If you do a Google search for "tax sale properties", you'll find yourself staring down a confusing list of returns-- some from websites trying to sell you information about when and where tax lien sales and tax deed sales are, some from low-tech government sits with pictures of stinky swampland, trying to sell you undesirable tax sale properties, and maybe even some other articles explaining to you the many hoops-- both financial AND legal-- that you're going to have to jump through if you want to have any prayer of making a sound investment. It's not easy to find any good, solid information to help you make the decision about whether investing in tax sale properties is for you. If you do your homework, you're likely to find at least as many sources telling you that investing in tax sale properties is a losing proposition, as ones that will tell you it's a great idea- and the ones telling you it's great are usually trying to sell you lists.
I hate to do this to you, but if your way of investing in tax sale properties is going to be bidding on liens or deeds at the county auction, I'm with all the naysayers. There are so many pitfalls and risks to this method that in the end, it's almost never worth it. After all, we invest in real estate to try to make a better life for ourselves- to build toward a secure future, to make more money than might be possible working a 9-5, and to have more personal freedom and time to spend with our families. Right? When you realize the work that often times goes into investing in tax sale properties in this way, at the end of the day, it may be preferable just to work toward the gold watch and the corner office and "work for the weekend."
Bidding on tax deeds would be great if there wasn't so much competition. There are lots of properties that end up at the sale that are okay and have some equity. Unfortunately, you're never going to get a good enough deal to make any money on them, because the guy next to you isn't about to let that happen. He will bid against you until the property is close to retail value-- then you've got your nest egg invested in a questionable property (since you usually can't inspect it first) where if one thing goes wrong, you'll lose all the money you stood to make and perhaps then some.
Same general thing with the tax lien sale. If you've got tons of money, like to gamble, and don't mind waiting a long time for payoff, you can make some decent money off of the interested generated from buying liens on nice properties. Owners pay off tax liens most of the time. However, you risk running into that rare occasion when you end up owning the property you bought a lien on... which again, would be great if you'd gotten it for a steal, but that competition at the auction is going to bid it up to almost retail value. So you may end up owning a property you never wanted, not getting the interest, gaining too small of an amount of equity to make the headache worth it, and... what if there's another economic downturn? You could end up upside-down. It's really not worth it.
It sucks, right? We know that tax sale properties are often free and clear (mortgaged properties would have had their taxes paid off prior to sale by the mortgage companies)... which means tons of equity... gosh, I wish there were a way to get those properties without all the competition, before the sale.
Well, of course there is, you just have to be a little more creative than the next guy. It's called "deed grabbing," and it's a method of obtaining the tax sale properties right from the owners, rather than waiting until they've lost everything and you're wasting away at the tax sale watching great properties get bid through the roof. It's easy, all it involves is striking while the iron is hot, and finding the right owners who are ready to walk away and hand you their tax sale properties for next to nothing. And best of all, it's a well-kept secret, so there is minimal competition. And it WORKS.
Want to learn the secrets of deedgrabbing? Go to deedgrabber.info.
Olliver Kennedy is a successful entrepreneur and real estate expert.