We’ve all heard the story before. A new investor buys a property, sight unseen, at auction. Then, when the investor heads off to start work on the property, he discovers it has burned down, been demolished, or succumbed to a tornado or other weather event. “Look at everything in person before you buy!” trumpet the investor fearmongers in response. “Better yet, don’t invest in real estate at all!”
Well, before you hang up your real estate investing dreams and all of the incredible potential returns that come with the ability to invest in properties other than those immediately adjacent to your own backyard, let’s take a step back and look at one of these “scary stories” in detail. I expect we’ll be able to learn a few lessons along the way…
A Really “Hot” Deal in South Florida
Recently in South Florida, a real estate investor bought a property at a tax deed auction. It was a four-bedroom, three-bath, Mediterranean home, and it appeared to be in great condition. The investor even drove hours out of his way to check out the house about a week before he attended the auction. “It was a fantastic property,” he said.
Unfortunately, that fantastic property burned to the ground the day after the investor did his drive-by, and the county did not update its records. Apparently, the investor also did not search the property address the morning of the auction to see if there had been any news in the area! As a result, he plunked down nearly $12,000 to secure his bid on the property and was about to pay the rest when he discovered the home had burned to the ground.
The investor appealed the purchase and got a reprieve, but noted he was very fortunate to have gotten that outcome. The county could have forced the sale and, instead of making a mint on the investment, the investor could have been tens of thousands of dollars out of pocket for the purchase of a burned-out shell.
South Florida newspapers are using this story to discourage readers from investing in tax deed auctions, but the real lessons here are more about how to work in that type setting in a way that prevents this kind of mistake from happening. Here are PIPGroup’s:
3 Keys to Avoiding Firetraps at Tax Auctions
- Check out the property in real time
In this case, the investor thought he had checked on the property recently enough to be safe putting in a bid. However, at PIP Group, we make sure all of our information is absolutely as up-to-date as possible before we put our investors’ money down. You cannot afford that one-in-a-million chance that hit this investor where it hurts.
- Operate in investor-friendly states
There are some states that are more appreciative of real estate investor involvement in the tax lien and tax deed process than others. In this case, the investor considered himself “lucky” that he did not have to pay in full for the burned-down house. PIP Group works hard to make sure any state where we invest – including in areas of Florida – is an investor-friendly area as much as possible. That helps optimize our chances of getting good deals and great service from the tax office in the event we need it.
- Do the detailed due diligence
Many times, you will not be able to walk through a property with a tax lien on it before the auction. That means you have to pay extra-close attention to all of the details when you do your due diligence. PIP Group has an extremely detailed due diligence process that optimizes our odds of knowing what is inside a house in terms of code violations and other potential issues even if we cannot personally walk through the property.
If you want to learn more about how PIP Group advocates for its investors at every tax auction where we participate, visit PIPGroup.com for details and learn how to get involved.
We’ve all heard the story before. A new investor buys a property, sight unseen, at auction. Then, when the investor heads off to start work on the property, he discovers it has burned down, been demolished, or succumbed to a tornado or other weather event. “Look at everything in person before you buy!” trumpet the investor fearmongers in response. “Better yet, don’t invest in real estate at all!”
Well, before you hang up your real estate investing dreams and all of the incredible potential returns that come with the ability to invest in properties other than those immediately adjacent to your own backyard, let’s take a step back and look at one of these “scary stories” in detail. I expect we’ll be able to learn a few lessons along the way…
A Really “Hot” Deal in South Florida
Recently in South Florida, a real estate investor bought a property at a tax deed auction. It was a four-bedroom, three-bath, Mediterranean home, and it appeared to be in great condition. The investor even drove hours out of his way to check out the house about a week before he attended the tax auction. “It was a fantastic property,” he said.
Unfortunately, that fantastic property burned to the ground the day after the investor did his drive-by, and the county did not update its records. Apparently, the investor also did not search the property address the morning of the auction to see if there had been any news in the area! As a result, he plunked down nearly $12,000 to secure his bid on the property and was about to pay the rest when he discovered the home had burned to the ground.
The investor appealed the purchase and got a reprieve, but noted he was very fortunate to have gotten that outcome. The county could have forced the sale and, instead of making a mint on the investment, the investor could have been tens of thousands of dollars out of pocket for the purchase of a burned-out shell.
South Florida newspapers are using this story to discourage readers from investing in tax deed auctions, but the real lessons here are more about how to work in that type setting in a way that prevents this kind of mistake from happening. Here are PIPGroup’s :
3 Keys to Avoiding Firetraps at Tax Auctions
- Check out the property in real time
In this case, the investor thought he had checked on the property recently enough to be safe putting in a bid. However, at PIP Group, we make sure all of our information is absolutely as up-to-date as possible before we put our investors’ money down. You cannot afford that one-in-a-million chance that hit this investor where it hurts.
- Operate in investor-friendly states
There are some states that are more appreciative of real estate investor involvement in the tax lien and tax deed process than others. In this case, the investor considered himself “lucky” that he did not have to pay in full for the burned-down house. PIP Group works hard to make sure any state where we invest – including in areas of Florida – is an investor-friendly area as much as possible. That helps optimize our chances of getting good deals and great service from the tax office in the event we need it.
- Do the detailed due diligence
Many times, you will not be able to walk through a property with a tax lien on it before the auction. That means you have to pay extra-close attention to all of the details when you do your due diligence. PIP Group has an extremely detailed due diligence process that optimizes our odds of knowing what is inside a house in terms of code violations and other potential issues even if we cannot personally walk through the property.
If you want to learn more about how PIP Group advocates for its investors at every tax auction where we participate, visit PIPGroup.com for details and learn how to get involved.
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