Protecting a tax lien investment from damage

8 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.

Medium crab1 copyNed Carey, Crab Properties LLC | http://baltimorerealestateinvestingblog.com/

@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 almost 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.

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 ...