Avoid These Zip Codes!
So you've just gotten a deed to a house, and though on the dingy side, it looks like it can be cleaned up and resold for a tidy profit, right?
The answer is - "Probably!" Before you start, check the zip code you're buying in! Read on for details:
Remember - Tax Sale Houses Sell at the Bottom of the Market
When you get a property from an owner before a tax sale, or AT a tax sale, it's almost certainly going to be valued at the BOTTOM of the market. The question is, what's "the market"?
You need to see what your competition will be (other properties similar to yours already for sale) once you list your property for sale.
To do this, see what else is for sale now, in the same zip code as your house - the very CHEAPEST houses. If you see more than 5 houses for sale under $15,000 - steer clear!
Why $15,000? Don't forget your costs
If you get a deed to a property for $200, who cares what else is for sale, you're going to make money, right?
Not in the bottom 5% of US zip codes. The back taxes are going to have to be paid out of the money you receive for the house. Redemption amounts for property (or minimum bids at a sale) are usually about $4,000 - $5,000 for most houses.
Then you will have marketing costs - say $1500 at least for a Realtor.
Add another $1000 for miscellaneous costs, and you're at about $7500.
You can pay all of these costs AFTER the sale if you buy from the owner and you resell the property before the tax sale deadline - as shown in my ebook.
But whether or not these costs are "out of pocket", $7500 of your sale price will go toward costs of redeeming the property, and various other costs of selling.
And of course, we're buying and selling properties to make money, and we should make at least $7500 per property. So that gives us a general rule of thumb, that properties need to be WORTH at least $15,000 in the area we're working.
In 95% of zip codes in the United States, the cheapest few properties available start at $20,000 or higher, and you're golden! Just about any property you buy will sell for at least $15,000, maybe much more, and you've got a nice profit ahead.
The Bottom 5% of Zip Codes
In the bottom 5% of zip codes, however, your property will be thrown in with 5 or more properties available now, for $15,000 or less. Your property IS NOT going to gain attention of the marketplace, when listed next to 5 or more other properties in the same price range of $15,000 or less.
It will likely sit...and sit.
We're in this business to sell wholesale quick, and get a sale before we have to pay the taxes and other costs to redeem a property - so we need to work zip codes with no more than 3 properties available for $15,000 or less, and preferably 0!
Best zip codes to work are those with cheapest-priced properties in the $20,000 - $50,000 range.
Zip Codes to Avoid
Here are the top zip codes in the U.S. to avoid:
|# under $15k||Zip||City||County||State|
|38||48203||Highland Park||Wayne County||MI|
|29||60411||Chicago Heights||Cook County||IL|
|28||64130||Kansas City||Jackson County||MO|
|15||72204||Little Rock||Pulaski County||AR|
|12||27801||Rocky Mount||Edgecombe County||NC|
|12||47362||New Castle||Henry County||IN|
|11||64110||Kansas City||Jackson County||MO|
|10||49507||Grand Rapids||Kent County||MI|
|9||63112||Saint Louis||St Louis City||MO|
|9||44137||Maple Heights||Cuyahoga County||OH|
|7||46806||Fort Wayne||Allen County||IN|
|7||63113||Saint Louis||St Louis City||MO|