Tax deed investing is often mentioned as a great alternative investment method. But as any first year economics student can tell you, the free market is driven by two forces: supply and demand.
Are there really enough tax deeds to get excited about?
Depending on the balance between the two, the market grows, shrinks, or stagnates. The rules that guide the growth of industries and nations are also true for individual investments, like tax delinquent properties.
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Before we put a dime into tax deed investing, it’s good to know a little bit about the numbers; the supply and the demand, if you will.
So what do you think, how many tax delinquent properties are available and sold every day in the United States? Let’s crunch the numbers, using the state of California as an example.
Is tax deed investing a good method for California?
California, like half of the states across the country, uses tax deed investing to collect delinquent property taxes. Of its 58 counties, 43 have posted information online from recent tax sales that you can have a look at 24 hours a day. What were the results of these recent tax sales? In just those 43 counties, 4,354 tax deeds were offered to the public, most of the sales taking place in the past six months. In addition, in the next few weeks, there are another 650 tax deeds scheduled to be sold.
That’s a lot of supply, but what about the demand? Of the 4,354 tax deeds offered, 3,364 of them were sold, and 990 received no bids.
What does this information tell us?
In just this one state, a staggering number of properties were offered to the public. And the amazing thing is that California is actually on the low end when it comes tax deed investing. Other counties in other states, like Lee County in Florida, actually have weekly tax sales because of the huge number of tax delinquent properties in the area. During their weekly sales, Lee County offers anywhere from 40 to 50 properties, and some are sold for incredibly low prices.
So let’s try to take the California case study and use it to get a picture of what is happening across the country. In the 25 states that offer tax deeds to the public, there are a total of 1,671 counties. If we take the same average as California (75% holding regular sales) then we can reasonably assume that about 1,250 counties are currently have their tax sales at least once per year.
In California, each county offered an average of 101 properties per auction (some more, some less).
What about tax deed investing in Florida?
Looking at counties like Lee County in Florida (which moves over 1,000 tax deeds per year) we can see that California’s numbers are probably a good indicator of what’s happening in most tax deed states. So about 1,250 counties are each offering at least 100 tax deeds per sale, and having at least one sale per month, that means there are roughly 125,000 tax deeds being moved each year, or an average of about 480 per business day! And because county tax sales are staggered across the calendar, it wouldn’t be exaggerating to say that just about every day there is one going on somewhere.
Tax deed investing is still something to get excited about
So what does all this mean for you? It means that, despite all the news reports to the contrary, we are still in the middle of a sort of housing crisis. But it also means that there are plenty of tax deed investing opportunities to research – and in some counties there were more properties than there were investors! These numbers show that there exist both supply and demand when dealing with tax delinquent investing…the recipe for any healthy investment.
Click here to access a 7 part course about tax delinquent investing
