Cleartosell recently exhibited at an event where we spoke with a tax deed investor who mentioned that he prefers buying vacant land at auction rather than land with structures on them because of the lower maintenance and easier upkeep involved. Since we normally deal with investor clients who buy single-family homes or condos to flip or rent out, we investigated the issues associated with tax deed vacant land and share our findings below.
So why should you consider buying tax deed vacant land?
In addition to simplicity of upkeep, there are a few characteristics of vacant land that attract tax deed investors:
No house = less stress (and no tenants!)
If the task of rehabbing and maintaining a house doesn’t appeal to you, then vacant land is the way to go. The lack of a structure on the property comes with an array of advantages for a tax deed investor both before and after auction. The absence of a structure makes it considerably easier to inspect the property prior to bidding at auction and without previous owners or tenants residing there eliminates the burden and expense of eviction after auction. The right vacant land can be essentially a “hands-off” investment and a valuable addition to an investor’s portfolio.
Greater likelihood of buying over the counter:
Some investors would prefer to bypass the live auction scene and purchase tax deeds over the counter instead. The list of lands is a great place to find vacant land at reasonable prices and may be purchased over the counter in the county of choice.
Vacant land is often overlooked at live auction because investors have their sights set on more valuable properties with houses that are auctioned for pennies on the dollar.
This eliminates major competition for investors seeking only vacant land, but be extra diligent in your research when buying from the list of lands. You should first locate the parcel via GIS and conduct a drive-by if possible to be sure you are aware of any major flaws that might have sent other investors running the opposite direction and not simply overlooked from lack of interest.
Tie Up Less Capital
Other obvious benefits such as lower property taxes and requiring less upfront cash to acquire make vacant land appealing. This class of asset can be a great way to get your real estate investment business up and running.
But alas, where there are pros there are always cons, and this type of property comes with its own unique set of risks and down sides to consider.
Beware of legal matters
A tax deed investor we know once bought a seemingly nice piece property only to discover then entire property was a water conservation easement that could not be removed. A property that cannot be used is difficult to sell and can be a massive set back to your business.
There are other types easements to look out for including roads and pathways crossing the land for public access purposes or buried gas pipelines that are transferred upon sale of the property and might be permanent. Furthermore, the removal of easements can get legally convoluted and outcomes could differ depending on specific language of easement, interpretations of the courts, and state law.
Beware of physical constraints
During your pre-auction due diligence look for land boundaries, drainage points, swampland, etc. all of which need to be identified to avoid blindly bidding on a potentially useless property. Assess the potential for existing or future city liens for trash dumped or unsightly conditions from lack of upkeep. Being responsible for years of violations accruing at $200 per day is not an ideal investment!
If you would like further tips on what you should be looking for during pre auction due diligence, request a copy of our due diligence checklist at firstname.lastname@example.org
Cassandra April 12, 2016