Become disenchanted with tax sales

[jreist]

I have become disenchanted with Tax Sale and have lost interest.  A couple of years ago I was working in Campbellville and a fellow employee who live in the area told me about TAX Sales and that there was a rural property that had recently sold on TAX Sale, I can't remember the price sold but in was less then 20K. I read Paul Gordon's book Non Traditional Methods of Buying Real Estate and did research on the internet.

We thought this would be a great way of finding retirement property.  It was a great way to buy property below market. But several of the properties that we have looked at or bid on have sold high at or below market.  I have seen property that is selling through regular MLS listing at better prices.  Case in point would be the 50 acres in Wainfleet, the land was heavy clay with with poor drainage that would be difficult to farm and you would have a hard time getting permits to log. There is no way that you would be able to get permition to do development on the land.

The property sold for over 130K which I see as over market value for the area. If a person wants to spend that much he would be better off looking at MLS.ca .

[jreist]

It use to be that TAX sales were posted in 2 weeks before the sale, reducing the number of people who would participate and better deals. Know I am seeing TAX sales advertised weeks  in advance giving more people a chance to hear about the sale and increase the bidding war. A few years ago very few probably new about TAX sales, today we have the internet where anyone can have access to this information through this forum or ontariotaxsales.ca . 

[Cris]

Jreist:

Your point of view is understandable, but I still think there is opportunity in this field.  Although as a relative new-comer I have to admit I don't know much about tax sales, I do know a bit about investing in general and think your frustration is coming from the same phenomenon that usually bites stock investors in the butt:  hype around a particular investment creates a feeding frenzy that usually means that investment will become over-valued.  Some of the best, most consistently successful investors (think Warren Buffett) make it a point of ignoring the latest trends in favour of patiently looking for undervalued, overlooked investments.  Mr. Buffett famously refused to invest in any tech stock during that sector's heydays and for a time he was written off as being behind the times.  Witness that now, looking back, he did exactly the right thing and is once again vastly outperforming the market.  What does all this mean, when it comes down to it?  For me, it means that if there are too many people who are talking about a particular property (either in forums, or if an owner of a neighbouring property says "it's been like a zoo around here", or if there are a lot of recent tire marks to an abandoned/vacant property) , I am likely not going to waste too much of my time on it.  What I will do is look for those properties that people seem to have ignored, do my due diligence to make sure there is no good reason to ignore it, and then be the only one/one of a few people who are bidding on that property.  This, of course, takes time and patience, as there are a lot of smart people out there, but for me, taking my time to find the right property at the right price will be worth the dejection I feel each time I see an admittedly great property go for outrageous prices.

[mantlerc]

Maybe you are thinking of the wrong type of farming. There is alternative farming, such as chickens and windmills.

[Topwater]

I think both have their points. For me, tax sales is a hobby and no more than that. Opportunity for good deal is there but I don't think anyone can do it full time and make a living, at least not in Canada. There are some property has good economic value, but not too many. Competition is not too little. There is lot of homework to do before you place your bid, and even your bid is sucessfully, you still have do whole lot of works (such as building, renovation, paper works) before you put it in the market and hopefully make some profit. Think about the time, works, capital and risk, and compare to the potential payoff, I have to agree some say better off to invest in some good quality mutual funds.

May be some of you can disagree my view and tell me some of your good story.

But I still enjoy the hunting part.

[gap]

Mutual funds?  For me, that's just a way to force yourself to save some money, not find a reason to touch it (like we would if it was just in our bank account), and not do our own homework, under the guise of having a safe investment.
Real estate, in my opinion, is so much better.   Here are just a few of my reasons: 1.  Nobody will lend me money to buy stocks (mutual funds or not), and several people/institutions have lent me money to buy property   2.  I get cash for cash value only (i.e. I buy a $1 stock, I get $1 value, and MAYBE it will go up - with real estate, I buy a $1 investment, I get a $4 value, and sometimes, I buy for $0 and get a 100% investment),   3. If I make money with stocks, I pay tax on the whole amount right away, if my property goes up, I re-qualify for a higher mortgage, pull equity out and pay 0% tax but still get the use of my money.    4.  If I want something of good value, there's very rarely a way to buy it below its own market value, i.e. IBM doesn't ever say, "hey our stocks are worth $5 today, but I'm in a hurry for some money or I'm getting a divorce and need to liquidate, so you can buy me for $4", several people have sold me homes or pieces of land for below market value - this means I instantly have made money.  (For example, I recently bought a house on a tax sale (true, it was in rough shape), but I bought it for practically nothing.    I made a deal with a friend who does renos to fix it up and spend the same amount I did.  We sold it for four times the amount I bought it for (after his fix up) - and we split the profits.  I could have sold it right away and made the same profit for myself, this way I get to help someone else out too.)   The money over the money I paid out is taxed at only 50%.  5.   If something happens in the stock market arena, my stock drops immediately, and I have no chance to recoup.   Rarely does something happen in one day to cause such a dramatic drop in my real estate portfolio.  If something does happen in an area, I can try to recoup before it drops further.   6.  With stocks I have to wait until they go up and hope they will - I have no control.   With my real estate, I can achieve an increase on my own accord.   For example, I can add a garage, or a bathroom to increase the value.   I can repaint the outside for 3 grand, and increase the value $20k - people generally don't have the 'open-mindedness' to see the 20k increase after the paint job, they just see something's in bad shape.     7.   With real estate, I can structure so that I can more accurately get an increase in value, i.e. buy along the new Highway 11 or the new Highway 400, or the new planned extension near Welland.   I can research all the government pledges or the new Toyota plants, and estimate where an increase will happen.   BUT, EVEN IF I'M NOT LUCKY ENOUGH TO BUY where an increase will happen -after all, who can forsee the future - I can still buy a piece of property that will net me, after ALL expenses, maybe $5k per year.    Seems like a lot of work for $5K someone once told me - you have to find a house, buy it, mortgage it, find tenants, etc.....but ask yourself this, imagine working 5-10 hours a year on one property (I hire management companies for the tenants and include that in my calculations before I buy the house), how happy would you be if after about 10 hours of work, you kept receiving a cheque for $5k Every year after the first work and only had to occasionally think about the investment? 
I recently ran into someone who bought a large tract of land (near the water, but not on it), leased it to a windfarm company, (do you know how many billions the federal government has just pledged for windfarms on previoulsy thought useless land)  and is making a killing leasing the land (long term) to this company in cashflow.  What a forward thinker!   I'm sure he didn't look at it like his piece of land was a loser. 
I could go on forever. 
Sure tax sales have their negative side, but if you do your homework, you can win BIG, as I have.

[brassman]

I agree that there is too much interest right now for you to make a real killing. I still enjoy looking and there are lots of properties that no one can see the potential in. I have bought a few and I am looking at a few right now. [I wish I had more money.]Tax sales are only one source of prospects. Think longer term. Find a property that has problems that you think you can solve. Use the property yourself and enjoy it for a while. When buyers come to see it, they will see a property that someone else is getting value out of. Do this to the property that add real value. Forget about trying to sell something to a greater fool. If this is going to be a business for albeit part time,offer real value to your potential customers.

[mantlerc]

Does anyone know anything about the properties in Fort Erie, Ontario, which are up for tax sale?

[jpatti]

Maybe you are thinking of the wrong type of farming. There is alternative farming, such as chickens and windmills.

Chickens tend to need something to eat and you aren't going to raise much food for them on hardpan clay.  Furthermore, there's only so many chickens I want to eat... an all-chicken diet is terribly boring, even if you eat eggs too.

And windmills require the land to have wires run to it if you're going to sell it.  Given that I don't even want electricity on the land for my own use, a windmill farm isn't terribly interesting to me. 

The original poster said he wanted to farm as a *retirement*.  To me, that he could make money raising chickens or with a windmill farm is pretty irrelevant - farming as a retirement isn't about bringing crops to market. 

Retirement isn't about making a living, but doing the actual *living.*  Having the life you want to live.  What good is *any* amount of money-making if you never get to have the life you want?

I dunno about the original poster, but I'm getting disenchanted too.  I've been following the sales a bit over 2 years now.  Similarly, we are looking for land to retire on. 

I am interested in about 10 acres with no services, remote, but not much beyond zone 4.  It'd be ideal if it were half-wooded, but I'm not opposed to clearing it ourselves if it were entirely wooded.  I want access to the land, but no roads terribly nearby, ideal would be 3-season access on a dirt or gravel road many miles from the nearest paved road.  And certainly no town within visual distance - I want to see stars at night until I die.

It is specifically important to me that the land I buy and surrounding land never be worth anything in my lifetime as I plan to stay there.  Increasing value does me no good, it just means my property taxes go up.  And increases the chances of me having to see a Walmart in my neighborhood. 

I don't want land, I want a *home* - a permanent home.  And farming is of critical importance, not for money-making, but for survival.  It can't be all hard clay or all rock, it at least has to be suitable for a few acres of pasture.  With pasture, I can grow something that produces manure and eventually have a good garden, but pasture must be at least minimally possible to even begin.

I also want to be relatively close to my family, so I have a limited area to choose from. 

It's difficult enough to find something suitable as it is, but it's also kind of difficult and frustrating competing with investors. 

It's like... when we go to auctions and I'm trying to buy a crock to make pickles in, but have to compete with some antique dealer who can pay ten times what I can and then will sell it for triple that to some restaurant who will hang it on a wall as a decoration.  It works that way with pretty much nearly everything useful that we need - a meat grinder, a foley mill, a hand-cranked ice cream maker, good hand tools, a scythe, etc.  We have often joked that the best way to outfit a farm would be a crime-spree that involved burgling restaurants.

And thus far, the hunt for land has been more of the same.  Competing against people who don't even *want* the thing you do is frustrating as heck.

All the *other* things one can do with properties bought via tax sales aren't interesting to me at all... I don't *want* to make money.  I want specifically to retire and never have to make money again! 

[speedfreeksteve]

I think some people just get it stuck in their heads that a tax sale is the ONLY way they'll find their dream property for a bargain. This is absolutely not the case.

I've seen MLS listed properties where an acquaintence of mine went in and lowballed the asking price on each of them. Ended up with a 50 acre farm for $139000. The asking price was $250000. Just took a motivated seller.

You can also find plenty of deals by word of mouth by talking to locals in the area you're looking. Alot of people in rural areas prefer to sell privately, so you would never see these properties listed on MLS.

[Frank]

Speed is absolutely correct.  I've purchased properties all three ways.  In some cases they were listed and I low-balled, others were through tax sale, and still others by approaching people who didn't even know they wanted to sell their properties (until I spoke to them).  I've managed to make them all winners, but don't be fooled you can lose any way you go - depending on market fluctuations. 

I know of some folks who bought an old house, fixed it up and made a large profit.  When they tried to do it a second time the market turned and they lost money - they haven't ventured back.

best of luck with your search for property.  You are right in that there are some crazies out there that are bidding more than market value - but they won't be back, once they realize their folly.

[twinn]

I agree Frank, I have been at this game for a while and have bid on some properties, have not been successfull, although what i have learned is that a property that I deem useless is of value to someone else.  I have seen properties that cannot be built on but have been bid on by  hunters, naturalists etc..  its all about perspective.  I have seen quite a few good deals and some not so good deals.  With tax sales most perspective buyers (myself included) are limited by our budgets, we all want 4 season waterfront lot in cottage country but don;t have the 50-60000 in cash to purchase the property.  Thats the one downfall to tax sales, you need the capital upfront as banks get uncomfortable when financing a recreational property.  The best deals are the ones that are unadvertised and the ones that you seek out for yourself.  I have seen some really good deals and missed out on one that i would have one if my buddy would have got to the auction on time.  My advice is to keep looking and eventually you will find one, just be realistic in your expectations.  Good luck

[Frank]

Absolutely, upfront capital is a must.  If you don't have it you can't play.  You need to get someone in your camp that can make you that loan - and I'm not talking about cousin Benny the knee breaker.

p.s. why would you ever depend on a 'buddy' to get the papers there on time - do the job yourself and that way you have no one else to blame.   I really get a kick out of seeing the ones that come in two late via fedex, or purolator. 

[RichD]

I think allot of is is about "expectations" If you go in to this thinking your going to snatch up a property for 20 cents on the dollar all the time then your going to be disappointed, however, if your OK getting one for 75 cents on the dollar then you stand a very good chance of getting one. The trick seems to be predicting how low to go??

[twinn]

Hey Frank, Bidding on so many properties and being unsuccessful, I did'nt want to take the time of work, I had thought it would be be better(less expansive to me) to send my buddy with the deposit and and another draft for the difference if I am successful, gave the guy instructions and a  bullet proof package, with directions to and from the office, instructions on how to do a a lien search the day of at the local office, money for gas and lunch and paid for his time (assuming that he would spend about 8-9 hours).  The guy did the lein search, ate lunch, got there late and then gave me the wrong info about how much the property i wanted sold for, double checked with the town the week aftter and turned out that i would have one by a few thousand, oh well live and learn--- a lesson learned the hard way.  I did'nt think that it was possible to mess it up but i was wrong.  There will be other properties......