The 3-Year Life Cycle of Many Large Tax Sale Bidders
The whole reason I had gotten interested in tax sales in the beginning was that I'd been buying
some cheap properties from a local broker, Jonathan - and noticed all these properties were owned
by the same company.
I finally asked Jonathan where this company was getting all of its properties, and found out that
they had gotten them from our county tax sale.
So I figured, "let's cut out the middleman", and I set off to buy at the tax sale (unsuccessfully)
like I was told you about last time.
It was only later I discovered that the company selling these "cheap" properties, had gone out of
business because they had lost so much money,
and in fact was selling their properties to me at a big loss.
And in the meantime, I've observed that a lot of big tax sale funds, who drive up the prices at
tax sales, have a three year lifecycle that pretty much goes like this:
Year 1: Hire bidders to attend tax sales and pay them 1% for every dollar
they invest at the sale. Bidder pays whatever is necessary to win enough properties to invest the
Year 2: Company gets deeds to many of the properties they bid on. On the surface
everything seems OK - the assessed values are about what they paid.
Year 3: None of the company's properties have sold for the amount expected because
the bidder had carelessly bid on run-down, or even demolished properties that could never sell for what
was invested. Company goes out of business.
Unfortunately in Year 4, there is always a new company to take its place, with lots of "dumb money"
Trying to outbid dumb money is never smart...and of course you can't make any money at an auction
if you don't buy anything.
But I was not far away from figuring out how to overcome this issue (and others that tax auction bidders face).
Jonathan was soon to call me with a request that led to me "seeing the light" - a solution to all
Watch for that next.