DeedGrabber Mini Course Day 2
"The REAL Source of Tax Sale Bargains: The At-Risk Property Owner"
Yesterday, we talked about how difficult it is to get a bargain at a tax deed auction because there are always other bidders there, ready to push the price well above what you'd like to pay.
And you also saw why it's so difficult to get a bargain property though tax lien investment - there is either a similar bidding process that pushes the price too high, or if you're lucky enough to get a bargain lien, you will probably be paid off.
So, how do we take advantage of the tax sale to get super-bargain properties?
We Buy Directly From The Delinquent Property Owners!
Let's talk about the owners of property nearing a final tax payment deadline. As you'll see, they're an interesting bunch.
Most of these owners are not desparately trying to save their "homestead" (although you will encounter that occasionally).
Instead, a good number of these owners have walked away from the property or just cannot pay the taxes on the property despite owning it free and clear. This is frequently the result of an inheritance or the death of the original property owner.
Somewhere down the line, the property was thrown into the new owner's lap and they were unequipped to deal with it. Maybe they've been sinking money into it to "keep it alive" and have finally decided it's a losing proposition.
Maybe they even bought the property themselves and had plans for it at one time, but never were able to follow through with them.
For whatever reason, they just want to bury their head in the sand and forget about the property. And they have.
Where does it end up? Tax sale.
Tomorrow we'll talk more about the 4 types of owners you'll talk to when you contact them about their delinquent property. But for now, let's look at what would happen if we bought a tax lien against a particular property owned by one of these "don't wanters".
Do The Math
If we were to purchase a property tax lien against such a property, we would probably end up with the property. The "don't wanter" owner would not pay us off.
But let's do the math. Say 500 property tax liens are offered in your county. 250 of them will not be purchased because the underlying property is not even worth the amount of taxes owed.
Of the 250 liens that are purchased, maybe 100 of them are bought for much less than the property is worth. Of those 100, 5% do not redeem.
So with an offering of 500 liens, there are about 5 bargain purchases to be made through the tax lien process.
How are you going to identify those 5 properties in advance so you can make your bargain lien purchase? You can't! You just have to hope you get lucky and buy the right liens. To regularly get bargain properties, you'd need a crystal ball.
DeedGrabbers Don't Need A Crystal Ball
We're going to let the tax lien investors research the 500 properties and buy dozens of liens. We're going to wait a while and let most of the liens pay off. Then, shortly before the final payment deadline, we're going to see which are left unpaid.
In the example I just gave, how many liens will still be unpaid near the deadine? Maybe 50? Will those 5 bargain properties that are going to be lost be in that list?
The same effect is seen in tax deed states. The handful of good properties which are going to actually be lost to the tax deed sale, will be on the final tax deed list. All the others will have been paid off by the owner or the bank.
Now we contact the owners of those 50 properties, and the "cream rises to the top". The 5 owners who are about to lose their property over a few thousand dollars in taxes will be on our list.
We'll contact them, and offer them some money before they lose their property, when they had already resigned themselves to do so anyway.
They'll see the value to our offer, and take it.
The Importance of the Shortcut We Just Took
Let's look at what we just did (or didn't do):
1. We didn't research 500 properties before the sale.
2. We let the other tax sale investors sort out which properties had value, because they felt it was worth purchasing a lien, or we waited for the tax deed list to come out.
3. We didn't tie up thousands of dollars in liens and legal fees or bid against other bidders at the deed sale.
4. By waiting until near the tax sale deadline, we got our prospect list down to 10% or less of the original tax sale list.
5. Our list contained everyone who is planning to let their property go, or who just can't pay.
Now we contact the owners, knowing that the 5 who are about to provide a bargain to the tax lien investor, or lose their property to the deed sale, are on our list.
We're about to grab a deed to the property right as the tax lien investor is licking his chops. Or we might see him at the tax deed sale with a $50,000 check in his hands, ready to bid on the property.
Too bad for him, we just got a deed to that property from the owner, and quickly resold it or paid the taxes off - it won't be in his portfolio any time soon.
If we ever talk to him about our activities, he might get a scowl on his face and call us a "DeedGrabber". That's OK, we can't be everything to everyone!
Tomorrow's lesson is called:
"Who Sells Their Property for $200!?!?!?"Sincerely,
Everything You Need to Know to Profit From
Tax Property Before the Sale -
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Ebook Digital Download: "Go Ahead, Be a DeedGrabber" in digital format for immediate download. Takes you step-by-step through the process of DeedGrabbing, from getting your list of owners, to contacting the owners, what to say to them, and how to research the property for value and title issues before you buy. Then, how to sell the properties you get for big paydays.
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