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!