You know, I’m not a big fan of code enforcement. I like the idea behind it, but the application of that idea is my big issue. A landlord can be doing nothing wrong and still get harassed by code enforcement parasites that are clearly less concerned with the quality of tenants’ lives, focusing more on how much they can squeeze out of every landlord. So I chose to ignore their letters of rental registry or certificate of compliance applications. Recently, however, I found something that made it clear that, sooner or later, I’ll be forced to deal with them. Tax delinquent properties.
After being annoyed by the attic estimate guy, I remembered something he said about how they have over 1,000 tax delinquent properties in Smalltown. So, the next morning, I went on Smalltown’s government website and saw them for myself. Hundreds upon hundreds of tax delinquent city seized-and-owned properties available for sale, and not all of them were pieces of garbage. Some were in great neighborhoods where the previous owner couldn’t afford the high taxes. Some were four family buildings with great potential, but were mismanaged and then abandoned by the owner(s). And the prices were cheap, in the range of $10,000-$30,000. In fact, I think the highest price I saw was for $56,000. All one has to do is fill out an application with the city and put in a bid for the property. If the bid is accepted, I pay that amount and the property is mine. And, with the average price being around $20,000, I could buy them with straight cash with no need for mortgages. I can put the deed in the name of an LLC and that would be that. Awesome, right? Well, there’s one hitch....
See, in order to apply for a tax delinquent property, one must have a good record with code enforcement. I can’t have outstanding violations and must have an up-to-date certificate of compliance for property Charlie. Without that, my application gets rejected. Another thing is the city of Smalltown favors giving the properties to 1st time home buyers who plan to live in the property. This would give the city a higher population of permanent fiscally-responsible residents that have the means to live and—more importantly—pay taxes in Smalltown. While I’m not saying that my application would get rejected (after all, I'm not an out-of-state investor), I’d certainly lose out if my competition was a married couple looking to settle and make Smalltown their home. For years I’ve been comfortable ignoring letters from code enforcement, preferring to pay the fines rather than deal with the constant hassle of enforcement officers looking for an extra buck. But it looks as though I won’t be able to do that forever. The allure of buying a beautiful property dirt cheap due to tax delinquency is too great to ignore.
I plan to go to an REIG (Real Estate Investors Group) meeting next month. I was supposed to go to this month’s meeting which took place last week, but it conflicted with the overtime from the bank job. My best guess is that, in order to get good with code enforcement, I’ll have to make at least $5000 (high estimate) of minor repairs to property Charlie. I’ll have to move out the basement of property Alpha and dismantle the batcave, getting rid of anything that resembled someone living there (plumbing, bed, added electrical lines). I’d have to do rental registry for all the properties, including property Chi. That’s a lot of hassle I don’t need and, more importantly, I can’t afford right now. So I’ll go to the REIG meeting next month and ask how long I can continue ignoring the warnings for rental registry and certificate of compliance. What’s the fine for said ignorance, and how many times can they fine me per year? I would hope a collection of landlords would know the answers to these questions, but we'll see.
Once I get property Delta, I’ll start making amends with the demons of Code Enforcement. Then, with them off my back and my credit in good standing and with the higher income I’ll be making, tax delinquent properties will be yet another option to expand my little empire.
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