All Forum Posts by: Will Sifert

Atlanta.
Referencing a small corner property, 45'x20', zoned Residential. Planning says nothing can be built there (well it could but it is VERY VERY VERY unlikely it would be approved per zoning). Long established residential neighborhood and used to be a corner store. Completely demolished and no slab left for 40+ years. Vacant for 40+ years.
In other words, anyone who buys it is buying the right to pay taxes on an unsellable lot forever. 
I had looked for the relatives of the deceased owner before with no success. 

It went up for tax sale Nov. 2023.

Somehow, a quitclaim was made from the sole heir just 5 days before  the tax sale - and recorded in the deed book the day after the tax sale.  

The tax debt was about $7k on the property. The property tax lien sale amount was $80,000 on the courthouse steps!!! So, they are close to $90k in. I own the surrounding lot and was the second bidder. Based on similar lots, it should have gone anywhere from not purchased to 3-9k. 

Can anyone clue me in to what the heck is goin on here? 
I will be glad to send you a $50 Amazon gift card for a really plausible theory. 

Prior Theories:
It could be turned commercial (no)
A residence could be built there (no)
They bought it to sell to me at a profit because I am the only one who cares about this. (Plausible for a $5k win. Not plausible for $80K+back taxes which gets up to $90k. If I would have paid more, I would have bid more)
They made a mistake and thought it was a different property (there are several with the same roadname but not the same Parcel - and this was professional who was bidding on several properties)

Can anyone clue me in to what the heck is goin on here?

Five Unique Ways I’ve Seen People Make Money In Real Estate

1. Water Utility - 44 years ago when I was a relatively new real estate broker, a gentleman contacted me to see if we could help sell a small water utility he created. About 15 years prior he had purchased an inexpensive tract of land near Lake Houston outside of Huffman, Texas. He proceeded to drill a well, and set up a water utility. He then sold the lots cheap to homebuyers, negotiated with a lender to provide mortgage financing, and teamed with a builder who would build simple, inexpensive homes. Meanwhile he received a mortgage origination fee on each mortgage; a small profit on the sale of each lot; and a broker commission on each house build. He now had a utility with over 380 “hookups”. We agreed to market his utility through our business brokerage division, and received multiple offers from larger water utilities netting the seller $millions.

2. Buying property for “materials” - back in the late 1970s I was a banker in Geneva, Switzerland. I came to know an Englishman whose business was the purchase of very old, very decrepit houses on rather large estates. He would subsequently dismantle the house, ship the materials salvaged By container load to the U.S, and sell the now empty estate to a developer. His financial state,ent showed that his proceeds from the sales were net three times the price he paid for the property.

3. This is one I was personally involved with. We lent secured by a 20 unit mid term rental property. The property was located on 3 lots. However, the septic and wells were located on an adjacent, but separate lot. At closing the taxes on the 3 lots were paid, but the utility lot was overlooked. The utility lot went to tax sale, where it was purchased by an investor for $15,000. When the owner of the 20 units went to sell the property, he found out that he no longer owned the lot housing the well and septic. Fortunately we had title insurance. The title company paid the investor $150,000 for the lot, or 10 times his purchase price 6 months earlier.

4. Substitution of collateral - This one I did myself. I bought a “junk” lot at a tax sale for $300. I purchased a house in good condition for $55,000, with the seller accepting the lot as worth $5,000 down payment and seller financing for $50,000 for 20 years at 5% interest. This was 1982 and interest rates were approaching 18%. Also, the deed of trust had a substitution of collateral clause I had negotiated. I went out and purchased purchased anold 30 year treasury bond(s) (actually five $10k bonds) with a 5.5% coupon for about $24,000. I then “substituted” the treasury bond for the $50k mortgage. So now I had $24,000 plus $300 invested in the property. I put a tenant in for $650 per month, and after 12 months sold the property for $52,500 cash.

5. The Bust Up - I HATE this technique - it’s unfair, unethical, and possibly fraudulent (however I witnessed it done very profitably so I’ll include it perhaps as a cautionary tale. We had a fabrication company for sale (when I was a broker) that contained lots of equipment and valuable real estate. The business itself was worth little, as it was only marginally profitable. A buyer put an offer in at a relatively good price after spending significant time with the seller and indicating how he planned to improve and personally run the business after purchase. The offer was for a modest amount down, with the seller carrying back a note. The seller then made the mistake of allowing the buyer to draw up the contract and closing docs, and further “saving” money by not hiring an attorney. The note which represented the major part of the purchase price was secured by the business In general but was more like a corporate bond. After closing the buyer borrowed against the equipment and inventory, and then sold the real estate. He declared the proceeds as a dividend to himself, and defaulted on the note to the seller leaving the seller with the recourse to repossess the business which now had no real estate and that’s equipment and inventory was fully mortgaged.

Let us know of unique ways you’ve experienced making money in real estate

Quote from @Noah Bacon:

Thank you for the post, @Edward Condon!

I do have to agree with @Chris Seveney that this forum topic is one of the lower trafficked forums, which may make the split not as effective, and instead of breaking them up into their own individual topics it may be more appropriate to dissolve the topic entirely and keep the discussions for Tax Liens and Mortgage Notes under the Real Estate Private Lending Forum.

I will leave the topics alone for now, monitor the activity over the next few weeks to see if there is an increased demand in these topics, and keep you informed if there is an update to the topic(s)!

@Noah Bacon I think the fact that they are combined could be a reason this is a less-popular forum. People come back when they know the content is relevant to them. When half of it is not relevant, they are less likely to come back. I have have never understood why the two topics were lumped together on BP. 

When you try to speak to everyone, you end up speaking to no one.

@Scott Trench

Just my 2 cents but I am Not sure either one of these has enough juice to stand on their own - notes would be most similar to private lending if they were to be broken up.

Quote from @Will Sifert:

Quote from @Patrick Roberts:

Quote from @Will Sifert:

Quote from @Patrick Roberts:

I like the SC process as well. I've attended the CHS county auction for the last 3 years and bid on several liens last year but did not obtain any. I believe you still have go through a quiet title process in SC and I know this has caused problems for other investors in obtaining clear title and title insurance in future sales. Even though the CHS county auction is in person, it was still saturated. In 2022, the auctioneer made a comment about seeing a lot of new faces and asked how many people were bidding for the first time - about 2/3 of the room put their hands up. Last year, I had a person sitting next to me tell that liens were 100% safe and there was no way to lose money. That being said, there were some very professional crews (funds) there. I plan on attending some other county auctions this year and branching out from just Charleston.

Overall, though, I don't think its an efficient way to obtain properties. If I remember correctly, the redemption rate in CHS county is something like 80-90% and the interest that can be earned is capped. With the way people were bidding the last two years, the yields if the properties were redeemed were like 2-3%. Maybe I'm missing something, but to me, it seemed oversaturated and this crushed the potential returns. Again, this was specific to CHS county. 

Have you tried Civic Source in LA? We bought a property in the BR area in 2020 and it was pretty straightforward. Just hard to find good properties on it. I haven't messed around with Nola much, just BR. 

 I’m very familiar with civic source they started about 10 years ago to fix a problem. In LA the tax liens that didn’t sell were adjudicated to the parish. The laws dealing with adjudicated auctions were cumbersome, each parish had to deal with it and very very few adjudicated auctions ever happened.  Civic source was created to take decades worth of properties that had been sitting idle on the parish’s books and make it easy for them to auction them off and put it back in commerce.  The problem was no one wanted to buy or pay much for property that was not insured with title ins so civic source purchased a title insurance company and insured the properties they auctioned of. That is what gave us USNational which has been a big help in my area as I can use them to insure tax sale properties I acquire when in most cases other title ins companies will not.  The negative is that the title ins can cost 3-4x or more than what traditional title ins will cost. It also means the buyer has to be explained all of this and they have to use USNational when they go to sell, and explain it to their future buyers.

With all that being said when the market is soft or there is lots of inventory I’ve noticed tax sale properties (including the adjudicated you buy off of civic source) will typically sell for about 10-20% less than market value.   Every time I go to bid on property on civic source people are bidding it up to or over market value. It’s crazy.   Just about anything online is going to be so competitive that you rarely if ever will find a deal. If I am going to pay market value I will browse the mls to see what is for sale, not overbid for a tax sale property.

In SC I was hopeful, since they are all in person that there would be some smaller to medium counties that wouldn’t be too competitive to where you could still get a decent deal, if it doesn’t redeem.
What % of value do you think most property was being bid up to? I would be looking for mostly abandoned or run down houses that need repairs. They typically have a better chance of not redeeming. Or even vacant land. 

I agree - the handful of worthwhile properties on Civic source in BR were bid up like crazy on the few that I watched. Last year in CHS, liens for any house worth owning seemed to be selling for 30-50% of market value. Good properties were typically higher than that. Marginal properties were hit and miss. About 4-6 buyers got the lion's share of the SFH 200k-400k homes. If I remember correctly, East Coast Tax Auction LLC and Red Rock Capital were two of the high volume bidders. A couple of local individuals as well. I recorded a list of what most of the liens sold for and tracked the wins of the clearly professional bidders for research and learning purposes. A little bit of vacant land, but most of it seemed worthless from what I remember researching. I was primarily targeting properties that were likely to redeem and would yield me at least 12%, so my bidding and research were structured around that. I had no illusions about acquiring properties this way.

Between the tax auctions, the FB groups I'm a part of, and what I see in my day to day as a lender, my general opinion is that there's still too much money chasing too few deals as a whole. The marker is still frothy and most of the "deals" I see are dogshit. The higher rates have somewhat slowed down the "get rich quick with no money down" crowd as financing is more difficult, but I still see a lot of new investors with serious cash or purchasing power. There's still a ton of liquidity out there.

Bidding up 30-50% would work for me. I wouldn't want to go much over 50% and my "value" might not be as high as the next guy as I assume the condition of the home is worst case, full gut, electrical plumbing needed etc etc.   I would target the properties in their current condition that would be worth less 100K. Sounds like this is a sector that would not have fierce competition. I am not an investor who does it for the interest. I target the sweet spot, property that has a better chance of not redeeming (vacant or abandoned or in need or lots of repairs) but it has to still be worth it. Not a tear down. If it is a tear down and the value of the land is less than the cost of the demo work I don't want it if you give it to me for free lol.  If the property is too nice it has a much higher chance of redeeming and it gets a lot more competition from the investors looking for the interest. I like vacant land, more likely to not redeem and less speculation on my part worried about it's condition. But it has to be decent vacant land, not something land locked, can't be built on or some obscure piece. Its much easier to calculate it's value, if similar lots are selling for 50K and I can get it for 10-20K  it doesn't redeem, i can clear title, etc list it and make some money.    Thanks for the info. 

You may have to look at the surrounding counties with your strategy. Charleston is still crazy hot and any decent detached SFH is selling for $250k distressed or $400k+ on market. Even in the rough areas of N Charleston, homes that would sell for $50K in BR are selling for more than $200k. Most of the liens for these properties were going for $80k+ going off of memory. I had no illusions about acquiring properties via the tax sale in CHS - too many funds with deep pockets involved and too many wholesalers calling the property owners after the auction. I was talking with a realtor who had one of these properties listed - the owner had received more than 100 wholesale calls/texts/etc in the months after the auction. The CHS market is still red hot. 

I will say this, though - SC just passed a de facto ban on wholesaling, which may slow down the market for these kinds of distressed properties. Wholesalers now have to close on their deals before re-marketing the property, so the high volume teams will likely face capital constraints. Supposedly, sub-to is also in the crosshairs of both the state and the CFPB. I expect this will crimp the current pace and volume for distressed sellers. This year's auction may be different. 

Quote from @Will Sifert:

Quote from @Patrick Roberts:

I like the SC process as well. I've attended the CHS county auction for the last 3 years and bid on several liens last year but did not obtain any. I believe you still have go through a quiet title process in SC and I know this has caused problems for other investors in obtaining clear title and title insurance in future sales. Even though the CHS county auction is in person, it was still saturated. In 2022, the auctioneer made a comment about seeing a lot of new faces and asked how many people were bidding for the first time - about 2/3 of the room put their hands up. Last year, I had a person sitting next to me tell that liens were 100% safe and there was no way to lose money. That being said, there were some very professional crews (funds) there. I plan on attending some other county auctions this year and branching out from just Charleston.

Overall, though, I don't think its an efficient way to obtain properties. If I remember correctly, the redemption rate in CHS county is something like 80-90% and the interest that can be earned is capped. With the way people were bidding the last two years, the yields if the properties were redeemed were like 2-3%. Maybe I'm missing something, but to me, it seemed oversaturated and this crushed the potential returns. Again, this was specific to CHS county. 

Have you tried Civic Source in LA? We bought a property in the BR area in 2020 and it was pretty straightforward. Just hard to find good properties on it. I haven't messed around with Nola much, just BR. 

 I’m very familiar with civic source they started about 10 years ago to fix a problem. In LA the tax liens that didn’t sell were adjudicated to the parish. The laws dealing with adjudicated auctions were cumbersome, each parish had to deal with it and very very few adjudicated auctions ever happened.  Civic source was created to take decades worth of properties that had been sitting idle on the parish’s books and make it easy for them to auction them off and put it back in commerce.  The problem was no one wanted to buy or pay much for property that was not insured with title ins so civic source purchased a title insurance company and insured the properties they auctioned of. That is what gave us USNational which has been a big help in my area as I can use them to insure tax sale properties I acquire when in most cases other title ins companies will not.  The negative is that the title ins can cost 3-4x or more than what traditional title ins will cost. It also means the buyer has to be explained all of this and they have to use USNational when they go to sell, and explain it to their future buyers.

With all that being said when the market is soft or there is lots of inventory I’ve noticed tax sale properties (including the adjudicated you buy off of civic source) will typically sell for about 10-20% less than market value.   Every time I go to bid on property on civic source people are bidding it up to or over market value. It’s crazy.   Just about anything online is going to be so competitive that you rarely if ever will find a deal. If I am going to pay market value I will browse the mls to see what is for sale, not overbid for a tax sale property.

In SC I was hopeful, since they are all in person that there would be some smaller to medium counties that wouldn’t be too competitive to where you could still get a decent deal, if it doesn’t redeem.
What % of value do you think most property was being bid up to? I would be looking for mostly abandoned or run down houses that need repairs. They typically have a better chance of not redeeming. Or even vacant land. 

I agree - the handful of worthwhile properties on Civic source in BR were bid up like crazy on the few that I watched. Last year in CHS, liens for any house worth owning seemed to be selling for 30-50% of market value. Good properties were typically higher than that. Marginal properties were hit and miss. About 4-6 buyers got the lion's share of the SFH 200k-400k homes. If I remember correctly, East Coast Tax Auction LLC and Red Rock Capital were two of the high volume bidders. A couple of local individuals as well. I recorded a list of what most of the liens sold for and tracked the wins of the clearly professional bidders for research and learning purposes. A little bit of vacant land, but most of it seemed worthless from what I remember researching. I was primarily targeting properties that were likely to redeem and would yield me at least 12%, so my bidding and research were structured around that. I had no illusions about acquiring properties this way.

Between the tax auctions, the FB groups I'm a part of, and what I see in my day to day as a lender, my general opinion is that there's still too much money chasing too few deals as a whole. The marker is still frothy and most of the "deals" I see are dogshit. The higher rates have somewhat slowed down the "get rich quick with no money down" crowd as financing is more difficult, but I still see a lot of new investors with serious cash or purchasing power. There's still a ton of liquidity out there.

I like the SC process as well. I've attended the CHS county auction for the last 3 years and bid on several liens last year but did not obtain any. I believe you still have go through a quiet title process in SC and I know this has caused problems for other investors in obtaining clear title and title insurance in future sales. Even though the CHS county auction is in person, it was still saturated. In 2022, the auctioneer made a comment about seeing a lot of new faces and asked how many people were bidding for the first time - about 2/3 of the room put their hands up. Last year, I had a person sitting next to me tell that liens were 100% safe and there was no way to lose money. That being said, there were some very professional crews (funds) there. I plan on attending some other county auctions this year and branching out from just Charleston.

Overall, though, I don't think its an efficient way to obtain properties. If I remember correctly, the redemption rate in CHS county is something like 80-90% and the interest that can be earned is capped. With the way people were bidding the last two years, the yields if the properties were redeemed were like 2-3%. Maybe I'm missing something, but to me, it seemed oversaturated and this crushed the potential returns. Again, this was specific to CHS county. 

Have you tried Civic Source in LA? We bought a property in the BR area in 2020 and it was pretty straightforward. Just hard to find good properties on it. I haven't messed around with Nola much, just BR. 

The law changed it to 4 years after the first auction, or the first sale by the tax collecting official. So, if the lien does not sell in Year 1, and you buy Year 1 and Year 2 liens in the Year 2 auction, then the 4 years starts on the date of the Year 2 auction.  

You must still own all of the sold tax liens up until the date you bring your foreclosure lawsuit.

Anyone with redemption rights can ask for a public auction. That seems like a bad thing for investors, but it actually creates a lot of opportunities AND makes it much less like the foreclosure lawsuit will be attached on constitutional grounds and run up huge legal fees while your lawyer fights those issues.