My first tax Deed Sale is coming up, Any advice?

Question

Hello, I will be using my Income Tax return to invest in Tax deeds at an Auction here is Orlando, FL. I was so confident and now after reading some stories I feel a little nervous and feel maybe I might need a mentor. I signed up for a couple of very low priced tax deed investing training and books and I have learned a lot! I feel confident but then I am left with that What if?...... this happens and I don't know the answer to it. As a single mom with a full time job in FL my return will be about $7500 is that enough for a tax deed? and can I sale it right away to a rehaber? I don't have great credit that will get me approved for a loan to pay for a mentor either. I actually used my SUV as a collateral loan for investing in Binary options and it got repossessed. And I don't come from a wealthy family; so no one to lend me the money for a mentor either. I am actually the first one of my family to start real Estate Investing or anything this lucrative and that goes for generations before me. So! any advice or recommendations? Do you think I am just getting the jitters because it is my first time; but every thing will be OK?

Patrick L. · Answer

$7500 might be enough for something, but if you think you're going to get a $50k house for $7500 you're not in the right ball park. For $7500 in Florida you're looking at a trailer, a vacant lot, a house that's falling down, etc. You cannot sell with a warranty deed right away unless you do a quiet title action ($3k+ and around 4-6 months if everything goes smoothly). The opening bids are just the opening bids and any property with real value will go somewhere near it's actual value. Most counties in Florida are very competitive, the stories you read in the books are probably fiction or an isolated case from a different era. I would suggest researching the properties you're interested in and watching the auction. Try to come up with what YOU think that value is before the auction and see what it goes for. Research who's buying them in your county and what they're doing with them.

Wayne Brooks · Answer

As @Patrick L. said, the auctions are quite competitive here, and if you simply look at past auctions and what those properties sold for, verses what you would have wanted to pay...you'll see the reality. I haven't even bothered bidding at tax deed auctions for the last 3 years here.

Patrick L. · Answer

Have you gone through the past auctions to see what similar properties to those you might be interested in buying have sold for? You can get a rough idea of what percentage of retail the buyers are paying and what you would expect to pay. Generally most of the properties I'm interested get redeemed the day before or day of the auction so there is a lot of wasted time doing research but that's part of the process.

Angeleca Dunbar · Answer

How did this work out for you? I am currently seeking to do the same with far less money. But, I am so scared! I don't have money to waste and these stories are making me want to cancel my plans and wait until I save more money.

Anthony Yannucci · Answer

I would think that a bankruptcy would not matter if it made it to the tax deed sale. I would have to look into it, but I am pretty sure it has no bearing. If there was a bearing, I am not sure how the county could then legally put it up for sale.Good to know about the meth lab....I am sure there are companies out there that could clean it all up?? I will keep en eye out for that as well. Thanks Michael!

Anthony Yannucci · Answer

I think that is pretty good due diligence Michael--I would add to look up on the county site any assessments or code violations placed on the property by the county which does not get wiped away and would need to be paid by the new owner of the tax deed. In FL, i look this up on the Clerk of Courts website. You can also email the county and ask for the lien payoff on a property. Sometimes they do this for free. My question to you is why look to see if there is a bankruptcy on file? How would that effect you as the new owner? Also, what happens if it was used as a drug house?

Sharlene Macon · Answer

Thank you everyone, you have all given me a lot to think about and tons of great information (Knowledge) appreciate it. I will continue to persue my goals and see what I can do with what I have. But thanks for the advice, I'm sure this has helped me avoid a lot of heart ache and heach aches! :-)

Kyle J. · Answer

@Sharlene Macon Like Patrick pointed out, $7500 probably won't buy much at a tax deed auction. But if you do end up buying something, you'll definitely want to have some money in reserves. You could very well find that the property you end up owning is already occupied, and if the occupant refuses to pay you rent then it'll end up costing even more of your time/money to get the person out and get a paying tenant in there. Just something to think about.

Michael D. · Answer

@Anthony Yannucci I think I read somewhere that if they are going through bankruptcy that they can revert the sale in some counties but I may be mistaken. It might have only been for Tax Liens were they would pay less % on their back taxes.If the house was used as a meth lab you would have to sanitize the entire house before selling or renting it. It has something to do with the highly chemical conditions that stay in the dry walls.

Michael D. · Answer

@Anthony Yannucci & @Patrick L. could you share with us what you do for due dilligence?So far I've come up with:1. Find a Tax deed that you're interested in.2. Research the parcel ID for assessment price and land value3. See if it matches the 70% rule (Assesed Dwelling Value ÷ Gross Assessed Value X 1004. Check local bankruptcy court on property owners to see if they have filed for bankruptcy5. See if property owners have any IRS tax liens (not sure how to look this one up yet)6. Physically view the property (condition, neighborhood)7. Check with local law enforcement to see if the house wasn't used as a drug house.Anything else?