Tax Properties - 5 Things You Should Know

At some point in everyone's real estate investing career, tax properties enter the scene as the "miracle" real estate investing vehicle. Usually this comes about because of a tax sale guru's promise of free and clear properties for only a hundred bucks or so.

Unfortunately, this just isn't how it works 99% of time - at least if you do things the "usual way".

What You Should Know About Tax Properties

1. The number one thing you'll discover when you go to your first tax sale, is that there is always a catch.

If the properties are being sold outright at a deed sale, there will be public bidding at auction. This means that the prices of worthwhile properties will almost always far exceed the minimum prices. You'll likely be shocked at how many people at the sale have cash, and how high the prices go.

At tax lien sales, there is always some random or bid-based system to distribute the liens amongst bidders. You probably already know that you will have to wait for the property for up to 3 years or more - but you may not realize that almost all tax liens also pay off!

2. Some "pretty" properties go through the tax sale - but they are mostly worthless properties that shouldn't even be purchased for the minimum bid. In the middle are the bread and butter properties that need a lot of TLC, but do have some value, and are worth a look.

3. Tax properties CANNOT be sold with title insurance until an additional procedure is done called a quiet title - this delays your ability to resell several more months and in some areas can be quite expensive.

4. You cannot inspect the interior of tax deed or tax lien properties - and you'll rarely be surprised with interior condition being better than you think. When you "go long" and buy tax liens to acquire properties, the condition of the property can deteriorate significantly while you're waiting to get the property.

5. Researching which properties to buy, and performing other necessary details to perfect your interest, can be costly both in terms of time and money. You may have to go through thousands of worthless properties to find some worth bidding on. Once you're the winning bidder, there are often legal and noticing costs that exceed the amount paid for the property or lien at the sale.

This is also NOT for the investor on a shoestring. Though you're eventually reimbursed for most costs, a lot of cash can flow out while you wait for it to come back in!

Turn Tax Sales On Their Head!

There's a way to get very inexpensive tax properties while avoiding all of the problems above. Contact the owners of tax properties that are heading to tax sale, or have unredeemed liens sold against them.

-These tax properties are often unwanted, and can be had for just a couple hundred bucks from the owner.
-You can inspect them - and walk away from the real losers
-Since the properties are not obtained FROM the tax sale, there are no noticing, legal, or quiet tile costs. You can sell the property immediately.
-You will not have to bid against anyone else or wait to obtain the property
-In the case of tax lien sales, there are relatively few unredeemed liens, and they've already been researched by someone else

In addition to this strategy, there are several other ways to profit from tax lien properties that you've probably never heard of - and minimal cash is required. Get my Underground Guide today and look at tax properties a whole new way!

{ 12 comments… read them below or add one }

s August 26, 2012 at 12:17 am

starting a new career and I'm interested in real estate investing. Open to any suggestions??

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Rick Dawson August 29, 2012 at 12:59 am

Buy tax delinquent property from the owner before the deadline!

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Steven Rosenstein December 7, 2012 at 4:04 am

When you buy a deed from the owner before the tax sale, what happens to the mortgage if there is one on the property?

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Rick Dawson January 5, 2013 at 12:21 am

It remains against owner and the property, not you. If the owner cares about it, you should establish what will be done about it before buying the property, or walk from it.

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Gloria January 10, 2013 at 5:10 am

Hi Rick,

I have been thoroughly enjoying reading your mini-courses! Great information, and as timing would have it, also very fortuitous. 🙂 In my county, the annual delinquent tax lists just came out. I already created a rough template letter to mail to the property owners, but have one question for you: How do I find out if there are liens on the property, other than the taxes, of course! I have read the account information on the county assessor's website, along with the linked files from the treasurer's website, but the only delinquent amounts I see on any of them is the tax amounts. I sure hope you can help me! The tax auction is on February 14, so time is of the essence...

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Rick Dawson January 14, 2013 at 4:30 pm

There isn't a very efficient way to do that with a large number of properties (or even really several dozen). I learned a long time ago to save that for last or you'll waste a lot of time researching properties you'll never buy, and not enough time reaching all the sellers you can do deals with.

When you get a deal going, discuss it with the owner frankly. Just ask if there are any mortgages or liens against the property besides the tax bill.

You'll get an accurate answer about 90% of the time. Then you can move on quickly if you don't like what you hear.

If the deal sounds good, then search the owner's name in any online recorded documents the county offers. This will uncover 95% of the issues.

Only then, order a title report to make sure. This way you spend very little time researching and waste very little money on title reports.

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John Cochran March 3, 2013 at 12:46 am

There are so many hucksters out there selling information about how great tax lien certificates and tax deeds are and how one can acquire great wealth easily. Common sense tells you this is not possible, but people generally believe what they want to hear. I'm glad to hear someone who pretty much tells the "real" story about crowded tax lien sales and the true amount of time it takes to research properties. Those fast talking hucksters all have deals that sound so great, and they claim they've made millons of dollars. But there isn't enough hours in the day to accomplish what all has to be done. Anyway, I'm glad someone is telling a story about tax liens that is believeable.

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Rick Dawson March 5, 2013 at 10:21 pm

There are ways to make money in just about every business - but the ones that sound miraculous usually are!

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Rick Dawson March 5, 2013 at 10:43 pm

Thanks. There are actually shortcuts that can be used to make money with tax liens if you have money to invest. However, for the average person, making 10-12% on limited capital is not a worthwhile endeavor. It's a very active investment and it's not like putting it in a bank and forgetting about it.

But the "I just bought this beautiful house free and clear at a government tax sae for $286" stories really are getting old!

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Mary November 25, 2013 at 3:00 am

how much should you pay the home owner for there tax deed. Also would I own the home free and clear or do I need am attorney to make it legal?

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Rick Dawson November 25, 2013 at 11:50 pm

Negotiating is covered in full in my ebook - too much to cover here: https://deedgrabber.infusionsoft.com/app/orderForms/Ebook

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Gordon Marcina July 19, 2014 at 2:43 am

I bought your "Go ahead, be a DeedGrabber" book in 2009, which is it's copyright date too. Is this the same as your current book, or do I need an update?

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