Post and photo by the Hawthorne Hawkman.
On my occasional forays downtown, I like to stop by the Hennepin County Government Center to look into property histories. Today's curiosity involved properties repossessed by Hennepin County through tax forfeiture. One in particular piqued my interest, as it is in my community. The condemned house was purchased for the amazingly low sum of $11,000 in December of last year.
But that's not the whole story, nor even the most infuriating part. No, what truly amazed me was that the buyer didn't REALLY pay $11,000. Instead, he put down just...
...$1,100. A ten percent down payment snagged the property in question. That, and a promise to pay the remaining $9,900 in ten installments.
Over ten years.
That's right. $1,100 down and $990 a year can buy you a tax-forfeited house in north Minneapolis. I still have trouble wrapping my brain around how easy this appears to be, and my mind keeps going back to the old "Crazy Eddie" pawn shop commercials of the '80's. Hennepin County offers a Christmas sale even Crazy Eddie couldn't beat.
Granted, almost all of the tax forfeitures in this price range are not turnkey. They will require tens of thousands in rehab costs to bring them back online. Many are condemned and will hopefully fall under the watchful eye of the Minneapolis code compliance process. Even so, and even at much higher prices than the example above, tax forfeitures have got to be a feeding trough for notorious and aspiring slumlords.
Even roughly quadrupling the price doesn't make much difference in its feasibility for the negligent landlord. At $40,000, a $4,000 down payment and a $3,600 yearly payment makes it ridiculously easy. The Mahmood Khans and Bashir Moghuls of this world have that kind of dough at their fingertips. Theoretically, these kinds of owners could do just about anything with a property that they acquired that cheaply.
Put minimal work into it to get it barely up to code, and it's already cash-flowing. If the area seems like it's getting better, you could just sit on the house and wait for it to be worth more. Or a sale on contract for deed could be done to almost any buyer. Ever wonder how people (usually sign spammers) can advertise that they'll sell you a house without a credit check? Well on a contract for deed property acquired this low, the only thing that really matters is the up-front payment. That will cover the acquisition cost for the next year or more. Even if the new buyer never makes a payment, the slumlord still comes out ahead.
As I explained this phenomenon to some neighbors, the first reaction was, "Let's pool our money and beat the slumlords at their own game!" The bigger picture eventually came into focus: why does this game exist in the first place? The seller in question is our own government. They are selling properties in a way that enables owners of problem properties in our neighborhoods--people that are KNOWN as slumlords, no less. At prices this low, sold in this manner, slumlords may almost be the exclusive buyers. Even with the ability to buy at auction under an LLC, the County has to know who the bad actors are, and those people continue to acquire more and more. And this has been allowed to happen for how long?
We have to cut off the supply and keep county-owned properties out of the hands of slumlords.