How to make money with tax liens and tax deeds

On my blog, you have heard me talk quite a bit about tax delinquent property. In fact, it was only after learning about how counties collect delinquent property taxes that I really got excited about real estate investing. I couldn’t believe that some people would let their properties go for nonpayment of taxes, and neither could I believe the investment opportunities that tax sales presented.

In this very special blog post, I would like to share some alternative methods for making money with tax liens and tax deeds. We all know the basics of buying a tax lien (and getting repaid with interest) or a tax deed (buying a property for 30% to 40% of its value); but give me a minute and let me share some alternative methods you may not have thought about.

Making money with tax liens. Outside of the standard model, how can you make money with tax liens?

Consider buying a lien on a property which doesn’t have a mortgage on it. And don’t be scared off by a property in need of some TLC. You don’t want a property with a mortgage because often the bank will swoop in a redeem the parcel, and for our purposes we don’t want that to happen.

In states that sell tax liens, once the redemption period expires (the time for the owner of record to pay off their delinquent property taxes) the holder of the lien has the right to foreclose on the property. That means that for paying just a few years’ worth of property taxes you can be the owner of the entire parcel with all existing liens wiped out (except those issued by the government). Then you can either fix up the property and rent it out or flip it for a huge profit.

Making money with tax deeds. While you might find a good deal from time to time buying tax deeds in a metropolitan area, I have found that you can make more by thinking outside the box. For example, focus on rural areas with lower competition and more reasonable prices.

But here’s another method – check the list beforehand to find a property up for auction which you are pretty sure will sell. Contact the owner and purchase it just before the auction – and let the county market, sell, and process the paperwork for the parcel for you! Many tax deed states return any overages (money over and beyond the delinquent taxes) to the owner of record, which means you would get paid for just putting two and two together.

Each state has its own rules, and my team and I have prepared state-specific guides detailing which methods work in which states along with the relevant state statutes for your benefit. You can pick them up here: www.taxsaleguides.com.

Investing in tax delinquent real estate is just the best. There are so many opportunities!

 

 



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