going to tax auction Thursday night

**mek42** · 08-16-2011, 10:57 PM

I'm going to visit our neighboring county's tax auction (real estate) later this week. Our plan is to first make more progress with debt payments. Then, once we have the extra cash flow available post snowballing, we want to save up and buy with cash a tax auction property or perhaps a HUD property. Then take a year to rehab it ourselves, move in and then sell our current house and then be done with our mortgage.

So, I'm going to go to the tax auction this time to get an idea of how it works and to get a feel for how much certain properties go for. Additionally, if a property does not sell, it becomes "available for offer" so if one of the properties we are interested in doesn't sell, perhaps I can take the time to rearrange my Roth funds and purchase the property through my Roth. That way if we buy a different home with cash from the sale of our current home, we could rent the auction property tax free towards our retirement.

Anyhow, does anyone have experience with tax auctions? Is there anything I should be paying special attention to as I go to watch and learn?

**khaski** · 08-17-2011, 09:00 AM

I have no experience with this, but I get -really- nervous about the 're-arranging' your Roth. With the markets all in flux right now you may take a big hit if you cash out to buy a second property AND your retirement is, well, your retirement, not a piggy bank. It could be used in a real emergency, but buying a second residence doesn't count as one in my book. I think your overall idea is a great one-IF you can afford to pay cash, and not by taking out of retirement. The good news is many experts forecast real estate will be in the toilet for quite a while more (huh, did I just say that is GOOD news? Well, for your situation, anyways). Just my 2 cents, for what it's worth.

**mh3rdwheel** · 08-17-2011, 09:14 AM

My ex-hubby works for a company that goes to tax auctions, I know that they always goto to court house and do research on the propery to check on liens, etc. This you can go online and do a proerty search on the houses. Good luck.

**mek42** · 08-17-2011, 10:47 AM

Originally Posted by khaski

I have no experience with this, but I get -really- nervous about the 're-arranging' your Roth. With the markets all in flux right now you may take a big hit if you cash out to buy a second property AND your retirement is, well, your retirement, not a piggy bank. It could be used in a real emergency, but buying a second residence doesn't count as one in my book. I think your overall idea is a great one-IF you can afford to pay cash, and not by taking out of retirement. The good news is many experts forecast real estate will be in the toilet for quite a while more (huh, did I just say that is GOOD news? Well, for your situation, anyways). Just my 2 cents, for what it's worth.

I literally meant rearranging, not withdrawing from. It is possible to purchase real estate though a Roth, though there are a limited number of trust holding companies that are set up for this. If my Roth assets are sufficient to purchase the property outright, but my cash assets are not, I would purchase the property through my Roth. That way any eventual rent incomes* or capital gains would go to the Roth. So, instead of my current portfolio of just stocks at one brokerage, my Roth would become some stocks at the brokerage and some real estate through a different trustee company. I don't think I could buy at an auction through the Roth due to timing, but I think I could acquire a property for offer due to tax foreclosure as the timing is different.

*I'm not sure if we could also pay non-contribution rent to the Roth as residents of the property. I have a lot of learning to do with respect to Roth real estate, right now I just know that it can be done.

**khaski** · 08-18-2011, 08:16 AM

Huh...never heard of it, but you've piqued my interest. Good luck tonight at the auction, hope you learn a lot, let us know how i goes!

**mek42** · 08-18-2011, 11:05 PM

It was a good experience. I stayed for about half of the auction. Two of the three properties had been auctioned by the time I left and I made sure I would be able to check the price of the other one (second to last on the list) before I left. I also asked questions before leaving to make sure I understood how things worked. This was my first time hearing a real auctioneer in-person. They really do use that distinctive speech pattern!

One of those two properties went in the range we could have afforded, though it would have required me liquidating nearly my entire Roth. My Roth is only about $4-5k now, so it would be easy to replenish it once our mortgage is gone. We'd likely be able to replenish it in entirety and maybe even payoff BS2 from return on equity and, dare I hope, a modest profit. I'd put Roth replenishment / opening a cash account at a brokerage with a much better commission schedule (minimum opening balance requirements) ahead of BS2 from house sale proceeds, as BS2 will go really fast without mortgage payments in the budget.

Some basic research into prohibited IRA transactions makes me think that using the IRA for the first tax purchase is a bad idea, as we want to actually reside in the tax auction property for a time.

Our home county is having an auction in a month, so maybe we'll think about bidding. If not, we can keep working on BS2 and setting aside some cash for future auctions.

**l8eebugg** · 08-19-2011, 09:48 PM

agree you need to search for leins on property before buying, also how zoned. Bought a tiny house on a postage size lot at a auction to use as a garage. Cheaper than building a garage. Not as convient as having garage next to house..but a block away from where I work. Can't find the septic system...so it will be used as a storage place till my house is paid off and then maybe put in septic and then rent out.
You can get great deal if you are careful and know how to fix them up yourself.

**mek42** · 09-21-2011, 10:59 PM

Ok, our county auction is this weekend and we've decided to bid on a property. The property looks unoccupied and in decent shape. We've budgeted to replace the roof as part of deciding what our maximum bid will be.

Hopefully in a year or so we'll be without a mortgage.

**mh3rdwheel** · 09-21-2011, 11:05 PM

Originally Posted by mek42

Ok, our county auction is this weekend and we've decided to bid on a property. The property looks unoccupied and in decent shape. We've budgeted to replace the roof as part of deciding what our maximum bid will be.

Hopefully in a year or so we'll be without a mortgage.

We also been checking out the Sheriff's auction, a couple of good ones coming up in Oct. around the end of the month in Ohio (Belmont county)

**Nishu** · 09-22-2011, 09:44 PM

Good luck, Mek! I have been reading about foreclosures and I had no idea how much stuff there is to learn about tax auctions. If you happen to have a nook I can lend you the book I'm reading about it.

**nodmicks** · 09-22-2011, 09:49 PM

I can't wait to hear how it went!

**mek42** · 09-22-2011, 11:44 PM

Originally Posted by Nishu

Good luck, Mek! I have been reading about foreclosures and I had no idea how much stuff there is to learn about tax auctions. If you happen to have a nook I can lend you the book I'm reading about it.

I have Nook and Kindle apps on my iPod touch. How does it work legally to loan electronic media?

**Nishu** · 09-23-2011, 12:53 AM

I am not sure, I haven't done it yet. I will try to figure it out and get back to you.

**mek42** · 09-24-2011, 10:01 PM

Well, my wife went to the auction (I had a lab for the EMT-B class I'm taking) and the property went for much more than we budgeted to bid. One of the other bidders is the across the street neighbor; apparently the previous owner had skipped town, stripping the copper from the house (the neighbor was bidding for the two car garage and land) so perhaps it is good that we didn't win this time.

From this and the other county auction I went to a couple months ago, we have learned that if we want to win we need a bit more money, but somethings go for way cheap, especially vacant land, so it is worth trying again in the future even while we are in BS1 without having saved more for tax auctions. If nothing else, if we keep going we'll learn about the market valuation to have a target budget goal once we're out of BS1.