Over the past year I’ve been experimenting with tax sales.

I’ve bought 3 pieces of vacant land now and the sale of the first property just closed last week with an ROI of 54.35% in one year. If I had been smarter about it, the ROI would have been close to 200% but I’m a bit of a greedy bastard and shot myself in the foot. Gabapentin and Kratom have very good benefits for you help, visit this website and learn all about this.

So far, these tax sales seem like a really good investment. On top of that, I just like having land for camping, hunting, fishing, building a cottage.

Why am I writing this email?
If I can get a few more deals under my belt without any problems to prove the concept:
1) I’m thinking this might be the kind of thing you guys would be interested in doing yourselves.
2) I’m thinking this is the kind of thing that can be ramped up, investing as a group with a wide range of skill sets.
3) This whole thing leads to a few other things that I’ll get into later. Some of them I know nothing about and I’m hoping some of you guys can point me in the right direction for information.

Note: Please don’t forward this email to anyone.

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Here are the rough details on the 3 properties – areal photographs are in the Open Office document attached:

Property #1: Devil Lake Rd., 9.66 Acres
Bid Price: $6,405
Tax Assessed Value: $45,000
Sale Price: $14,000
Total investment including property taxes: $7,735.03
Closing fees: $2,060.78
Actual Profit: $4,204.19
ROI: 54.35%

Property #2: Lake Mazinaw, 8 Acres
Bid Price: $18,440
Tax Assessed Value: $135,000

Property #3: Sunday Lake, 36 Acres
Bid Price: $35,500
Tax Assessed Value: $395,000

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What is a tax sale?
If you don’t pay your property taxes for 10 years, the city or township the property is in will take your property back and put it up for auction. That’s a tax sale.

The minimum bid is the property tax owed on the property. All kinds of properties come up on tax sales including vacant land, houses in cities, old mines, Hostess potato chip factories, failed condo developments.

An interesting insight after looking at these things is you don’t actually own land in Canada. You own a lease on that land, we call the lease a “deed”. Every year you pay rent – we call the rent, “property tax”. If you stop paying the rent, your ass gets evicted. It doesn’t matter if you bought a $10,000 piece of property and put a $500,000 house on it – if you don’t pay the property tax, you’re out. What’s worse is the $500K house brings up the value of the land, so your rent goes up. The Canadian Government owns the land, not you.

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The story on Property #1: Devil Lake Rd.
The first property I bought about a year ago, November 2013. I was the only bidder and bid the minimum amount.

It’s 9.66 acres in a triangle shape but in the middle of the property is (was) this big beaver pond. The attached picture if from before the pond came up to the full height. One corner of the land has frontage on a gravel road that is maintained all year round and has hydro at the property line, but there was no way to get to the other two corners of the property without trespassing or using a canoe.

I had the land listed at a number of different prices. My realtor, who didn’t have a lot of experience with vacant land, guessed that we could get $55K for it based on comparable properties but without ever seeing my property. Tax assessed value is $45K. We listed the property at $45K and didn’t get any interest. We listed the property at $35K and got two written offers at $15K and two written offers at $25K over a roughly 6 week period of time in the late spring. I said no to the first $25K offer thinking I could get more but then said yes to the second $25K offer a couple weeks later. That sale was conditional on the buyer speaking with a conservation officer on site.

That sale fell apart. The report was the conservation officer told them there was poison ivy everywhere (it wasn’t poison ivy, it was Virginia Creeper) and the officer told the buyer finding a building site on the property close to the road would be difficult because the building would have to be X meters away from the edge of the pond.

If I was smart, I would have put the land back up for sale right away and found someone else to pay $25K. Instead, I decided to drop the level of the beaver damn by a couple feet to regain access to the Eastern part of the land. Long story short, this got me into a bit of trouble with the conservation authority. These conservation officers are a real pain in the ass. As soon as that “complication” was resolved, October 7th, I wanted to be rid of the land. I had picked up the other two properties and not having done a land deal like this from beginning to end was getting me nervous.

I put the land up for $15,000 trying to sell the land as quickly as possible knowing I had missed the summer market. I tried to market the land specifically to hunters. I got loads of interest and sold the land in the next 7 days for $14K. I was hoping to get a bidding war happening but it didn’t work.

Still, it was a $4,204.19 profit by the end of it. 54% return in one year. That beats my IND Direct / Tangerine savings account, any mutual fund, any index fund: any day of the week.
Note: This number doesn’t include the cost of my beaver troubles.

If I was smart and took the first $25K offer it would have been a 197% return in 6 months – an annualized return of 388%.

Details on Property #2: Lake Mazinaw

Property #2 is a thin strip of property 160 feet wide, 2000+ feet deep, 8 acres total.

It’s on Lake Mazinaw but it doesn’t have frontage on the lake. There’s highway 41 between the property and the lake. That said, all of the neighbours have docks on the lake and it doesn’t seem like I need to get approval or a permit to build a dock.

The land has a great view of the lake but the other problem with it is there’s a 20 foot granit rock face between the highway and the land. I still don’t know quite where the property boundaries are but it may be very difficult to cut a driveway into the land. That said, if the property line matches up with the information I’ve gotten from MPAC, then the neighbours driveway is actually on my land, which would make it a lot easier to put a drive in using the same access point to the highway. The neighbours cabin might also be on my land – which would mean it’s my cabin. I have a surveyor coming in a couple weeks to mark the two front corners of my property and give me a bearing for the sides of the property. It’s costing me $1500 + HST. The quotes I got for a full survey and Registered Plan to be put on file with the Land Registry Office is $20K which is just crazy.

One of the many problems with tax sales is you’re essentially buying the property sight unseen. You don’t have the right to walk the properties before hand or go inside any buildings. You don’t really have a whole lot of information. All you have is an areal, if you’re lucky, and the property line marked on the areal might not be the real property line.

The land is quite hilly which I’m guessing is why it would cost so much to survey it. Towards the back is a swampy area and at the very back is a beaver pond. I won’t be fucking with this beaver pond. 🙂

There are oak trees everywhere on this property and towards the back are a few trees that are just huge. Would love to get a chainsaw mill and cut some huge ass slabs out of a few of the trees.

I’ll have to wait for the land surveyor to figure out exactly what my plan is with this property but with the information I have now, my plan is to at least get a permit to put in a gravel driveway, build a dock, and sell the property first thing in the spring.

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Details on Property #3: Sunday Lake

This property is the one I’m the most excited about but it still isn’t in my name yet. I’ve paid for it. Hopefully the deed will be in my name by the end of the week. The property is 36 acres and has loads of frontage on Sunday Lake which is a fairly small lake but really looking forward to camping there next summer.

Right now there is only water access to the land but the land is only about 150 meters front he public boat launch. I’m trying to figure out how to cut a road into it. In the Northern portion of the land is a hydro easement so I’m thinking I can rent a bull dozer, get a permit, and within a weekend I can have a dirt road to and through the property.

With this property there are a lot of options:
1) Hold on to it
2) Sell it as is
3) Divide the property into multiple lots and sell off each lot
4) Divide the property into multiple lots, start building cottages on the lots and sell them each off

That said, I really like the idea of holding on to this one for a while.

If any of you guys know anything about any of the topics below, please let me know:
– getting a permit to build a road
– building roads
– dividing lots
– buildings cabins
– shipping containers
– setting up a managed forest
– selling standing lumber
– setting up a sugar bush
– growing ginseng

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What’s the catch?

Information:
I mentioned above that the biggest problem with these properties is you’re buying them sight unseen. The previous owner isn’t going to be talking to you so there is a lot of feeling around in the dark.

HST:
This one I had no idea about before I got into this and is a significant land mine. This is going to get annoying but I’m going to start talking about myself in the third person to differentiate between me and my corporation.

With Property #1, Robin bought the land personally. I had to pay HST when I bought the land. When you personally buy vacant land for personal use, there is no HST when you sell the property. If you buy vacant land as an investment, then there is HST when you sell the property. Since all offers come in with a clause, “the seller will pay any HST applicable”, this means if you buy a piece of land as an investment for $10K, and sell it for $10K, you pay 23%, $2,600 in HST. I’m not sure how CRA determines the difference between an investment and personal use but I haven’t paid any HST on the sale of Property #1.

Robin bought Property #2 as well and I’m hoping that if Robin keeps it down to one deal a year I can say that they are always for personal use.

8K3 Inc. bought Property #3. When a corporation buys a tax sale property, there is no HST on the buy but there is always HST on the sell. On top of that, if the property is divided into two or more parcels of land (either by a person or a corp) then there is always HST on the sell.

I hate taxes – have I mentioned that? 🙂

Other Taxes:
Robin will have to pay capital gains (25%) on the $4,204.19 from Property #1 and whatever the gain is from Property #2.

8K3 Inc. will have to pay “non-active” income tax on whatever the gain is from Property #3 which I think is 33% and then there’s some weird thing where it’s tax exempt flowing the remaining 77% through to shareholders.

On the flip side of that, I’m hoping 8K3 Inc. can buy a bunch of toys now and write them off.

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How do you find tax sales?

Officially tax sale listings go out every week through the Ontario Gazette.
http://www.ontario.ca/government/ontario-gazette

That said, the information in the Ontario Gazette is useless. All they have is the legal description of the land and the amount of the minimum bid. Example below:

#4 Roll #4353-040-009-12701
Part of Lot 1, Plan 1348 as in RO275273
Except Part 1, 51R-20555
PIN 58504-0018
264 Forest Harbour Pky
Minimum Tender Amount: $5,129.48
I pay $150 for a membership to this site which gives just a little more information but not a whole lot more:
http://ontariotaxsales.ca/
If you’re interested in looking at it, let me know and I’ll send you my user name and password.
The site also has a bunch of historical results for thousands of tax sales. It’s amazing how many of these pieces of land go up and get zero valid bids.
Here’s the catch on “valid bids”. I first bid on one of these properties back in 2006 before this site existed and every one of my bids were disqualified. You bid has to be at the township by a very precise time. If it’s 5 minutes late, it’s disqualified. You have to fill out a bunch of forms and they have to be filled out completely. If you miss a field or use pencil instead of pen, your bid is disqualified. Your bid has to come with a money order deposit for “at least” 20% of your bid. So if you bid $1000.01, and you include a deposit for $2000, your bid is disqualified.

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Why doesn’t everyone buy them? What’s the down side?

I’ve already mentioned some of the reasons:
– very little information
– easy to have your bid disqualified

The other reason very few people bid on these things is you need to have cash and that cash needs to be liquid. Not only do you need to have cash to put in deposits for every bid, but if your bid wins, you have 14 days to pay in full for the land. That means you don’t have time to get any kind of financing. You barely have time to move money between bank accounts. For Property #3, 8K3 Inc. needed to have $35,230 liquid. Even worse, if you bid on multiple properties at the same time, and a number of them win, you have to be able to pay for all of them. If you don’t pay within 14 days, they keep your 20% deposit and the land goes to the second highest bidder. It also takes a damn long time to get your 20% deposit checks back sometimes when you lose.

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Holy shit this turned into a long email. Apologies to letting this thing get so long. There’s a whole lot more I didn’t get into here.