Your most important tax sale decision - Choosing your hunting territory

[Dave2]

The montague discussion points to a more fundamental issue in these market times.  Based on my (very limited) experience so far I believe one of the most important tax sale decisions is "choosing your hunting territory".  With the coming slowdown in the Canadian real estate market I believe this will become critical.  

The reason I say this is I believe that success in tax sales will be changing in future.  As always proper buying will be extremely important.  You have to avoid problems, select the right property and don't overpay.  That is what 90% of this forum is all about.

What has not been extensively discussed is the disposal of your property.   (There are ways to dispose of your property other then selling.) After getting knocked about by the market for the last 6 months in spite of an extensive advertising program I think currently and going forward we have to think carefully about our buys.  

My advertising works as I have over 10,000 hits. The problem is converting this to sales.  Personally I think unless you have a very valuable purchase that you cannot rely on the real estate community but you have to do it yourself.  

If we call a spade a spade most of us buy lower priced land parcels. Buildings purchased through the tax sale process are risky.  IF the truth be known I am a low life that I will call a "slum LOT lord.

The advice on this board is sound.  I just think the sell part of the equation
 needs some more attention.  Before you consider the issues involved in selling I think a little attention to a key aspect which underlies the whole process needs attention.  

The only thing that has saved me in the last year is I made a key decision to mostly buy properties close within an hours drive.  

[netpred]

Dave is a knowledgeable, experienced and respected member of this board. He is bang on. There is no easy street. This is a high risk game. There is the potential for high reward but there is always a risk of loss. The potential loss would not be necessarily limited to the amount bid if, for example, environmental issues popped up. It used to bother me when people bid crazily or without performing the proper searches. I find comfort in the fact that if a person engages in this approach they will get burned sooner or later. There are enough horror stories here to prove my point.

So, what to do? Bid smart, do your searches and view every property that you bid on. Most importantly, you have never lost anything if you are not the successful bidder - the property was never yours. However, you can lose big time if you are the winner of the wrong property.

Dave is also correct that even if you buy right, it may take a long time to sell a property. It is fast becoming a buyer's market out there with many properties on MLS for years without takers.

[Bruce289]

With the coming slowdown in the Canadian real estate market...  
  

I'd be curious to know what the concensus is of the members regarding the "coming slowdown".

The real estate market (at least where I live) has been fairly flat for probably the last 5 years. Not withstanding the blip this year.

So are most expecting more of the same?
Something similar to what we saw in the late eighties/ early nineties?
Or something worse than we've ever experienced before?


Bruce

[Dave2]

Bruce:

If I could accurate forecast the real estate market I could actually make a lot of money.  The honest answer is I don't know.

It is definitely slow now and why I try to stay close to home is that meeting people onsite takes (a lot) of time.  I was up three times this weekend on site (part of my problem is I have multiple properties for sale to show ranging in list price locally from low 20's - $80,000. (The wisdom of our elders like Frank and PFM does work on the purchase side   in spite of brutal local competition.)  I had potential purchasers as far away as from London.) Hopefully one will close.

One of the real problems for land is the banks have stopped lending against land period amen.
While I will take back mortgages there are a number of issues with it specifically that you may not cash out sufficiently to replenish your purchase capital.  

The one big advantage you have with a tax sale purchase properly done is that you are a low cost provider and while margins may get depressed you can sell eventually.  Being a local slum lot lord also has advantages that are not always first apparent.

You get recognized as a buyer of last resort and people who have to sell quietly approach you if you keep your mouth shut.    If I can ever start to sell some and get the handcuffs off from the boss surprisingly I am not solely dependent for tax sales for my next purchases.

[Pfm1011]

One of the real problems for land is the banks have stopped lending against land period amen.
While I will take back mortgages there are a number of issues with it specifically that you may not cash out sufficiently to replenish your purchase capital. 

Land purchase , unless waterfront in cottage country , is a long term hold with no revenue potential , Buy a tax sale house, renovate then sell or rent and you will see a return in 3 to 6 months . Buy land and you can expect 9 month minimum on a flip if you are lucky. It can go years .  I have pieces I have bought that are a MINIMUM of 15 years out .     Although 100 acres of bush might sound impressive at a party, unless it is within a mile of a city , expect slow return.  Cities grow at a mile a DECADE, so you better be close if you expect a developer at your door. Most developers only land bank for 2 to 3 years .

They quit making land years ago...but they made a sh*tload of it in canada .  50 acres bush in Canada is like sand in the desert.

Additionally as dave2  ( and myself) have found, purchase capital is critical . I have had periods where a few pieces  tied up my capital and although I made money on them, The lack of working capital they caused probably cost me more in lost opportunity then I made on the land and I hate the feeling of not churning the cash.


As per selling Dave..forget doing it yourself, hand it to the agents.  They will make more then the 5% they will cost you and will save you the hassle of dealing with time wasters. I hate agents when I buy but their greed works for you when you sell.
.

[Dave2]

As per selling Dave..forget doing it yourself, hand it to the agents.  They will make more then the 5% they will cost you and will save you the hassle of dealing with time wasters. I hate agents when I buy but their greed works for you when you sell.
.

Although to other members of the board there is conflict on the difference between mine and PFM's approach on selling there is a very logical explanation.  It starts with the my original premise that the key issue is "choosing your hunting territory".   In any ecosystem of which this is one, there are a number of hunting territories defined by both geography and by type of game. Interesting in a jungle like this there is room for both approaches we just have to recognize the different hunting territories have different key factors of success.  

PFM obviously is mainly a big game hunter which to find means he has to cover a wider geographic territory.  It also shows in his top rate superb technical knowledge because the last thing you want to do is make a mistake with big game.  I make smaller bets but it means
I have less at stake with each bet and on the other side make less profit.  It also means I have more competition such as "Big foot".  

I have actually been refused service by a real estate agent on my low value properties.  
Picking a number I figure anything less then $40,000 selling price using a real estate agent is a waste of time.  With big game ie a higher selling price this is not a problem.

I said it myself by calling myself "slum lot lord" which means I invest smaller amounts in a larger number of properties close to home. There are a couple of exceptions but I am not going to show my total hand to my competition.

As the French say "Vive la difference" or Bill Cosby "Different Strokes for different folks"  
The people on this board like PFM also have skill sets that mere mortals like myself cannot match.  That is why they can buy houses.   Now I wonder if PFM's first name is James initial B
 After all only one can be numero uno.

[Bruce289]

Dave,

Thanks for the response. It's nice to know that I'm not the only one with a non-functioning crystal ball.

[Dave2]

As per selling Dave..forget doing it yourself, hand it to the agents.  They will make more then the 5% they will cost you and will save you the hassle of dealing with time wasters. I hate agents when I buy but their greed works for you when you sell.
.

PFM question for you.  How do you prevent real estate agent from getting a commission and you doing all the work?  Standard conduct out in the country around me for an agent with a land listing:

a) Give them map directions to the property

b) Purchaser must do own do diligence regarding zoning and and possible uses of the property.

c) BTW I have some other listings that are a lot better then this one.

d) If I am not careful, Principals only (ie they will not deal with another real estate agent . They want 100% of the listing return.  Locally our real estate board has a tough reputation with other agents from another real estate  board as official board policy on split of commission is 60% to the listing agent on split commissions.)  

[speedfreeksteve]

My advertising works as I have over 10,000 hits. The problem is converting this to sales.  Personally I think unless you have a very valuable purchase that you cannot rely on the real estate community but you have to do it yourself.  

Dave I just have to point this out. Hits doesn't equal advertising success. Advertising most effectively with the least about of hassle/money is what the goal should be. Advertising success is when you meet your goal in a reasonable fashion.

I have 4 tax sales properties right now in Ontario and Florida and I would be happy to sell all of them right now for the right price, the issue is whether I wait or sell (assuming they'll go up). A big part is that I'm delaying the hassle of actually selling them. I initially thought before maybe I could get lucky and just sell them on craigslist (with no commission to be paid out). But everytime it turned out to be more hassle that it was worth. I'm a busy enough person and I'm not going to have to deal with annoying sellers for weeks and then maybe even have to drive up to my property and show it to save a few hundred bucks on commission.. and that's IF it actually converts to a sale.

My opinion now about tax sales is that the winning a bid is much easier than the sell side of things.

[Dave2]

My advertising works as I have over 10,000 hits. The problem is converting this to sales.  Personally I think unless you have a very valuable purchase that you cannot rely on the real estate community but you have to do it yourself.  

Dave I just have to point this out. Hits doesn't equal advertising success. Advertising most effectively with the least about of hassle/money is what the goal should be. Advertising success is when you meet your goal in a reasonable fashion.

My opinion now about tax sales is that the winning a bid is much easier than the sell side of things.

Speed:  I agree with you and it also appears the rest of the board does but they are reluctant to talk about it.  It is interesting the feedback I have received in private on this one.  That is why I posted it in the first place.  

My comment about hits was misunderstood.  There is a body of opinion out there that thinks if you post it on the internet your work has been  done and it will sell. Bullshit it has just started.

Also about real estate agents.  My experience is that because of low commission they don't work for low value properties.  I am prepared to debate anyone on this board indcluding PFM on this one.  Its not about saving a few hundred bucks its about selling my property.  

IF someone has a magic formula I would be interested in talking to them in private. What is interesting is if we look at all the market pros in the same niche I believe they have come to the same conclusion.  Who am I talking about; Dignamland; Wuerch; The land store etc.

I think your last statement is key and also the earlier comments by myself and PFM about capital.  The time to dispose of property maybe increasing.  That is why this year you have not heard a lot from me on the buy side.  Cycle times are increasing.

On a closing note it would appear calling onesself a slum lot lord is not all bad.  I have been approached by someone about selling property in the Upper Ottawa valley.  I don't have anything in that area but if anyone does PM me and I will pass it on.

[netpred]

My opinion now about tax sales is that the winning a bid is much easier than the sell side of things.

This is so true.

The bottom line is that you can always win a tax sale if you bid high enough but you cannot always sell a property (unless you sell it low or at a loss).

The people who get burned are those who either do not do all of their due dilligence or bid too high. In either case, I have very little sympathy because such actions drive up the prices. Sooner or later, these people will suffer the consequences. This is Darwinism at work.

Although we are all in competition with one another, it is in all of our interests that tenderers bid reasonably.

[Pfm1011]

In simple terms ..profit isnt  made in the selling of the land..its made in the buying

[Dave2]

In simple terms ..profit isnt  made in the selling of the land..its made in the buying

Don't disagree but I will observe that there is no profit until it is ALL deposited in your bank account.  I believe this is taking longer these days and may mean you have to sacrifice more of your profit.  

More important is that buyers are having trouble getting financing for their purchase so you may have to give a vendor take back mortgage which means you don't get your money quickly.  The days of quick flips maybe over even for good buys like North Bruce.  

I feel so strongly on this point and using North Bruce as an example I am prepared to bet PFM for a good coffee;
(Prefer Williams Coffee pub over its US counterpart). that it takes longer to sell for the price mentioned.  A PM from the owner in confidence will be all that is needed for me to cough up if PFM is up for the challenge.

[landbaronofthenorth]

"Also about real estate agents.  My experience is that because of low commission they don't work for low value properties.  I am prepared to debate anyone on this board indcluding PFM on this one.  Its not about saving a few hundred bucks its about selling my property." 

I have had success with dealing with real estate agents and selling low value properties by agreeing to a fixed commission amount (i.e. specific dollar amount, vs. a percentage of final selling price). The agent may be less motivated to maximize the sale price, but is interested in the completion of a sale transaction as this is the only way they get paid.

The exposure to potential buyers on MLS and avoiding the hassle and frustration of dealing with "mildly interested" potential buyers is invaluable in my opinion.

[landbaronofthenorth]

Sorry about the issue with the quotes in the last post.  Have not figured out how to quote from other posts properly yet.
 
The following is a link to a real estate agency with a number of listings of large acreages in Northern Ontario. This may provide an opportunity for selling simlar properties.

http://www.recreationland.net/index.asp

I have not used their services (yet) and am in no manner affiliated with this company.