All Forum Posts by: Pete Harper

Quote from @Cynthia Martinez:

Looking to hear others' experience and insights -  

-How to quickly diligence outstanding liabilities (e.g. mortgages) that would not be wiped out by the sale?  

-Minimum red flag diligence to determine a max bid and cover major risks, while still being an efficient use of time?

-For residential property - expectations for the property while prior owner has redemption right - challenging to resell or lease during this period?  likely scenario to evict / lease-back property to prior (tax delinquent) owners?

-Specific to Harris County, TX -  is this sale too competitive to find a good deal? If so, which surrounding counties would you consider, if any?

-If you have pursued tax sales (especially if in the Harris county / surrounding county areas) - did you find success with this approach or did you abandon it?

Thank you! 

Texas tax sale are not for the faint of heart.  

I usually start out by a quick google/zillow search of the property.  Don't be surprised if the house is no longer there or the roof has fallen in etc.  You can screen out the really bad ones.  

Next I would do a search in the county appraisal district and county clerks office.  Any liens on the property will be recorded.  City fines are not cleared with sale. I purchased a vacant lot that had weed abatement fines greater than what I paid for the lot.  Fortunately I was able to argue with the city and get them removed.

Watch the redemption period.  For owner occupied the previous owner has up to two years to redeem.  As others have said you will not be able to sale until the redemption period is over.  You can't do cosmetic repairs during the redemption period.  The owner doesn't have to pay for cosmetic repairs should they decide to redeem.  You can make structural repairs to stabilize the property like a new roof that would be covered in redemption.  Check before you do anything. You can lease the property during the redemption period.  You can even lease back to the previous owner.  The Sheriff said they would fast-track evictions.

You can't go inside the property for inspections.  The best you can do is walk outside and ask the current resident if they will let you inside.  Don't assume just because a property is occupied "it can't be that bad". Learned that the hard way, after purchase we did inspection and could see daylight through the bedroom ceiling.  

Almost all the good properties get cleared off the auction list at the 11th hour.  The current owner comes up with some cash to make a payment.  You'll see the same property show up the next auction.  I've see the same property pulled three times this way.  At the auction you will see the pro-flippers show up.  They know what they are doing and gobble up the best properties.  Know your top price and don't get caught up in a bidding war with these guys.

I came up with a slightly different strategy.  With the tax sale list you have a great list of motivated buyers.  Start early enough and you can contact the current owner and offer to buy the house cheap.  For the owner they get something for the house rather than loosing it all to the auction.  You will need to pay the back taxes and avoid a bidding war with the pros.  I had one deal like this but decided to back out after I discovered the roof over the kitchen was falling in. The majority of what you will find are properties where the previous owner has passed away and there is no immediate family to pay taxes and take care of the place.  Frequently the property has many years of deferred maintained and neglect. 

I've purchased a couple tax sale properties but have decided the "juice is not worth the squeeze".  I've had better luck with traditional "yellow letter" campaigns on select properties found by driving for dollars.

Quote from @Jules Simon:

Thank you Karl. We are especially concerned with the insurance prices since they seem high to us.

Jules

Insurance rates are going to be very high on the coast.  More than double what they would be for a similar home inland. You need to carry a special flood policy in addition to your regular homeowners policy.  When we were flooded in a hurricane you have two separate claims.  FEMA flood insurance covers any water damage from ground flooding.  We had additional water damage from wind driven rain that was covered by homeowners.  Don't go cheap on insurance.  Remember it is not a matter of IF you will be hit by a hurricane or tropical storm but WHEN.  Galveston has the destination of being the site of the deadliest hurricane in US History.   

John, You arrived in Austin too late.  You should have seen it before all the hordes of Californians ruined it. (Ya, Just joking)

We first moved to Austin in the early 90s. This was right after the Saving and Loan bailout. Property was cheap, cheap, cheap. In our neighborhood there was a new HUD foreclosure every week. You could buy SFH for pennies on the dollar. Knowing what I know now I should have bought up a bunch of properties. Say la vie. The current pricing run up is just another market cycle. I think we will see prices moderate or even come down a little. Invest for the long term. Austin still has that cool vibe. Compared to the rest of Texas there is still a lot going on. 6th street live music, UT Sports, and Lakes. Strong Hi-Tech jobs market. There are still good opportunities to invest in the path of progress along I35; Temple, Waco and Killeen.

Personally I would not invest in Houston.  The weather is too unpredictable.  You never know when another Gulf Hurricane is going to move in and flood everything.  The flood maps are notoriously bad with very little predictability of what areas are high risk.  Insurance rates are sky high.  Jobs market is overly dependent on oil and gas. Further North is better along I45; Woodlands and Conroe.

This more recent data is counter to the article above.

https://www.biggerpockets.com/...

To put the 111,000 people into perspective.  There are over 40 million people living in California.  That represents less than 0.3% of the population.  Not exactly a "mass" exodus.

Whats always missing in these analysis is the difference in wage scale between TX and CA.  After 20 years in TX my wife and I moved from Collin County to Santa Clara county.  My wife worked for Collin County and found a similar job in Santa Clara county.  Her wages literally doubled, plus she earned a very good pension in CA vs nothing in TX.  I worked as an engineer in hi-tech and my wages doubled as well.  We enjoyed a very high standard of living in CA.  

What is also missing is property taxes.  Property taxes are outrageous in TX and go up every year.  Our property tax bill went down when moving to CA, plus with Prop 13 they don't go up.  Unlike TX, no fear of being taxed out of your home in CA.

I'm investigating if I qualify as a RE Professional for the IRS. I'm retired with no W2 income. Primary income is from real estate, investments, pensions and IRA. We currently own 38 units held in LLCs and privately. We just turned over the day-to-day management to PM. We turned one the management to allow more time to acquisitions and renovations. Even so I'm involves with setting rents and approving repairs. My wife and I do our own renovation work and make readies. We do our own repairs except were we need licensed trades ie Plumber or Electrical. I'm currently working on a duplex renovation. We took the kitchen and bath down to bare studs and are rebuilding. We easily meet the 750 hr requirement. I have a meeting set up with a CPA, what other things are they going to be looking for?

One work of caution HURRICANES! It's not a matter of if Galveston will be hit by a Hurricane but when. We used to own beach property in nearby Surf Side Beach. We had a SFH and a Duplex. The duplex had a ground floor unit that we rented long term. The upstairs unit we used for ourselves and as a short term rental. My long term plan was to own ten beach houses and retire as a full time beach bum. In the span of 9 months we were hit first by a tropical storm and then Hurricane Rita. The ground floor unit was flooded with minor damage to the upstairs unit. It took us about 6 months of work to rebuild the downstairs unit. Meanwhile we had some money coming in from the upstairs STR. We finally got the downstairs unit finished and a new tenant placed. Then Rita hit. The downstairs was a total loss. All that hard work under 5ft of flood water. The upstairs was damaged too. SFH lost power and water. We were devastated after spending every weekend the previous summer rebuilding only to be set back to square one again. Before Rita we were 5th row from the ocean. After Rita we had been upgraded to the 4th row. An entire row of homes were lost to the ocean. You can still look on zillow and see lots out in the ocean. These folks lost everything. Their homes were gone as well as the land it sat on. They had no ability to rebuild. Many were uninsurable after the previous tropical storm. We know folks who lost their entire retirement savings. Thanks to FEMA we were able to rebuild for a second time. As soon as renovations were done I sold everything. Years later my wife stopped by and took photos of our old place. At first I didn't even recognize it after subsequent storms.

Austin,  Here are my thoughts.  I lived in Round Rock for 13 years and currently own investment property in Killeen.

Georgetown:

Pros: You are in the path of progress from Austin.  Better opportunity for appreciation, close to high paying jobs, more diverse employers, better schools, lower crime, and better amenities.  Austin is coming off a housing boom, might be able to time the dip.

Cons: Higher cost. Longer commute to Ft Hood but you are going light traffic direction since most folks are commuting the other direction.

Killeen:

Pros: Lower cost, easier commute to Ft Hood, greater inventory of investment properties, and good deals if you can find them.

If you are open to house hacking you could by a 4-plex for $400k that will generate $3200/month. Live in one side while you are stationed at Ft Hood. In four years when you tour is over you can either sell it for $500-550k, or do a cash out refinance and use your VA loan to buy a place in Georgetown keeping the 4-plex as an investment.

Cons: High crime, poor schools, lower rents, one company town (Ft Hood), property taxes are going up faster than other Texas markets.  You really need to pay attention to neighborhoods, a block or two makes a big difference.  We have friends who live in Killeen that had a fatal shooting next door.  Stay out of old town, Harker Heights or South Killeen are better.  I don't believe any of our current tenants are military or ex-military.  Low rents primary draw with some commuting into Austin Metro.  We own property throughout central Texas and Killeen is the lowest $/sqrft despite being the newest/nicest property.  Prices shot up in the last couple years, lots of out of state money.  Price/Rent ratio is upside down right now with rents not keeping pace.  A year ago we were shopping for more property, placed multiple bids but didn't get anything.  Prices were negative cashflow.

Temple/Salado might be a better compromise for a private residence.

You can absolutely buy a property without an agent.  You can download your state approved contract and make the offer yourself.  Just make sure you have an attorney involved to review the paperwork.  Most charge $250 to do so.  Some of my best deals have been where I represented myself using an attorney.

I had one recent purchase where I used an agent and she was a train-wreck.  She was totally intimidated by the sellers agent and was getting bullied into poor terms.  When problems arose during the inspections she disappeared on my.  I finally ended up dealing directly with the sellers agent to get what I needed.  

A bad agent is worse than no agent.