Does the realtor you mention have experience buying at tax auctions? If so, I'd consider hiring him to do the work, so you avoid buying something that's not quite what you thought it was (like the couple who bought a second mortgage on a house and was surprised when the first one got foreclosed on).
I own multiple rent houses in Dallas.
It's worth the effort if you can pay cash. Period.
If you have to finance the rental property, then you have to make it your full time job because every dollar counts.
Taxes are easy. It's just another business with costs and income and a property tax hit at the end of the year. There's no such thing as a "good" tenant. They are all good and bad.
modernbeat wrote: It's worth the effort if you can pay cash. Period. If you have to finance the rental property, then you have to make it your full time job because every dollar counts. Taxes are easy. It's just another business with costs and income and a property tax hit at the end of the year. There's no such thing as a "good" tenant. They are all good and bad.
I did it for 10 years. I financed, but the mortgage and taxes were such that I could maintain cashflow, even if I was down for a few months.
You will have down times, so factor that in. Tennants will come and go (in my experience) roughly yearly, and you need to count on one month lost per tennant change. It will take you that long to clean up after the old ones. People are pigs. If there are any complicated systems in the house, like oil heat, wells, cisterns, etc., expect to be fixing them People will find a way to screw them up.
My mom did it for 20 years, and had one perfect tennant that stayed almost 10 of them. They always paid on time, were clean, and helped out. They are probably 1 in 10 million.
If you can handle the possibility of gettting called late at night, in the morning, or in the middle of working on your project car, you can make some money. After 10 years, and a particularly bad tennant, I got frustrated and sold my rental. I didn't make anything on the house, but the tennants paid off most of the mortgage, and that went straight into my pocket.
If you buy it, come back, and we'll tell you how to deal with tennants 
Just to let you know from the eyes of a tenant: I've been in my place for a week. I've called no less than 4 times. Of course, you'd think that wall outlets that are hooked up to electricity is reasonable. Or blinds on the windows.
You will get called at weird times when you don't want to be.
I may be naive, but I can't imagine that you would be forced to submit a bid without thoroughly examining the property. In such a case, I wouldn't submit a bid any higher than the land value.
Also, I would consult a real estate attorney regarding possible encumbrances on the deed, such as unpaid taxes.
The warning sign for me is the tax auction. If the PO can't make it work well enough that he/she could pay the taxes, look carefully into whether you can. Assuming a mortgage, will the property rent for enough to pay all the bills and still have a positive cash flow at the end of each month?
My dad did rental property for years (and I am helping sort out his estate now), his hard and fast rule was to not buy single family homes unless it was super duper dirt cheap, like fire sale. He bought a few but never kept them (except one but that was a special case, his long time maintenance guy lived there rent free), he'd clean them up, get a tenant in then sell it to someone else. In other words, what's called 'flipping'.
The vast majority of his stuff is multiple units (triplexes, two small complexes, etc) because if one goes vacant the others can help keep it afloat until it gets rented again. With a single home, if it goes vacant you now have zero income for that property until it's rented. But the taxes etc will keep piling up even if it's vacant.
I don't know about PA, but down here investment property is taxed as commercial. Recently I had to straighten out a county screwup; the house across the street is a rental unit but mine is owner occupied. The county got them mixed up and hit my escrow account for $2800.00. The actual tax amount: $796.00. 
On a tax auction it's not that unusual to not see inside until the morning of the sale. The problem is if you are financing (and have to get preapproved) or if there is hidden structural problems. The advantage you have is that you know the neighborhood and when there is a problem you don't have far to drive.
Turbotax Premier will handle rental property, I used it until I bought the apartment building.
You are asking questions about the property and about dollars.
Don't start with those questions.
Start with, "Do I want to be a landlord?". Proceed to, "Can I evict a nice young couple with a baby on the way, or a sweet little old lady?". Next ask, "Can I handle the stress of a truly monumental a$$hole tenant who won't pay the rent no matter what? Can I be a bigger a$$hole?". Here's a really big one, "How will it affect my marriage? Can my wife put up with the phone calls and stress when (not if) I am not home?". Wouldn't hurt to ask, "Can we handle 6 months without rental income, and perhaps several thousand dollars of damage repair?".
Once you are through those questions, you can proceed to the others.
The financial benefits of rental property ownership are primarily long term (tax advantages, depreciation, etc.). Monthly cash flow and short term gains from flipping are pretty tough these days.
I used to own PA rental properties. The laws are NOT on your side. They strongly favor the tenant. It can take 6-9 months to legally remove a bad tenant. They can do a lot of damage in that time (the voice of experience). I learned to never go through the "proper" channels. I would bribe them ("Look, this is going to end badly. I will PAY you 2 month's rent IN CASH if you will voluntarily leave within three days with no damage"). It's legal if they choose to leave. This was a LOT cheaper than the legal system + lost rents.
Tax sales- pretty normal to not get in until auction day. Also pretty normal for there to be a LOT of damage inside (it took a while for them to be evicted). Also fairly common for there to be title problems (like other liens). Caveat emptor.
I've spent 30 years in real estate related businesses. Expect another downturn. I would buy rental property now, but only if it was at about 50% of market value, with minimal financing. The market simply hasn't dropped enough to level the over pricing of the last decade.
Now that I've been so negative, I say go for it. At least if you have considered what has been said. Your proximatey to the property and your wife's interest are both in your favor. But don't go too deep into debt for it.
About the tax auction an not being able to see the property first. If you're not comfortable with that, then just forget the whole idea right now, because that's how it works.
You're buying a tax certificate on the property. This is not a typical house shopping situation. It's a long-shot chance at a very good price on a piece of real estate. It's not a bid-and-own-it-today kind of deal. In my experience, there is no practical way to borrow money for a tax sale property (you can finance it after you own it...but to bid, you'll have to have funds on hand). Buy it for land value minus the cost to demo the house, no more (this is one way to approach it). I personally wouldn't bid on it unless I could get it for significantly less than that formula (land value minus demo).
You could go knock on the door and see if they'll let you look around. I've had tennants let me look at foreclosure properties before.
A realtor isn't going to help you here because nobody is paying a commission and the house is not on the market (unless it is on the market, but I assume not).
Here in MO, you purchase a "tax deed certificate" or some such nomenclature, then you wait a year for the owners to "redeem" the tax liability. That's just how the law works (here).
If there is a mortgage on the property currently (your county records will tell you this), the bank with the mortgage WILL pay the tax liability (unless it's some anomaly that's more liability than the mortgage is worth). They'll do this either before or after the tax sale.
And thanks for reminding me...it's time to check out the upcomming tax sale list in my county!
I've got experience as a real estate agent (I'm not an agent now, but was for several years) and first hand experience buying houses off the courthouse steps (trustee's sale, aka "foreclosure"). If anyone would like pointers on any of that stuff, I'm happy to help.
[edit because we were posting at the same time: I think SVrex has some sage advice about the "do I want to be a landlord" question(s)...listen to the guy with the experience!)
Thanks,
Clem
Sounds like you have thought a lot about the financial side, start asking yourself about maintanence.
Do you already know about plumbing and electrical? Do you already have the tools to do repair things? Structural issues, wall patching, painting, etc. If you can't do your own repairs, you'll have to hire it out, which will eat into your income.
Be sure to have a good furnace and water heater that will give lots of reliable service. I prefer gas, but if gas prices are high in your area, that may make it harder to rent. Many folks prefer total electric.
NYG95GA wrote: Many folks prefer total electric.
HaHa- not in PA!
Just had a thought: is it big enough to turn into a duplex?
Keep us posted- interested in how it turns out.
I was the counties delinquent tax attorney for over 10 years. First, most properties are redeemed by the owner or other interested parties prior to the one year termination; however they have to pay all expenses of the sale plus in Tn, 10% over the bid price. Second, every person in America has seen a portion of the "get rich quick schemes" tv shows and there will be multiple bidders. In my experience, most properties will go for approx $4000.00 just because no one wants to take the risk. Dont expect that you are getting much other than 4 walls and a roof but where else can you either get 10% on your money outside of a ponzi or a cheap house?? I do encourage you to consider whether you are landlord material. Not everyone is cut out for the issues that you will be presented. I have avoided that type of investment because I dont have the handyman skills and am not willing to take on additional stress in my life.
I bought a house for rental purposes. Got a shocker today. Tennant called and said the sewer was backed up. Called a guy to clean it. He reported the pipe had collapsed. Turns out I am responsible for the whole line from the house to the main connection. Looking at around $ 5000. Ouch.
^^ And that's another reason I am leery of single family home rental property. There's no other rental units to spread the cost around to and that sucks. But I swear $5000 sounds awful high (please remember I am not looking at the property so I could be dead wrong); running a new sewer line from the Garage Majal was going to be around $1700, that was around 100 feet or so.
Could be local, I know 2 years ago we were talking about doing it at my dads house, we were quoted approx $2800 for an approx 115' line.
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