New kid on the block looking for some help and advice!

[nomzero]

Good day to all.

I am a new "wanna be" tax sale investor who has been following the tax sales for a while now. Discovered this goldmine of a website recently and jumped for joy. 

I have a few questions about some recent experiences I have had with regards to attempting a tax sale purchase. More specifically the recently concluded Hamilton tax sale where 67 Park Row N and 978 Hwy 5 were the top contenders (for obvious reasons). Both got cancelled.

We have 20% down (deposit) + some extra for other costs and approached our bank (TD) to procure financing. After getting all info about tax sales (no appraisal possible etc.) we got a big fat NO! Blanket pre-approval for non-tax sale property was done though!

Approached Home trust  for it's 'B' products on the advice of bank and mortgage broker. What an awful experience that turned out to be. Bad interactions with "underwriter". After hearing the tax sale deal and 45 minutes of explanations he says "I don't FEEL like approving this mortgage!!!"

So, now the big question.

Where does one go for financing?
I am looking for specific names and contact details please. Private lenders (Companies or individuals) who will not shy away from a viable tax sale.   
I reside in the Greater Toronto Area and am very happy to drive most anywhere.

Any other advice on do's and dont's is very very welcome.

Looking forward to learning more and finally making the leap to "bought" instead of standing in the sidelines.


 

[pjdd]

Welcome to the board....I think if you read previous posts from the pros such as Frank/Dave2/g20/20/Netpred  (buy the way where is he???)/and many others you will learn a lot of valuable information. I have been doing this for about four years and have secured 2 properties and trust me it is not easy.

You have to do a lot of research/leg work and accept ALOT OF DISSAPPOINMENTS along the way from financing/tax sales/etc  to leap into this. The market is crazy right now (read previous tax sale on Rushton Road Toronto) and of course the MLS in Toronto is INSANE much like Tax Sales unfortunately....

Good luck..

[Jayz]

Don't tell the bank it's a taxsale. Tell them it's a private deal and access to the property for appraisal is impossible for some reason until after closing. I tried once but the sale got cancelled before I could hear back. I didn't follow up so I don't know if it could have actually worked out or not. Although I seriously doubt it, if somebody had success in getting conventional mortage on a taxsale, please share. I helped a friend earlier this year secure a property deal, the seller then tried to cancel the deal but the firend didn't let go so access to the property was blocked by the seller. It turned out this friend had to come up with all cash (close to a mil) because no bank could give him the mortgage due to no-access for appraisal dispite the fact the property could be (later proven to be) worth way over the purchase price based on comparasion and info available. So, no-access is the hardest part.

Maybe I should get into the business of arranging private loans for taxsale fellows. Discount is available for members of this board. 

[paris]

Buying a tax sale is really taking your chances. It would never occur to me to borrow money to buy one. I guess I figure if I have to borrow it, I can't afford to take the chance.

[pjdd]

Sorry guys for I may have worded it wrong on my previous post...when it comes to financing I always have paid cash I would never go to the bank for financing on a Tax Sale they will laugh at you especially now, if you don't have the cash this is a hard game to play..

[Frank]

You are getting some very good advice here.

All too often we see newbies who don't have the financial means to close.  If you like to gamble buy a lottery ticket....much cheaper and you could win. 

Most tax sale properties are or at least can be severely tainted...and that's why you won't get financing.  Even if you had just enough to close, do you really want to risk your life savings...your kids education...on something that can backfire.

You have to pay to play....if you can't pay then don't play.  Sounds harsh but that's the way it is.

[Dave2]

if you don't have the cash this is a hard game to play..

Unfortunately you need capital to play in this business.  But you can play it on a shoestring and build up your capital if you have the right strategy, start small and choose your spots.  

Spending capital starts right at the beginning in the research phase which may require you to do several title searches not just on the property being sold but also those in the immediate neighbourhood.

The most recent one I did over a dozen in the area of the property(s) up for sale. This led to some unusual conclusions

a) Increase the value significantly of the bid or bids to get all the property(s).
b) Do not buy the second place bid of a certain bidder who I also expected to bid as I worried about getting stiffed.  

The real expense comes post tax sale.  

Needless to say most tax sale properties are not in good condition at the time of the sale.  You have to spend money to get the proper price on resale if that is your goal or use for personal reasons. If you do your homework ther are a lot of people who will try and steal the property (see photo) and you need capital to wait out until the proper buyer comes along.  

As I say any idiot can buy tax sale properties the key is can you resell it for a proper profit.  This takes longer then people realize as in one case it took 25,000 hits before I sold it.  

No one has infinite resources though and maybe I will have to take someone up on his offer of a private loan.  I wonder if he and the pretty girls he has been known to hunt tax sale property with (which is an interesting strategy particularly in summer for inspection which I could have used this time last year when the occupied dwelling brought out the german sheppards) like ice cream.  

[drago408]

Trying to get financing for tax sales properties through banks is extremely difficult if not impossible.

I have come across one Toronto based mortgage broker who does have experience with Tax Sale properties, "Son of A Broker", if you google it, it will go to his website.

But as members of this board have said, cash is best.

[nomzero]

Thank you all for sharing important information. I have learned much in just these posts.

I am not entirely discouraged and will change strategies to affordable investments instead of not.

Spoke with "Son of a broker" and the he lends against equity in your principle residence.

Thank you all again. Much appreciated.

[g2020]

If you have equity in your home just go to any bank and get a low interest rate line of credit - that is what I did when I started out. You then just pay interest on the amount you need, and then when the municipality sends back your deposit, you just pay down your line of credit. If I got a property I would draw on the line, and then when the property was mortgaged or sold, I would just apply the proceeds to reduce the line of credit. I am not suggesting that you go over your head but responsible use of other peoples money can make sense when you use the borrowing to earn income. The interest on the line of credit would normally be tax deductible, unlike your mortgage, so any spare cash would be used to pay down the mortgage - the next thing you know the mortgage is gone and your only debt is tax deductible. 💰💰💰💰💰💲

[Frank]

G2020 is bang on with the homeline credit line. 

Having the wherewithall to make a purchase doesn't mean that a smart investor is going to cash in on his bonds, mutuals etc...or sell property short just to make a bid on a tax sale property.  Use the equity you already have in your home to give you the liquidity to make these snap purchases....without begging for funds....that is provided you have equity.  But remember never to gamble with your kids education funds.    I never go into a casino with any more in my pocket than I am willing to lose.

[Dave2]

G2020 is bang on with the homeline credit line.  

  Use the equity you already have in your home to give you the liquidity to make these snap purchases....without begging for funds....that is provided you have equity.  But remember never to gamble with your kids education funds.    I never go into a casino with any more in my pocket than I am willing to lose.

Sorry but I don't agree with you guys.  Like kids education; home equity is not something I touch, even when I am tempted.  


Tax sales are too risky and there is always something unexpected that can even trip up a sure thing.  Look at the Belmont Stakes race yesterday, a sure bet; California Chrome, got an injury.

My viewpoint is never make your bet with borrowed money.  When you have your win with your deeds; and have time to confirm your initial assessment, then you can borrow money against the property.  Ideally some or all of that loan is made against house money.  

When you have the property you can really take the time to find what you may have and if there are an pleasant surprises.  

Its like the owner of the California basketball team who was forced to sell the team.  He is laughing.  

"A quirk in the tax code ? Section 1033 to be precise ? allows you to defer taxes when your property is taken involuntarily. Sterling can logically argue the Clippers sale was forced on him by the NBA. The reason is irrelevant and not covered by any tax laws. If, within two years, Sterling were to invest the money in similar or related fields, those investments can be set off against tax"  That is a saving of $264 million dollars.

I know I miss some opportunities with that philosophy but I also can sleep at night. I am prepared to argue that philosophy with g2020 or  anytime.

[Frank]

Dave...how can you equate me with that asshole millionaire. 

I have successfully used my home equity to give me liquidity.....that is my point, and I don't gamble with money I can't afford to lose.

The kids education reference is for the young folks out there who are thinking that they will strike it rich by risking their kids future. 

My kids are all grown, educated, and off my payroll so that is not an issue for me....if I don't spend it, they will some day. 

[Dave2]

Dave...how can you equate me with that asshole millionaire.  

I have successfully used my home equity to give me liquidity.....that is my point, and I don't gamble with money I can't afford to lose.

My kids are all grown, educated, and off my payroll so that is not an issue for me....if I don't spend it, they will some day.  

1.  I still disagee with you and G2020.  

2. It was not my intent to imply that, as I like the guy probably less then you do.  I was illustrating the event; not the person which if true, is something that people would have taken more care to avoid him getting an unexpected benefit that he did not deserve.

The point I was trying but obviously did not make successfully is that post tax sale, we sometimes find unexpected events and they can be positive as well as negative like an unexpected cottage, you know  I once got.

3. Where I disagree with you both is that we are talking about advice to a new bidder.  I rate you personally as one of the most dangerous; if not the most  dangerous competitors on this board, so much so I go out of my way to avoid competiing with you.

The bottom line is your risk profile as a result is much lower then most bidders on this board myself included.

4. You yourself said that you can afford to lose home equity but there are a lot of people on this board who can't.   .

5. I play the game somewhat differently then you and G2020 reflecting my lower level of knowledge and experience.  Maybe someday I will be at that level.  But until then I will finance post tax sale when and if I win something not pre tax sale out of money I should think long and hard about losing.

[Frank]

Dave

You obviously still miss my point.  I am not gambling with my home equity.  I have other reserves, but those are wisely invested and cannot become liquid on short notice without other costs being incurred.  I simply use my home equity to achieve a level of liquidity to enable me to play without having to pay the costs to acquire the funds which are already mine, but I do not want to realize on them if the investments are in fact yielding returns.  Tax sale properties are most often short term investments, and I don't want to jeopardize long term investments for their sake.

Do the math.