Tax Auction Investment Exit Strategy

[Edward Ferrer]

Hi, 

I purchased real estate through a tax auction.  

What are some possible exit strategies I could consider on my investment?  

Thank you! 

[Zachery Buffin]

Well the first and probably biggest thing to consider is what your holding situation is like, what are the redemption laws like in New York? I have never got one up there but to give you an example of Tennessee's rules on the subject. 

Properties purchased in a tax sale may be redeemed by the previous owner, the heirs of the previous owner, or lien holders and assignees. An order confirming the tax sale is entered into the court records within 45 business days of the sale date. Once the order is complete, the property is eligible for redemption. If the IRS holds a lien on the property, the right of redemption is 120 days from the date of the sale (28 U.S.C. §2410(b)).

Usually the tax lien is more recent than 5 years which means that the redemption period is actually a full year from the date of purchase which means, more often than not, you will be sitting on your hands and the property during that first year but redemption isn't all a bad thing.

If they do redeem the property then the court will return the bid amount along with 12% interest per year on your bid amount (interest is calculated from the date of sale until the Petition to Redeem Tax Sale Property is filed with the Court). All requests for reimbursement of maintenance and/or improvement costs incurred by the purchaser are approved at the discretion of the Court. You are encouraged to seek the advice of an independent attorney before making any improvements to the property and before filing any petition requesting reimbursement for incurred costs.

If you are beyond redemption on it then the sky is the limit man, if we had details on the property we could probably give you a better idea of what to do with it but usually they are prime wholesale deals because they have probably not been lived in/taken care of. They might have had the previous owner do damage to it out of anger or any number of things that mean it isn't move in ready. Prime wholesale territory. If you want to hold it and repair it you are probably going to gain a lot of net worth with the remodel and forced equity in the property.

There are a lot of options here buddy, the prime thing to take away is that it is awesome you started and great that you are excited!