All Forum Posts by: Dan Mahoney

@Angela Levy Nice!  Thanks for adding your experience to the thread.  The details are really helpful to the community.  On the sequencing point:  The tax sale list on the sheriff's website is generally posted in the order of the auction.  So if you keep your spreadsheet in that same order you should be good.  

I hope your deal works out for you.  Just as a heads up...I've observed that in today's rising market, tax deeds are much more likely to be redeemed than they were a couple years ago.  You'd still earn your 20% premium but don't be too surprised/disappointed if somebody redeems you in the coming months.  

@Angela Russo Yes if you use an attorney you will pay attorney's fees. They are not required for forming an LLC but I can see hiring one if you are unfamiliar with LLCs.

Regarding PPR, I have only bought NP from them.  And only a few.

@Jeffrey Radcliffe I have purchased a few individual notes from PPR Note Co ( @Dave Van Horn's company) in retirement accounts with great results.  PPR hasn't released any new inventory in a while but I'd recommend them highly.  They deliver complete collateral packages and have good customer service.  Their loans are already in servicing with FCI which I think is a plus.

@Angela Russo There really isn't much cost to forming the IRA-owned LLC before starting investing. Here in Georgia it's $100 to register with the secretary of state. I just googled the fee for Wisconsin and it appears to be $130. Why wait?

@Mike Cleveland It's likely that the only way to remove the restrictions on your 401(k) retirement savings is to leave your current employer. Then you can roll over the funds into a solo 401(k) plan or IRA that allows "alternative" investments. Your current plan administrators are not going to change their mind.

@Justin Sumulong I second @Jason Piccolo's recommendation of Sunwest Trust. They are low cost and easy to deal with. Their online platform is weak, but if you use an IRA-owned LLC you won't need to transact with Sunwest very often (since the day-to-day lending transactions will happen in the LLC).

@Rashida Sigmond I've never found the "letter grade" descriptions of Atlanta neighborhoods to be very helpful, because the definitions are subjective and each neighborhood has specific pros and cons.  I would definitely focus on one or two specific neighborhoods to the point where you know each block, including the residents and the housing stock.  I'd echo @Stan Sugarman suggestion to visit on different days/times.

I have found rental houses in SE and SW Atlanta to be profitable, but I also believe it is riskier than investing in more affluent areas.

@Michael O. I agree with the other comments in this thread, but I think it is important to point out that the prices in the area are going up in anticipation of gentrification/demographic shifts, not because these shifts have already happened.  The average income in this area remains well below the regional average and many if not most residents are on some form of public assistance.  Demand/rents are pretty strong if you have a good quality product, but you will not find many qualified tenants if you use the typical criteria suggested in these forums (documented income 3x rent, 600 credit score, etc.)  Per @Gareth Jackson comment, the BeltLine is in walking distance, as are the Ashby MARTA station and the Atlanta University Center, so there are reasons to bet on the neighborhood.  You just need to be realistic about the existing tenant pool.

@Ericka G. Three quick follow up comments:

1) If you want to live in this house for 10 years or more it's more of a lifestyle expense than an investment and the exit strategy is less important.  By contrast, if you're going to move in 3 years the exit strategy is very important.  

2) If you are going to live in this house, figure out if the mortgage interest is really going to be tax deductible.  In tax year 2018, a lot of affluent families who have always itemized are going to be surprised to find themselves taking the $24,000 standard deduction (since state & local tax deductions are limited at $10,000).  These families will get zero tax benefit from mortgage interest on their personal home(s).  Depending on your circumstances, this may be an argument to forgo a mortgage and just pay cash for the house (in which case the appraisal becomes moot).

3) The appraisals are coming in low BECAUSE the market has been so hot.  By definition, appraisals based on sold comparable properties are looking at historical numbers.  In a rising market, historical market values are lower than current market values and appraisals come in low.

@Ericka G. I have never seen an appraisal revised upward.  I've given up on challenging them and instead have learned to apply to two lenders (therefore getting two appraisals) for each property.  The seller may be willing to extend the closing date to let you start over with a new lender.

This is happening a lot in Atlanta neighborhoods with significant renovation activity.  Appraisers come in from the suburbs and they don't have a clue which comps to pick.  They get it wrong on location (using comps from inferior neighborhoods), condition/quality (using fixer-uppers or cosmetic rehabs as comps for a gut renovation), and date (using comps from 11 months ago in a rapidly appreciating neighborhood).

The results can be wildly different.  Here are two actual examples from the past year:

Property 1:  Bank A appraisal (7/7/17) $69,700; Bank B appraisal (7/11/17) $131,000.  

Property 2:  Bank A appraisal (1/18/18) $190,000 (rejected by lender's automated valuation model); Bank B appraisal (3/1/18) $116,000.

Unlike your situation, mine are NOT unique properties.

@Brenda Herman Ok, I'll try to answer your questions.  

1) For the first year after a tax sale, an owner or lienholder can redeem (i.e., cancel) the tax deed by paying the tax deed buyer 120% of the amount the tax deed buyer actually paid at auction.  The redemption price goes up to 130% after a year and by another 10% each year thereafter.  Yes, this is defined by state statue.  Here is a link to OCGA 48-4-42 which spells this out.

2) You need to do a title search.  If you know how to do title searches, you can find the information at the county courthouse or using GSCCCA's online service.  If you do not know how to do title searches, you should hire someone who does.

3) The redemption price is calculated based on what the tax deed buyer paid at the auction.  The minimum bid is irrelevant to the calculation.

I don't know anything about your intended investment strategy but I will offer a word of caution.  As a tax deed buyer, you should only expect to be redeemed if your winning bid is so far below the market value of the property that someone would want to redeem it for 20% more than you paid.  This is becoming increasingly unlikely given how competitive the auctions have become.  It does happen, of course, but please consider the fact that most property owners who have stopped paying taxes have done so intentionally (i.e., strategic default).

@Jason Pennacchio On the cash offer point, you should look into Fannie Mae's Delayed Financing Exception.  You can buy the home in cash and then immediately mortgage it for 75% of what you paid (assuming it appraises at what you paid).  For the right kind of deal it's the best of both worlds.