Media attention chafes many tax deed investors

Gary Casper never saw much value in the slivers of land that get put up for auction because someone didn't pay their property taxes.

They pop up in unwanted places -- between houses, around retention ponds, beside roads. They are often vacant and overgrown. Construction is usually impossible, given their tiny size.

"I always thought the slivers were worthless because if you can't build on them, what good are they?" said Casper, a Hillsborough County real estate agent.

The answer: Good enough to earn hard-nosed investors tens of thousands of dollars. Don Connolly has proven that by snatching up delinquent properties and reselling them for hefty profits to neighbors suddenly facing an enemy in their midst.

Connolly's now infamous tactics, which include fencing lakefront properties and threatening to cordon off docks around submerged lands, have put a spotlight on the esoteric business of tax deed investing.

Investors, who worry about increased competition, aren't happy about it.

"It's going to give us all a bad name," said Greg Timby, who compiles a bimonthly list of properties being auctioned in Hillsborough and Pinellas counties and sells them for $50 a book.

Most of the people who invest in tax deeds buy plots large enough to either erect a house or sell to a developer. The "slivers" are something investors might sell to nearby residents for a small profit, said Casper, who has been in the real estate business for 18 years.

Few, if any, resort to strong-arming neighbors with fences or demolition notices, both of which Connolly has done, said a half-dozen investors interviewed for this story.

"Normally, you'd go up to someone who owns the property next door and say, "I bought this for a couple hundred bucks, pay me another hundred and you can have it,' " Casper said.

Connolly is "an aberration," he said. "He's just an unscrupulous guy."

Yet some of the investors can't hide their respect for a man who has made gold mines out of scraps of seemingly useless land, including some that is underwater.

"Most people don't buy the submerged lands because they don't see the value of that," said Wendell Williams, a real estate investor for 15 years who has taught his daughter the business. "I think Mr. Connolly is a very intelligent man."

Greg Sumler, another local investor, bought four delinquent lots this year.

"I know exactly what Don Connolly is doing and more power to him," Sumler said. "I mean, there's nothing wrong with what he's doing. People did that in the 1920s in the Florida land rush. We're all capitalists, and we're trying to make a profit."

Those who invest in tax deeds say they are much like any other real estate investment. They are risky, but can bring handsome rewards for those who understand the market and do their homework.

The odd parcels that have thrust Connolly into the news are only part of what comes to auction. Some are lots whose owners have died or abandoned the property. Some include dilapidated houses.

Many real estate investors don't limit themselves to tax deed sales. They are just as likely to buy foreclosed property, which is auctioned after a mortgage default.

"It's a way to make sure tax dollars are (collected by the county) and investors have a way to make money also," said Charlotte Luke, director of tax and license services at the Hillsborough County Tax Collector's Office.

Homeowners who are outraged over the huge prices Connolly demands for property he bought cheaply wonder how those properties got to the auction block in the first place.

After a landowner stops paying taxes, the tax collector puts a tax certificate up for auction. In buying the certificate, an investor agrees to pay the delinquent taxes.

He makes money from property owners who want to retain their holdings and now must reimburse him, with interest. Otherwise, the investor makes money when the land itself is auctioned.

The tax deeds have a base bid to ensure the certificate holder is repaid. But the sale price can soar far above the base.

At a recent tax deed auction in the downtown Tampa courthouse, for example, a property on Church Street required a minimum bid of just under $3,000. It eventually sold for $15,600 to the Connolly Family Trust, one of Don Connolly's business interests.

According to Hillsborough property appraisers, the lot and house was worth $22,636, which means Connolly already had made a paper profit of $7,036.

Seasoned investors warn that making money off tax deeds isn't easy. The deeds require cash up front. It takes several months to get a clear title. And you must have a plan for how to parlay the property into a worthwhile investment.

"We got a lot of (first-time investors) who come in and buy one time and get burned and never come back," Williams said.

Problems often crop up. There can be environmental restrictions or other reasons why land can't be developed.

"There's a whole lot of things that affect the marketability of the property that are not obvious," Williams said.

Fred "Shelton" Keely Jr. learned that the hard way. A real estate agent, Keely was at the downtown courthouse for jury duty last year when he found himself in the middle of a tax deed auction. He made a bid on a whim, but didn't win the property.

He was hooked. Last year, he purchased a vacant plot in Plant City for $3,500. He visited the property before he bought it, but it wasn't until later that he learned it was "landlocked."

"That means I've got to go across someone else's property to get access to my land," Keely said. He plans to hire an attorney to fight for an easement.

Still, Keely said he more recently bought a second vacant lot, this one in Seffner. He's about to turn it over for a great profit, he said. But he's not quitting his day job any time soon.

"For me, it's just a play thing."

Some don't ever figure out the system -- to their detriment.

Mary Wiggins runs a 24-hour day care center out of her house on W LaSalle Street in west Tampa. Since the early 1990s, when the next-door neighbor died and left behind a house and a vacant plot, Wiggins has been hacking back the foliage.

"It was really making my house look bad, all those weeds and stuff," she said. "Me and my boyfriend went and cleaned that lot off. I paid people to clean that lot, too. With my day care in my home, I didn't want nothing crawling up next to my house."

Wiggins said she went to City Hall in 1997 or 1998 to ask about buying the property.

A clerk "brought it up on the computer," said Wiggins, 41. "He said there was no taxes paid on it."

But "I never did get the understanding of it," she said.

In March 2001, Connolly bought the tax deed for $2,800. A month later, Wiggins saw him putting up a "for sale" sign. The price was $14,000, he told her. She told him not to bother with the sign.

The property was appraised at $11,250.

Wiggins said she hasn't been able to afford the new building that would allow her to move her day care business out of her house as she had hoped. But she is still happy she bought the lot.

"Right now, I'm trying to pay it off," she said.

-- Kathryn Wexler can be reached at wexler@sptimes.com or at (813) 226-3383.

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