I'm looking to purchase a tax deed property in my state of alabama. The road block that's got me is after I've used a hard money loan for the purchase and rehab of a tax deed property, how will I get from under the hard money loan? Normally, you could cash out refinance but I don't see any credit union (CU) approving financing on an uninsurable title. I'm thinking I'll have to wait until I do the Quiet title lawsuit/get a clear and (an insurable title) title insurance. But then again how would I pay back the initial hard money loan in the mean time.
Note: Alabama has a 3 year redemption period, so, the Quiet Title lawsuit can't take place until after the 3 years of me acquiring the deed.
My goal is to 1 not be stuck with the hard money loan. Any advice would be appreciated
I posted a video that explains about Alabama redemption time periods. Not as clear cut as 3 years after tax deed. Watch the video. I would not loan hard money against a tax deed, much less borrow money for an expensive rehab. There are about a dozen different ways things can go bad. The investor can probably control most of them, but the lender has no such close-quarters notice and ability to respond.
Get quitclaim deeds from the owner, or as many of the heirs as you can if there are heirs. That is the best way to protect yourself. Even if you don't get from all of the heirs, that at least makes you a co-owner and bootstraps into a lot of other rights and protections.
You can do a cashout DSCR loan to get out of the HML @Edwin Bethune. You'd just need to have had the property for at least six months. In some cases, the seasoning requirement can be as little as three months. If you ever want to talk about options or have questions....feel free to reach out.
I'm thinking I'll have to wait until I do the Quiet title lawsuit/get a clear and (an insurable title) title insurance.
Every state's law is different, but I think you are confused. In most states, you pay the delinquent taxes (and subsequent taxes) and receive a tax certificate. You wait the redemption period and its extensions (the three years, apparently, I dunno), and THEN you petition the court for a tax deed. Once granted, the tax deed wipes out everything except federal tax liens and any subsequent property taxes you didn't pay.
That's just about as good a title as you're ever going to get. It also, however, means that you cannot do anything with the property during the period of redemption, since the property title doesn't pass until the tax deed is issued.
Like I said, every state's law is different, but in most states you have no title during redemption. You never have "uninsurable title."
@Edwin Bethune If AL has a 3 year redemption period, it seems like rehabing would be risky. I'm not sure I would bother in your situation if you have to borrow money.
I posted a video that explains about Alabama redemption time periods. Not as clear cut as 3 years after tax deed. Watch the video. I would not loan hard money against a tax deed, much less borrow money for an expensive rehab. There are about a dozen different ways things can go bad. The investor can probably control most of them, but the lender has no such close-quarters notice and ability to respond.
Get quitclaim deeds from the owner, or as many of the heirs as you can if there are heirs. That is the best way to protect yourself. Even if you don't get from all of the heirs, that at least makes you a co-owner and bootstraps into a lot of other rights and protections.