Protecting a tax lien investment from damage

16 Replies

got a question. lets say you purchase a tax lien, and before the property is redeemed or you acquire it thru quiet title, what happens if the house is burned down or damaged by the current owner or someone else?? should or can you buy insurance on the house to protect your investment??

@Troy Michaels

I do purchase insurance on tax deed properties in GA during redemption period.

same with TX.

I do not acquire insurance for my tax lien in FL & AZ

Originally posted by @Troy Michaels :
what happens if the house is burned down or damaged by the current owner or someone else?? should or can you buy insurance on the house to protect your investment??

You just bought an expensive pile of burnt sticks. I have bought hundreds of liens and only had one fire and that property redeemed anyway.

should or can you buy insurance on the house to protect your investment??

I have never bought insurance on a tax lien property. However I will likely purchase some liens of 20-100K this year. I will consider insurance on these. The problem is the cost of insurance could wipe out any return if redeemed in a short period.

@Troy Michaels

Just like @ Ned Carey said, it all boils down to the $ amount & location.

I am using TX & FL & give you an example.

TX is redeemable deed state with penalty instead of annualized interest. That means you get 25% from day 1.

amount of deed = $20K

penalty = $5K

insurance around = $1K/year or $84/month

So even if the owner redeems in 1 day, you still net $4900; even if you pay whole year's insurance of $1K

In FL, interest is annualized @18%/year.

amount of lien = $2K

insurance around = $1K /year. So even at 18%/year. You will be losing $640 after insurance.

if it redeem in 1 month, that means you are getting 1.5% for the month( FL has a 5% penalty.) So you will be getting $100 interest -$84insurance. You will making $16.00 after insurance.

Hope this helps

Updated over 4 years ago

actually IN TX , if the owner redeems, you can recover insurance as expense.

thanx for the responses. i live in georgia. would these be owner occupied insurance polices? what companies would offer insurance in this situation. thanx.

@Troy Michaels

I have no luck of finding insurance brokers that will insure tax deed properties in GA.

I have to get mine insure through Affinity Group Management Co., Inc. , the Program Administrator for National Real Estate Insurance Group.

Lok for agents that work with investors. Agents who insure REOs and do builders risk policies at the guys to go to.

thanx tom and ned. those are both great suggestions..

Originally posted by @Tom Yung :
@Troy Michaels
I have no luck of finding insurance brokers that will insure tax deed properties in GA.

I have to get mine insure through Affinity Group Management Co., Inc. , the Program Administrator for National Real Estate Insurance Group.

That just happens to be the company that @Tim Norris is with ...

@Ned Carey and @Tom Yung

would the same be true if you were in the process of paying attorney's fees to foreclose and quiet the title?  

I just bought a tax lien in AL and through discussions with owner and neighbors we know that the likelihood of redemption is basically nill so we've started the process to take possession of the home and quiet the title.  This process will be an addition couple thousand dollars in retainers and fees.  In this case, would you insure?  And if so, what type of policy and any recommendations for who to call?

Thank you, in advance. 

@Cortney Jones I do not insure while waiting for foreclosure. The cost would be too high to insure all our liens as most will redeem. That is a risk I choose to take.

@Tom Yung I agree it makes no sense to insure with aTax Cerificate in Fl, but.....could you even get insurance on a property with just a Tax Certificate? You have no ownersship, and even the “lien” is I guess is in the tax collector’s name....they get paid when the certificates are paid off, then pay you your share.

@Wayne Brooks Exactly what you said. That's why I do not consider purchasing insurance on a lien. It's one of the risk when purchasing liens.

@Cortney Jones , it is sometimes difficult to find insurance in Alabama because you have possession rights but not title. That creates "insurable interest" issues.  Be sure to disclose to your insurance agent that you have a tax lien.  If the property contains a residential structure, or if the property is located within an urban renewal or urban redevelopment district, then redemption costs will include reimbursement for insurance premiums plus 12% per year interest.

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