Business & Finance Investing & Financial Markets

Tax Deed Auctions Are "Like a Box of Chocolates"

There is some emerging talk out there about why you should avoid tax deed sales.
In this, they are comparing the alleged intense competition that occurs at a public tax deed auction, to the lack of competition in working overages, or what is also known as "excess funds".
This is really practicing what is known as - "disinformation".
As an investor who works both, let me tell you, there is also a lot of competition in this arena as well, and it is not as lucrative as some would like you to believe.
Why? The main reason is that the last recorded address of the former owner is usually a cold dead one, increasing time and costs, before a payday - if you are lucky.
Working overages requires expensive skip tracing, and there is no guarantee of results.
You can spend a lot of time and money fishing for that elusive big one, only to wonder why the fish are not biting.
Working overages, or even working what is known as "front running" are very good to do as an augmentation to your tax deed prospecting and investing, as they can generate over time, some residual income, which can then be turned back into purchasing the real estate.
Any real estate investor can tell you that the power to profit in real estate comes from "owning the deed".
Having attended numerous tax deed auctions over the years, the intense competition is usually only experienced when investors are "cherry picking" high value properties.
Tax deed auctions-- when it comes to the competition on the day of the sale, are really "like a box of chocolates" in that "you never know what you're going to get".
By way of example, I have attended auctions where 25 to 30 properties are offered for sale, and where there are a selection of high value, medium value, and low value properties offered to a mix of potential owners.
The majority of the competition will be around the high value properties - like modern expensive homes.
There may be a few people competing for some of the median value properties - like developed land in estates, or condos, and absolutely no one competing for the lower value properties - like undeveloped land.
In fact, I have seen medium and lower value properties "passed in" due to no bids received.
These properties are usually rescheduled for another sale, or added to the "lands available for taxes" list, for an over-the-counter purchase.
Have you ever heard of the "Pareto Principle"? It is also known as the "80-20 rule", which states that "roughly 80% of the effects come from 20% of the causes".
This principle is a mathematically observable truth, and when applied to a tax deed sale, works out this way.
80% of the people will compete for 20% of the properties (the high valued ones), while only 20% of the people at the auction will compete for the remaining 80% of the properties.
Now, in anyone's book, that is still very good odds! Tax deed bargains are always found - in spite of the disinformation - and will continue to be picked up for "pennies on the dollar".
Real estate is, and always will be, the best investment in the world! Let's face it, Earth is real estate! So, "Owning the deed - is still - the goal!"


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