Transcription
Welcome to the Taxol Podcast. We're Tax Law Investing Made Easy. My name is Casey Denman. I'm a tax sale veteran. I am the leading tax sale expert. I'm the author of the Tax Sale Playbook, founder of the Tax Sale Academy, and I'm your host right here on the Tax Sale Podcast. Thank you so much for joining me for today's episode.
This podcast is available on a number of different platforms, including Spotify, Spotify video, YouTube, Apple Podcast, and wherever else quality podcasts can be found. So make sure you subscribe to us on your favorite podcasting or video platform. And at the conclusion of this podcast, if you are looking to learn more about investing in tax-delinquent real estate, this completely free podcast is brought to you through and because of the Tax Sale Academy, which you can check out at taxsaleacademy.com.
All right, today I want to discuss the strategy that I use to filter tax sale properties. The fact is that research is paramount to your success in this business. It is everything as a tax sale investor. But for the beginning investor, it does take a significant amount of time to learn. And then, once they learn how to accurately research a tax sale property, they also have to learn how to do it efficiently. Spending an hour to research every single tax sale property on a list is going to lead you nowhere very fast. The key to this business is learning how to research accurately and efficiently. If you've been looking for a leg up or a way to scale your tax sale business to the next level, efficient research is going to be it.
How can you efficiently pull a list of a hundred tax sale properties and filter them out without spending weeks doing so? Even more than that, how could you possibly filter out a list of 10,000 or more properties every single year like we do? Tax sale investing is a numbers game; that's a very important aspect of it. And learning how to research efficiently provides you with a massive, massive advantage. The people who go to one or two auctions and they complain about not being able to buy a tax-delinquent property at the price that they want, they're the folks that are doing it entirely wrong. Instead of complaining that the first auction or two didn't work out, come back and complain when you've spent the time researching thousands of properties. And I've seen hundreds of millions of dollars worth of tax-delinquent real estate sold. Oddly enough, the ones who have researched thousands of properties, they never ever come back to complain; they're likely too busy making money. But I say all this to emphasize the importance of learning how to research efficiently. It is so, so important and so valuable to you as a tax sale investor.
So how do you do this? Well, I use a filter to help process my research. Your goal should never be to perform the same amount of research on every single property. And listen to me very carefully here: your goal should be to perform the minimum amount of research necessary to determine if a property deserves additional time investment for that more thorough research. Simply put, we want to spend as little time as possible researching properties that we do not want to buy. Now, obviously, if we want to buy properties, we're all in; we're very, very thorough, very diligent with our research. But if they are eventually going to be removed from our buy list, we want to have wasted as little time as possible on those properties. Now, if you'll picture a large funnel that all these properties drop into at the very, very top, what we want is only the properties we're going to place a bid on to come out the bottom of that funnel. So we have multiple layers that we utilize to filter out those properties, starting with the easiest and less time-consuming type research and then, of course, ending with the most involved and the most time-consuming research. The entire idea is that every single step removes the properties from our list that we will not be buying.
Now, before I go over the general strategy of this approach, I want you to understand: it is extremely, extremely important to be incredibly familiar with the area that you're going to be investing in before you utilize this approach. This requires market research and market knowledge. Know how to value properties. Know what areas of towns are good or bad. Know the local building requirements, the local ordinances, know the big undeveloped subdivisions in that area. If it's a new area that you're going to be investing in, you should be spending plenty of time familiarizing yourself with that area before you even start researching a tax sale list.
Now, here's the odd thing: so many people ignore that step. Instead, they look at a tax sale list, they find a cheap property on that tax sale list, they spend their hard-earned money investing in that property, and then they go back and think, "Wow, I should probably learn a little bit about this area, about the ordinances, about the valuations, about what's happening in the local market there." And oftentimes, this leads to people that email me, tell me that they purchased property that they could not build on, properties that the home they thought they had purchased they now have to pay to tear down, and of course, fines that they weren't expecting—somewhat routine when you take that haphazard approach. So learn about the area first; that is a prerequisite to researching a tax sale list.
All right, so you have this massive tax sale list, or maybe you have multiple tax sale lists that you're working your way through. What I always do is I begin with a few browser tabs open, and I have multiple screens here. If you have multiple screens, it makes it even easier, but even if you're working on a small laptop, you can still do this. I always start with my Google spreadsheet for property research. This is something that I provide to all members inside the Tax Sale Academy, but simply put, it's just a way to organize the research on those properties. Next to that, I have the property assessor's site open, the GIS site open, and then any other helpful sites for that specific area. And next to these, I'll have the auction list. So looking at that list, the very first thing most people should look at—unless you have an unlimited budget—is the opening bid amount. The opening bid is typically back due taxes, interest, and fees. Now, if the opening bid amount is out of your budget—unless you have a lot of time to kill researching properties you will never purchase—you need to skip it entirely. So if your budget is five thousand dollars, you should not be researching properties that have a ninety thousand dollar opening bid; it just doesn't make sense. Automatically scratch those properties and skip them.
The next thing you want to look at are the legal descriptions. This is the legally described dirt that you're buying, along with anything on that dirt that is real property. This takes a little bit of time to learn; it can be incredibly helpful. Now, I did a webinar in the academy on legal descriptions a while back, and it is the webinar that many members say they find the most useful, even though they weren't expecting it to be. The legal description guys is what you are buying; that's it. If it says something like "water retention area" in the legal description, well, that's what you get. If it says something like "E 5 feet," meaning East five feet, you get that five-foot strip of land. Likewise, it's not uncommon to see multiple properties in one specific subdivision. When that's the case, you need to immediately stop what you're doing, go to Google, and start researching that specific subdivision. Now, maybe it is just a large, large neighborhood or subdivision; there's nothing, in quote, wrong with it at all. It's just thousands of properties there, and a few of them are at the tax sale. But a lot of times when you see a lot of properties in one specific subdivision, it indicates that there could be something wrong; could be a red flag. Maybe the properties there are unbuildable, maybe they're inaccessible, maybe they have crazy high HOA dues. Whatever the case is, by researching that entire subdivision first, it might be a way to filter out multiple properties at one time. If you look at it and you say, "Every single property in this subdivision is not buildable," right off the bat, you can cross out 15, 20 properties. And even if you don't end up crossing out any of those properties, at the very least, you've got a jump start on the research that you'll be performing on those properties later on.
The next way to filter properties is by looking at the areas that the properties are in. So I'm talking about more than just a very localized area like a subdivision. If you did your area due diligence ahead of time, you'll probably know where you do and don't want to invest. This includes sections of towns, multiple subdivisions perhaps that you simply don't want to invest in. Maybe they're crime-ridden areas, maybe they're depressed areas, or whatever it is, you don't want to invest there. Likewise, maybe there are areas where you want to invest: the best school zones, properties that are close to new developments, properties near the new Amazon distribution facility, speculative areas—whatever it is, everybody has different objectives, but you should have an idea of where you do and don't want to invest ahead of time. So all you have to do is skim through that list, look at the subdivision name or address, and kind of get an idea where the property is located. Go ahead and filter out the properties you do not want at this step.
I'm going to pause real quick on the filtration process. Here's the crazy thing: I've walked you through a number of steps so far that will likely eliminate a good chunk of properties on your tax sale list. And if you're prepared going into it, you've likely spent two or three minutes marking off many of these properties already. If it's an area that you are familiar with, maybe you've invested there previously, you've probably spent less than a minute so far marking off a chunk of properties. Again, it is all about efficiency.
All right, moving on to some slightly more time-consuming research. Depending on how the county's website is set up, I'll either search the GIS first or the property assessor's page first. Now, GIS and property assessor—I've got lots of videos, lots of trainings, even podcasts on what each of these are—so make sure you check them out if you're not familiar with either one. But if the property assessor, on their property report for that specific property, they have a GIS link that will take me directly to that parcel on a map, I will start with the assessor's page; I'll open that up first, then I'll click that link to load the GIS site for me, and of course, it'll take me directly to that property on the map. Now, if it requires a separate search, if the two sites are not interconnected, they don't mesh well together, I'll typically start with the assessor site, and then I'll open up the GIS site. If nothing stands out, here's how I do it: I will always copy and paste the parcel number. Number one, this ensures accuracy, but number two, it's also much, much faster than going back and forth and typing all of those digits out. So I'll copy it, then I'll paste it into the GIS or the assessor site, and I click search. The property information, of course, will then pull up, and I'll begin a quick scan. Now, on the GIS page, I will always have it preset to load the most recent aerial views. I will not do the default map stuff; I'll take it directly to the most recent aerial views. I check right off the bat to make sure nothing stands out as a red flag, such as a very, very narrow lot or a lot that does not front a road, or a lot that maybe does front a legal road, but the road was never cleared—as nothing but trees. From there, I'll begin to zoom out to see if anything else is a red flag in that specific area. Now, I am not worried about recent sales or political districts or nearby churches or grocery stores or hospitals or anything like that right now. I'm simply trying to find anything that stands out right off the bat.
Now, when I look at that assessor's report, I'm also going to check for the obvious. I look at dimensions, size of the property, land use codes (which you should be familiar with), any special notes such as "no access," "unbuildable," "park," "conservation area," "green space"—all that kind of stuff. And if it stands out obviously, we want to scratch through it. This scan, this initial scan, is simply there to help us filter out properties; that's it. That scan should take you less than a minute per property and can be as quick as 15 to 20 seconds once you're very, very efficient. Again, we're getting rid of more and more properties every step that we go deeper down into this funnel.
Now the time comes when we have to perform deeper research. Now, this is not an episode or training about research; this is simply how I filter out properties. I try to teach as much as possible about research on my podcast, over on YouTube, but it's a very, very in-depth part of investment. We actually have tons and tons of training on it inside the academy, so there's no way possible for me to put the information out there that you need to learn in this podcast episode. So understand, this is not a step-by-step research guide; instead, it's simply a way that I use to filter properties. But when you start your deeper research, you'll typically begin by digging into that assessor's report, into the GIS and other mapping programs such as Google Maps. You want to find the history of the property; you want to take a look at any photos of the property, if you can; check zoning; check land use; make sure the property isn't buildable; if it's vacant, maybe you need to check the building department website, code enforcement websites, run title if necessary—all that kind of stuff and much more. That is where you're going to do it. Now we're doing the deeper research. Along with that, you're going to look at valuations of the property. So a lot of people are probably wondering, "Why don't you mention this step much earlier?" You probably want to know, know what the property is worth right now. Obviously, you could value properties much earlier in this process; you can do it at any time you want to. But in some areas, especially if you're not familiar with that area's valuations, can be one of the most time-consuming activities. Now, unless you've come across an area with an abnormally high tax rate combined with an area that has very, very low property valuation because of something like lack of demand and an economically depressed area, the overwhelming majority of properties at a tax sale have opening bid amounts that are a fraction of their fair market value. Your valuation typically is not performed to find out if you would be willing to invest in a property compared to the opening bid, but instead, it's done to determine exactly how much you should consider spending for that property. So understand, you need valuations at any point, but it is somewhat time-consuming; that's why I put it in this part of the process because opening bid compared to market value, there's usually a massive, massive gap.
All right, so now we have a pretty solid list, and we're left with just the properties that we are interested in investing in. These properties are going to be the ones that you perform drive-bys on, whether you do it yourself or you hire a local scout to help out. Obviously, this is the most time-consuming and possibly expensive part of the process. Our entire purpose for a drive-by is to ensure what we see through our research and what we think exists through our research actually exist in the real world. If everything checks out, fantastic. But if there are issues such as a demolished house, a house that has a tree through it, a house that is flooded, a house that is underwater, property that has standing water—all that kind of stuff—we'll scratch it off of our list. And at this point, we're done. At the bottom of this funnel comes the properties that we want to invest in; we're ready for the sale. We have a polished list combined with our maximum bid amounts, and we are ready to go to that auction.
So hopefully this process that I've worked through with you gives you an idea of how I filter out tax sale properties and how I'm able to efficiently research thousands and thousands of properties every single year. If you're spending all day researching 10 properties, you're doing it wrong. Learn to be accurate, but also learn to be efficient. Efficiency is what will allow you to capitalize on the fact that this business is sometimes a numbers game. I truly hope that you've enjoyed this episode of the Tax Sale Podcast. If you enjoyed this episode or any other episodes, please do me a huge favor and leave a positive review on whatever podcasting or video platform you're listening to us on today, as it really helps us in the algorithms of the podcast and video worlds. And as always, if we can be of any additional help, make sure you check us out at taxsaleacademy.com. Hey, take care and make it a successful day. We'll see you next time right here on the Tax Sale Podcast. Bye.