Guest Article by Shawn Hobbs, Tax Lien Investing Agent and owner of SJH Investments LLC
I’m sure that many of you that are reading this have heard that you can get great properties in great neighborhoods at great prices at tax deed auctions. If you have, you’ve been up too late, too many nights watching infomercials. When I went to my first tax deed auction years ago, I also bought into the hype; and then I saw the room and all the money and my bubble quickly burst. I watched as more experienced investors bid properties so high, the money I brought was a joke.
Then I Got Some Good Advice…
After attending some of the more popular areas, I received some advice from an investor who saw me at several auctions. He suggested that I either start with land or go to an auction where the competition wouldn’t be as fierce. “Good idea” I thought and then the “hey” light bulb appeared over my head. I thought he was trying to get rid of me. He went on to explain how he got started in tax deeds by going to smaller counties and less popular sales. He even suggested going through the repository (struck-off) lists of the smaller counties to find deals. I thanked him, stop going to tax deed sales for a while and pursued other avenues of real estate investing.
How Am I Going To Get A Deal?
When I moved to Pennsylvania almost seven years ago, I found out I lived in a tax deed state and that they have annual tax deed auctions. Boy was I excited. I thought what better way to take the advice that I was given years earlier and test it out in the county that I now lived in. To my surprise, many beginning investors thought the same thing and crowded the auction hall the day of the annual judicial sale. I kept thinking “how am I ever going to get one of those great deals that everyone keeps talking about, if everyone is attending the sales that I am attending?” I started researching and travelling north and west of the county that I lived in to find “that” house. The more I looked, the harder it was to find. What I did end up finding were extremely cheap properties that required work.
It Really Works!
So one day about 5 years ago, I bought an ugly house from one of the Pennsylvania judicial auctions for around $1000. The home was worth about $30K but it needed around $7-10K worth of work. Real estate investing at this point was a part time hobby and now I have an ugly house that needed work and not enough money to fix it.
Fortunately, I found an investor who was flipping housing in the area and told me he could take my problem off my hands for $4K. Sold! You didn’t have to tell me twice about selling a house bought for $1000 for $4000. Come to find out he was a wholesaler and I was actually buying properties cheaper than he was. At closing he gave me his card and told me if I had other properties this cheap, he would be glad to take them off my hands. This strategy came in handy when friends and family started asking me to purchase property for them and when I finally launched my tax lien and tax deed agent company.
Leftover Deeds…
A little more than a year and a half ago, a friend and I went to a repository sale in central PA. It was the first day of the sale and the room was packed. We had researched the list and found a house in excellent condition. The owner had passed away, left no heirs and the house was originally auctioned for taxes owed. It had been struck off and now was available for the asking price set by the county. We thought this was great, no one wanted the house, and we researched the market and even knew our exit strategy.
Competition…
We came with the $2000 ready to buy the property; little did we know that someone else wanted the same house. A clerk took us out into the hallway and proceeded to conduct a mini-auction. We were ready to pay a little more than what we brought, but found out the other person was willing to pay $5000 for the house. Needless to say, we lost.
Funny thing, the guy we lost to, suggested that we buy something a little more “our speed”. He showed us a mixed use building that was 2200sqft, 5 bedrooms, 2 baths and a 700sqft commercial space on the 1st floor. Boy was it ugly! Just to clean it out would cost about $4000! The building was for sale on the repository list for $975.00. The current market value at the time was close to $90K and it needed around $50,000 worth of work. We decided to go for it, only because the buildings next to it were completely renovated and maybe we could do something with it. I posted an ad a few months later on Craigslist and sold the property for $7000; without having to put a dollar of work into the place.
The irony of the story is the house we wanted was right up the street and to this day, the guy who beat us out for it still has it up for sale and has not had one offer yet. This same friend and I have gone on to purchase a 2 bedroom house for $850 and are almost done with renovations ($3000 total) and will rent it out for $700 per month.
Wishing You The Best!
To those who believe that it takes a lot to get started in tax deed auctions, it may not, depending on where you start and how much time you are willing to put into it. Follow this advice and you should do well: Never feel intimidated, do your homework, know your exit and be prepared to go the extra mile if necessary to get the best deal possible.
About Shawn Hobbs:
Shawn Hobbs is a Tax lien and deed investing agent who aquires tax liens and tax deeds for investors who do not have the time to physically bid at the tax sale themselves or who do not feel comfortable doing the neccessary due diligence to make sure that they are bidding on profitable tax liens and/or tax deeds. You can find out more about his agency, SJH Investments, LLC at http://taxliendeedagent.com.
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