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The Changing Landscape

It is 8am on a Wednesday morning in a court room in the Broward County Clerks building in sunny Florida. Investors are beginning to pile in to the room for a Tax Deed Auction. Approximately 200 people enter the room. Some to participate and some just to watch what goes on.

My business partner and I are two of the many who are there to invest. Our team has spent many hours analysing the properties for sale at the auction, assessing area values, viewing properties and deciding on our maximum bid for these properties.

We purchase many properties in many different ways for many different reasons. The purchases we make are for both our own investment firm and we consult to help other firms and individuals purchase investments.

For the uninitiated, a Tax Deed Sale is a process where by a property is sold to a bidder for the value of the unpaid taxes plus some fees and interest. Every state works differently and in some cases very differently. In Florida the property has an opening bid of the back taxes plus fees and interest. The property can then be bid up as high as the winning bidder is willing to pay.

Over the last 12 months we have noticed something very concerning happening. There has become a lot more interest in these auctions. As if the cat where out of the bag so to speak. But the concern is what people are prepared to pay for some of these properties.

Some of these properties are in a state of disrepair and need literally $25k of repairs. An “Investor” bought one such property for nearly $20k over its current market value. And that is its market value if it were in good condition! I actually feel sorry for some of these people because they are setting them selves up for serious loss. But again if you don’t know what you are doing, then perhaps you shouldn’t do it.

Property prices having been rising comfortably in the Florida state and are now bouncing around what the true value would have been if the bubble had not of taken place. The concern is that some areas are starting to become over valued again.

Why do we feel this way? It doesn’t take a genius to notice when speculators and banks are meddling with markets. Sad to say I feel the USA is setting its self up for another 2007 and I don’t think it will turn around as easily as last time.

History has a strange way of repeating itself and unfortunately humans are not good at learning from history! Although I believe there is a good few years before the next property crash which equals a good few years to continue generating massive returns and enjoying the cash flow on offer.

Hedge funds are moving into the markets and are buying huge quantities of real estate. When a hedge fund moves on something it is fair to suggest that they are playing the smart money. But banks have hundreds of thousands of REO properties in their inventory.

What does it mean?

Well if the funds are buying property then that will drive the price up via supply a demand principles. If there is less property then people will pay more for it.

However, if the banks were to release all of those properties in to the market, it would drive the price down.

What we have here is a careful balancing act between the two institutions.

Tomorrow I will go further into why the banks are not dropping all of these assets of their books and why now is best the time to get in to the market now matter where your from. The trick has always been and will always be knowing when and how to get out!

Education for Success,

Chris Shackleton

Investor & Entrepreneur

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