If you’ve recently attended a tax sale with the hopes of buying tax properties for just the delinquent taxes owed, you probably left empty-handed. Many people research properties and show up at the tax sale without realizing they stand next to no chance of getting their desired properties. Large companies with teams of lawyers and full-time researchers attend these sales and buy up all the good properties– and because they have more money, they can afford to make a smaller return on their money. You’re virtually guaranteed to be outbid, every time.
The truth is, buying tax properties at tax sale is probably the worst way for the average investor to buy tax property. Even if you are successful in bidding, in most states you won’t be able to take possession of the property for at least a year. This is because the tax commissioner or other tax authority generally gives the delinquent owner a year or more to resolve their tax issue. In some states, you have to wait as long as five years before you get the deed or can foreclose!
It’s disheartening, but you’ll be happy to know there is a much simpler way to buy tax properties, without ever attending a tax sale– by purchasing these properties directly from the delinquent owner, just before they are about to lose the property permanently.
The first thing you’ll want to do is compile a list of tax properties in your area. You can usually get a list like this from the county holding the tax sale. If you’re a more advanced investor, you can also compile your own list. Next, you’ll want to research these properties, to narrow down the list to ones you’re most interested in purchasing. This usually entails deciding what you’d like your profit margin to be, and deciding which properties will be your best investments.
After this, you’ll want to research the owners to find contact information. Often, they no longer live in the property, and may be difficult to find. Once you’ve gotten their information, you’ll need to call them, and make a deal with them to purchase their property directly. The best time to call them is just before they’re about to lose their property for good– when they’ve got nothing to lose by selling to you.
Once you’ve got a deal to purchase their property, there’s lots you can do with it. In some states, you can purchase it yourself, not pay the taxes, and then collect the excess funds from the bidding at tax sale; you can try to find a buyer, do a “double closing” and let them handle the tax issue; or, you can pay the delinquent taxes yourself, and rent it out, rehab it, sell it for top dollar, or even live in it.
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Thinking of bidding on property up for taxes at the next tax sale? You may want to reconsider. There are other ways of getting tax property outside of the tax sale, if you decide bidding on property up for taxes isn’t for you.
Tax sale does simplify things. All the properties available are auctioned in the same place. However, the bidding on property up for taxes is very competitive. Most nice properties are bid up close to retail value. You can’t inspect these properties before bidding on them, and often the owners pay them off anyway.
The best thing to do is to avoid bidding on properties up for taxes, and just buy them directly from their owners. But the best time to do this isn’t before tax sale; it’s after – towards the very end of the redemption period.
It’s still perfectly legal to buy these properties from their owners, even after they’ve been “sold”. But most investors don’t realize this.
About 9 months into the redemption period, check and see which properties are still unredeemed (their owners haven’t paid the taxes off). These will be the owners and the properties you want to look at. Tax sale investors’ bidding on property up for taxes at the tax sale will be valuable here too – you can see which of the remaining properties got bids, and that’ll tell you which are more desirable.
Next, contact the owners and offer to buy their property. At this point they’ll be desperate to sell, and willing to negotiate a very low price.
Want to get the property for $200 or less?
Find owners that have decided to “just let the property go,” meaning they have no intention of trying to sell or pay the taxes off. Tell them you’re a new investor and that you’d love the opportunity to try to do something with their property before it’s lost, since they’ve already decided to just let it go. Ask if they’d be willing to take $200 for their time in signing the deed over to you.
You’ll get a lot of “yesses” this way – and it’s the least risky way to invest in tax property. With only $200 invested, even if you are unable to flip to another investor, or pay the taxes off in time, you’ve lost almost nothing if you end up just letting the property go yourself. And it’s the only surefire method for getting property outside the auction for a steep discount.