Avoid These Zip Codes!

So you've just gotten a deed to a house, and though on the dingy side, it looks like it can be cleaned up and resold for a tidy profit, right?

The answer is - "Probably!" Before you start, check the zip code you're buying in! Read on for details:

Remember - Tax Sale Houses Sell at the Bottom of the Market

When you get a property from an owner before a tax sale, or AT a tax sale, it's almost certainly going to be valued at the BOTTOM of the market. The question is, what's "the market"?

You need to see what your competition will be (other properties similar to yours already for sale) once you list your property for sale.

To do this, see what else is for sale now, in the same zip code as your house - the very CHEAPEST houses. If you see more than 5 houses for sale under $15,000 - steer clear!

Why $15,000? Don't forget your costs

If you get a deed to a property for $200, who cares what else is for sale, you're going to make money, right?

Not in the bottom 5% of US zip codes. The back taxes are going to have to be paid out of the money you receive for the house. Redemption amounts for property (or minimum bids at a sale) are usually about $4,000 - $5,000 for most houses.

Then you will have marketing costs - say $1500 at least for a Realtor.

Add another $1000 for miscellaneous costs, and you're at about $7500.

You can pay all of these costs AFTER the sale if you buy from the owner and you resell the property before the tax sale deadline - as shown in my ebook.

But whether or not these costs are "out of pocket", $7500 of your sale price will go toward costs of redeeming the property, and various other costs of selling.

And of course, we're buying and selling properties to make money, and we should make at least $7500 per property. So that gives us a general rule of thumb, that properties need to be WORTH at least $15,000 in the area we're working.

In 95% of zip codes in the United States, the cheapest few properties available start at $20,000 or higher, and you're golden! Just about any property you buy will sell for at least $15,000, maybe much more, and you've got a nice profit ahead.

The Bottom 5% of Zip Codes

In the bottom 5% of zip codes, however, your property will be thrown in with 5 or more properties available now, for $15,000 or less. Your property IS NOT going to gain attention of the marketplace, when listed next to 5 or more other properties in the same price range of $15,000 or less.

It will likely sit...and sit.

We're in this business to sell wholesale quick, and get a sale before we have to pay the taxes and other costs to redeem a property - so we need to work zip codes with no more than 3 properties available for $15,000 or less, and preferably 0!

Best zip codes to work are those with cheapest-priced properties in the $20,000 - $50,000 range.

Zip Codes to Avoid

Here are the top zip codes in the U.S. to avoid:

# under $15kZipCityCountyState
16548205DetroitWayne CountyMI
13848228DetroitWayne CountyMI
11548227DetroitWayne CountyMI
9848224DetroitWayne CountyMI
9548234DetroitWayne CountyMI
8748204DetroitWayne CountyMI
7148505FlintGenesee CountyMI
6448238DetroitWayne CountyMI
5348504FlintGenesee CountyMI
4845417DaytonMontgomery CountyOH
4848506FlintGenesee CountyMI
4244105ClevelandCuyahoga CountyOH
3932209JacksonvilleDuval CountyFL
3848203Highland ParkWayne CountyMI
3760426HarveyCook CountyIL
3648235DetroitWayne CountyMI
3446403GaryLake CountyIN
3448601SaginawSaginaw CountyMI
3143608ToledoLucas CountyOH
3043605ToledoLucas CountyOH
2960411Chicago HeightsCook CountyIL
2864130Kansas CityJackson CountyMO
2748210DetroitWayne CountyMI
2648221DetroitWayne CountyMI
2448141InksterWayne CountyMI
2238114MemphisShelby CountyTN
2248212HamtramckWayne CountyMI
2231206MaconBibb CountyGA
2043607ToledoLucas CountyOH
2030318AtlantaFulton CountyGA
2049444MuskegonMuskegon CountyMI
1948089WarrenMacomb CountyMI
1945405DaytonMontgomery CountyOH
1948217DetroitWayne CountyMI
1844108ClevelandCuyahoga CountyOH
1844108ClevelandCuyahoga CountyOH
1746901KokomoHoward CountyIN
1743211ColumbusFranklin CountyOH
1744507YoungstownMahoning CountyOH
1753210MilwaukeeMilwaukee CountyWI
1732206JacksonvilleDuval CountyFL
1644509YoungstownMahoning CountyOH
1668111OmahaDouglas CountyNE
1560621ChicagoCook CountyIL
1538107MemphisShelby CountyTN
1539213JacksonHinds CountyMS
1544306AkronSummit CountyOH
1548532FlintGenesee CountyMI
1572204Little RockPulaski CountyAR
1446201IndianapolisMarion CountyIN
1448206DetroitWayne CountyMI
1435204BirminghamJefferson CountyAL
1348625HarrisonClare CountyMI
1317872ShamokinNorthumberland CountyPA
1346409GaryLake CountyIN
1235211BirminghamJefferson CountyAL
1260620ChicagoCook CountyIL
1244102ClevelandCuyahoga CountyOH
1227801Rocky MountEdgecombe CountyNC
1247362New CastleHenry CountyIN
1139204JacksonHinds CountyMS
1145205CincinnatiHamilton CountyOH
1161605PeoriaPeoria CountyIL
1148214DetroitWayne CountyMI
1132208JacksonvilleDuval CountyFL
1144305AkronSummit CountyOH
1164110Kansas CityJackson CountyMO
1043952SteubenvilleJefferson CountyOH
1044320AkronSummit CountyOH
1044120ClevelandCuyahoga CountyOH
1048612BeavertonGladwin CountyMI
1030223GriffinSpalding CountyGA
1031705AlbanyDougherty CountyGA
1049507Grand RapidsKent CountyMI
943206ColumbusFranklin CountyOH
963112Saint LouisSt Louis CityMO
945214CincinnatiHamilton CountyOH
945804LimaAllen CountyOH
944137Maple HeightsCuyahoga CountyOH
944505YoungstownMahoning CountyOH
845410DaytonMontgomery CountyOH
746806Fort WayneAllen CountyIN
749007KalamazooKalamazoo CountyMI
739212JacksonHinds CountyMS
763113Saint LouisSt Louis CityMO

{ 21 comments… read them below or add one }

s.saha October 21, 2014 at 5:34 pm

I like to buy some TLC , PLEASE guide me. i like to buy low price range.
thanks s saha

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Rick Dawson October 21, 2014 at 6:07 pm

If this is because you have a limited amount to invest, I would not start investing in TLC's. There is additional investment needed to perfect liens and durations can be long. If not, why the small amounts? You will usually get properties that are difficult to resell for a profit, and you will have to invest much more than the lien amount to perfect the liens.

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Andres October 22, 2014 at 5:34 pm

I agree with Rick's guidance. For every $1,000 TLC you buy, need to have about $3,000 or more to cover any property taxes and assessments that were beyond the years of the TLC you bought. Also extra for any legal fees to foreclose if needed, and property repairs if you plan to keep the property.

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Rick Dawson October 22, 2014 at 7:06 pm

Thanks Andres. When you buy something for $1000, it's also inherently a low-value property (small piece of land), or really run down, and the market can also change while you're waiting. If you have little invest, buying cheap liens will not allow you to participate easier.

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Andres October 22, 2014 at 7:34 pm

Rick, I did not mean value of property of $1,000 in my comment. I mean the value of the property could be $25,000 or more, for a small house, for the taxes on the property to be 1,000 or more for the tax lien.

latifa October 21, 2014 at 7:33 pm

LATIFA HILAL OCTOBER 21 AT 3:23 . I live in north virginia i like to move to an other state to start small in real estate like fix up or flip houses or buy tax lien deep. So please can u give me some advices i do not like loose my money because am using my house equity for start this business and i am 55 years old.Thank u

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Elizabeth Gilmore October 22, 2014 at 3:40 am

Hi Rick, I have 2 houses on each side of me that are foreclosing on April 1, 2015 for tax year 2012. Tax year 2013 & 2014 are owing and delinquent. Is it possible to contact the sellers, buy the deeds for $200 each, make arrangements on the 2012 back taxes with the county to get it out of foreclosure, do some cosmetic work, and sell it As Is with 2013 & 2014 still owing? Have you done this before?

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Rick Dawson October 22, 2014 at 6:13 am

You've just described my system! If you're thinking of doing this, my ebook at deedgrabber.com/ebook will be about the best money you've ever spent.

Only thing - don't do cosmetic work! Sell "as-is as-is"!

We've done dozens and dozens of these.

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Elizabeth Gilmore October 22, 2014 at 8:14 am

Oh wow! That is wonderful to know! I will be purchasing your ebook very very soon! Thank you for responding so fast. Also I live in MI, a tax deed state. It's exactly like you stated on one of your blog forums, the county seizes the deed PRIOR to the auction. So I see why I would need to contact the owners asap. After April 1, 2015, it's pretty much a wrap! So yes I will definitely need to get your ebook for clear cut instructions! Thanks for your generosity!

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Irene October 22, 2014 at 5:00 pm

Hello! Will your system work in California? Have any other investors had success here with seizing the deed prior to the auction?

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Rick Dawson October 22, 2014 at 7:05 pm

It will, and yes it's very profitable in CA, especially if you work with land.

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Corliss Dillard October 23, 2014 at 11:08 am

Thank you Rick for this valuable and much needed information. I will soon start to purchase tax liens and deeds. I live in Texas. I am a newbie and have limited monies right now. You are the only Guru I have followed who has even mentioned the added cost of deeds and liens. I will definitely be purchasing your ebook very soon. And you come out with other information long before anyone else.

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Debbi October 23, 2014 at 1:23 pm

I purchased this ebook and IMO it was money well spent. For those of you getting ready to try the techniques presented in the ebook, make sure you do NOT skip the research on the state laws regarding property tax! NO exceptions to this. There are numerous law firms set up to try to make the investors return the property to the owners using various techniques including saying the state did not notify the property owner correctly. The laws (in FL) seem to be targeted to the investors (tax certificate holder) and property owners and, currently, do not address another investor getting the property signed over to them and redeeming the property from the sale list. In most counties in FL, the property can be redeemed up to the start of the auction so if you get a property assigned to you, you may redeem it at the "eleventh hour" if needed, allowing you to hang on to your money a bit longer while you find a buyer.

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Nick October 24, 2014 at 7:37 pm

It's okay to buy rental properties in these zip codes because the cash flow doesn't end with rentals, whereas a flip deal's profit is set in stone, am I right? You're just talking about fix and flips?

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Rick Dawson October 29, 2014 at 6:21 am

Well, yes and no. To the extent that a property is nearly rentable when you get it for next-to-nothing, and you're willing to do a lot of landlording, yes you can make a lot of money like that and amass a free and clear portfolio of houses in just a few years. Afterall, they "pay themselves off" in under 1 year sometimes!

However, it's really not as great as it sounds. By the time you pay the ongoing yearly taxes and insurance in these areas, withstand vacancies and trashouts (this is big), it can be hard to come out ahead. Those who do, are usually "out in the field" tending to their houses daily, collecting rent, cleaning up after evicted tenants, etc. That's just not for me. But I know a guy who makes $20k per month in rent, in Gary, IN with this strategy.

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cv October 29, 2014 at 4:44 pm

HI, rick,
IF I buy property in tax auction. and find that owner don't move out.what I do to get pasetion ?pl. help. thank's.--cv

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Rick Dawson October 29, 2014 at 10:34 pm

It's pretty similar to an eviction, in many states you will request a "writ of assistance" from the sheriff.

This is among the lesser challenges of tax sale investing, notwithstanding the process of having to move them out and possibly dispose of their stuff.

7 dumpsters is my record!

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Nico November 3, 2014 at 7:15 am

I was wondering how it works when buying the house before the foreclosure/auction. And then I am refering to the fact that in case of a Tax Lien or Deed the house will be free of morgages and all other things attachted to the property.

But how is that in case of getting the house assigned to you before the Foreclosure/Auction? How you know the house is free from morgages and any other strings attached?

Greetings Nico

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Rick Dawson November 4, 2014 at 4:18 am

Take a look at my ebook at http://www.deedgrabber.com/ebook, it's a really inexpensive way of getting started and has everything you need. To answer your question, most pre-tax sale houses do not have mortgages, otherwise the mortgage company would have paid the taxes by the time it got to the sale. But when you get to the final stages of the deal you should get a title report to make sure there's nothing on the title that's an issue. The owner will almost always tell you upfront if there's a mortgage, just ask, but of course don't depend on this informaiton when buying.

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Grisel January 30, 2015 at 3:28 am

Just 2 questions....Why you don't accept paypal? Is it possible to but your ebook in Amazon so I can download it to my kindle?
Thank You

Reply

Rick Dawson February 2, 2015 at 6:03 am

We do accept Paypal! And you can take the PDF we give you and put it on your Kindle.

Reply

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