froze and burst. Rewired old electrical, some drywall, new fixtures, new ceilings, and paint. New floors and now worth $160,000 or so as a guess. Not bad.

How did you find this deal and how did you negotiate it?

Tax sale auction

How did you finance this deal?

Cash

How did you add value to the deal?

Nice fixtures really added a lot. Commercial faucets, modern light switches, fancy lamps, and new anything that shows in a picture. Palette for the walls with a theme has a nice effect. I did fall in love with faux ceiling tiles. Simple to cover up those old square type 70's tiles. It's such a difference. I highly recommend those. So simple to install and for $2-300, you get a beautiful result.

What was the outcome?

The before and after pictures are staggering.

Lessons learned? Challenges?

Had a slight scare with the septic. Turned out to be only a tree root blocking it. This is now on my list of things to check that may disqualify it for a buy. That stuff can get really expensive fast to put in a new one!

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

No

I can confirm some of the property taxes can be daunting.  I have 4 properties up in the northern area by Traverse City.   Pay attention to the taxes, they are what kill your cash flow.   Drew talks about this in detail and he's quite correct. 

It's not unreasonable to end up with $6800 annual tax bills for a nice property.  The reason is there's an exemption for homestead that cuts out most of it.   In essence, if you don't live there as your primary residence you can't claim that exemption and get mangled.  It does make it rough on us investors trying to balance out a rental.   It should be your primary concern in doing the numbers. 

I tend to go after the lower priced houses because of this and just make them really nice.   It keeps taxes lower and I get better renters in a decked out place with the higher rent. 

To find out how much the tax will be, you need to know what the rate is for the township it's in.   Usually like 3-10% assessment or some such.  They then take the SEV which is typically half of the last time it sold and you pay the percentage of that.  You can take off any exemptions you qualify for beforehand, but it's usually none for investment property.   Then the town tax is similar.  I'm simplifying that quite a bit, but I give myself a ton of leeway for taxes as they are just going to raise them anyway each year and it's a pain to get them to keep it low.  

I have a ton of skillsets from electrical, plumbing to siding and roofing.   I find it amazingly helpful.   I tend to buy houses on auction so I have no bills aside from taxes and utilities until they are ready.   I come home from work and go over to whatever new place I have and work.   I enjoy it and I pay no companies to do anything.  I save an enormous amount.

Then when it's done over the course of several months, I appraise it and refinance, then rent it. 

For example, I bought a SFH, 5 br, 2 ba for $30,900 and it appraised out at $120k with 16k of materials into it. I refinanced out 70k since that's all rent would cover for it's mortgage and moved on to the next one with a ton of equity. Huge profit margin mainly gained from just not having to pay for labor and being able to take my time and do things right.

I only have three units so far (so far).   So I'll probably go with something inexpensive if it has enough options to justify the cost.  I would like something that can scale up as I won't stay at three units long.   Thanks for all of the info so far, I'll look into each.   I just had no clue where to start so it's extremely helpful.

I'm looking for a way to accept payments via a website or similar and was wondering what others use for this. Just trying to find an easy way for tenants to pay their rents without a hassle for them.  I know there's paypal, but I wanted something a little more official looking.   I have a few rentals and I'm wanting to start putting it on auto pilot and this is needed.  Ideas?

Just tossing two cents in since I read all this.   I have seen one really interesting investment into one of the worst neighborhoods possible.  Literal war zone downtown Detroit.   One person bought every single house in a certain neighborhood since he could get them for practically nothing due to asbestos, crime, and other hazardous reasons.  Some places will pay you to take them.   Well, he got all of them in an localized area, then bulldozed the entire section and rebuilt a gated community with extremely high end houses.  That's one way to get a nice neighborhood.   I was kind of impressed at the ingenuity.  

Nice, someone close by.   Have to keep ya saved just in case we run into each other.  I look into TC as well, though it's a little overpriced anymore.   Seems like way too much of a bubble for me. 

Thanks Tanya.    Both houses are in Mancelona.   I originally moved here into a fixer upper since with my work as a remote, it didn't really matter where I lived.   So I picked the cheapest real estate in the area.   I picked Mancelona due to it losing 3 large manufacturing plants all at the same time and it was obvious the market had bottomed out in the town.   I had mostly wanted a break from bills at the time and being able to buy a house at 37k was perfect to have a super low mortgage payment and be able to have more cash for other things.   

The second I just bought because it was a ridiculous good deal and my first one was paid off.  I could afford to buy the second in cash.   Right now, i'm renovating the 2nd (will be done by May 1st, total of 3 months).  I plan to rent it out, then refinance, then start hunting the next.   I have my eye on another already.    My brother is a carpenter and can do drywall which are my weak spots.   I'm good with plumbing, electrical, and fancy crap like smart home junk.   I invested in a professional paint sprayer so I can do whole houses by myself.  Expensive, but soooo worth it.    That was my reasoning for getting into this.  Seemed like a good idea and the skill sets worked between us.

The town itself is doing somewhat better, but still mediocre.  It's the neighboring towns booming that are bringing it up.  Traverse City is a huge tourist resort area and Mancelona is only 30 minutes away with not much in between.   Eventually, that town will start the downfall since it's getting too big for what it's roads can handle already and I expect this little town will start going back to normal fast.  Luckily, the buy low thing applies right now.