Why are Tax Liens and Tax Deeds documented evil on this website
Most Popular Reply
Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votesQuote from @Ashish D.:
I've read through hundreds of post on this website about Tax Liens and Tax Deeds, and almost every single one is discouraging investing into it stating myriad of different problems and nuances. However, when you search the internet, you find hundreds of posts and documentation talking about investors being so successful with it, big ones and small. I've spoken to few investors who have made tens of properties using it. Why are posts and documentation on this website particularly advising against them?
The people I’ve encountered in my 40 + years as a real estate investor and private lender who are successful have the following in common
They are educated as to principles of real estate; real estate law; and real estate finance
They LEARN something new about real estate investing almost every day, and are open to realigning their strategy, tactics, and portfolio to encompass new information and knowledge
They SPECIALIZE either in a strategy, property type or geographical area, and become EXPERT in that area
They have survived real estate “depressions” where property prices have dropped 20% - 50%
They understand the difference between real estate investing, operating a real estate BUSINESS, and having a real estate job.
They network, for knowledge, capital and most importantly DEAL FLOW
The key thing to consider when you watch a YouTube video, take an “introductory” seminar, or read a guru’s website, is what is the subject persons BIAS? If he’s selling you something, then there’s a very good chance his “pitch” is not truthful. There are some very good localized mentors that hang around BP and contribute with excellent advice and information on forums, podcasts, and articles. But something happens when and if they decide to
go national”. Those guys end up buying marketing programs from one of a few specialized real estate marketing organizations out of either Las Vegas or Salt Lake City; and the result is the cost of their programs goes from $3000 to $40,000, the quality of their information go from a 8 to a 4, and once you’ve entered their program all your contact is with an employee while the guru is out giving seminars, workshops, and making videos.
37 Replies
- Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes2y
@Ashish D., I think because BOTH things are true! There is opportunity but also a lot of issues and risks. So, the opportunity is not well suited for a new investor who isn't knowledgeable about those risks nor prepared to handle them.
There is opportunity building houses, but should someone who doesn't know which end of a hammer to hold start building one himself?!? The issue isn't whether there is opportunity its whether that individual investor is well suited and prepared to take advantage of that opportunity.
For example, here is a common scenario in my state. Many tax sale properties derive from estates where the heirs take no action and the property goes to tax auction. However, MANY buyers do not realize that state inheritance taxes need to be paid on the property. There is no recorded lien, but that debt is attached to the title of the property and its based on not the sale price but assessed value (because of the passage of time since the death of the owner) and also based on WHO inherited.
So, you buy a property at tax sale for $50k thinking you got a nice deal, BUT the heir to the property was a nephew and the assessed value is $200k. So, there are $30k in inheritance taxes due to clear the title! Suddenly that deal isn't so good.
That is a super common scenario. There are a number of issues with tax sale properties and I'm sure they differ somewhat between states. So, its just not an easy or simple way to acquire deals, especially for a newer investor.
- 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
AS @Kevin Sobilo pointed out this is very STATE specific.
some states is quite clear cut others it utterly complex.
Tax Deeds for instance in CA are probably the simplest that I have seen and been a party to.
Properties go to auction Highest bidder wins 30 days later or so you get a tax deed.. depending on title company you may need to wait 1 to 5 years before they will insure title.. But you own it and nothing more to do on your end. Tax certs have all sorts of additional process's to claim ownership and are far more complicated depending on the state and or jurisdiction.
With the Advent of the Internet and many jurisdictions putting the Auctions on Bid 4 assets you simply dont get the screaming deals like you used to.. to much competition and uninformed money going after the deals.
- So why is this a deterrent? It comes down to due diligence right?
Quote from @Kevin Sobilo:
@Ashish D., I think because BOTH things are true! There is opportunity but also a lot of issues and risks. So, the opportunity is not well suited for a new investor who isn't knowledgeable about those risks nor prepared to handle them.
There is opportunity building houses, but should someone who doesn't know which end of a hammer to hold start building one himself?!? The issue isn't whether there is opportunity its whether that individual investor is well suited and prepared to take advantage of that opportunity.
For example, here is a common scenario in my state. Many tax sale properties derive from estates where the heirs take no action and the property goes to tax auction. However, MANY buyers do not realize that state inheritance taxes need to be paid on the property. There is no recorded lien, but that debt is attached to the title of the property and its based on not the sale price but assessed value (because of the passage of time since the death of the owner) and also based on WHO inherited.
So, you buy a property at tax sale for $50k thinking you got a nice deal, BUT the heir to the property was a nephew and the assessed value is $200k. So, there are $30k in inheritance taxes due to clear the title! Suddenly that deal isn't so good.
That is a super common scenario. There are a number of issues with tax sale properties and I'm sure they differ somewhat between states. So, it’s just not an easy or simple way to acquire deals, especially for a newer investor.
- 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Ashish D.:
So why is this a deterrent? It comes down to due diligence right?Quote from @Kevin Sobilo:
@Ashish D., I think because BOTH things are true! There is opportunity but also a lot of issues and risks. So, the opportunity is not well suited for a new investor who isn't knowledgeable about those risks nor prepared to handle them.
There is opportunity building houses, but should someone who doesn't know which end of a hammer to hold start building one himself?!? The issue isn't whether there is opportunity its whether that individual investor is well suited and prepared to take advantage of that opportunity.
For example, here is a common scenario in my state. Many tax sale properties derive from estates where the heirs take no action and the property goes to tax auction. However, MANY buyers do not realize that state inheritance taxes need to be paid on the property. There is no recorded lien, but that debt is attached to the title of the property and its based on not the sale price but assessed value (because of the passage of time since the death of the owner) and also based on WHO inherited.
So, you buy a property at tax sale for $50k thinking you got a nice deal, BUT the heir to the property was a nephew and the assessed value is $200k. So, there are $30k in inheritance taxes due to clear the title! Suddenly that deal isn't so good.
That is a super common scenario. There are a number of issues with tax sale properties and I'm sure they differ somewhat between states. So, it’s just not an easy or simple way to acquire deals, especially for a newer investor.
well it comes down to there is only so much time in a day.. some counties will have 2k properties going to auction.. DD how are you going to do that.. ? but yes it does come down to that.. in tax cert states keep in mind many insurance companies or large corps or hedge funds will bid down the returns to 3 to 5% there by cleaning the clock of every private investor who thought they were going to win at auction.. so what happens in reality is people burn out doing DD and never getting anything . then you hone in on a certain property and the day before the auction it gets redeemed just wasted all that time. to do this successfully you have to hone in on a 100 props thinking you might get one or two. But hey give it a try see how it works does not cost you anything but your time. Go for small counties that do not have as much competition as the large ones. thats were I would start and thats where my Dad would buy 100 plus props a year at tax sale.
- Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes2y
Quote from @Ashish D.:
So why is this a deterrent? It comes down to due diligence right?Quote from @Kevin Sobilo:
@Ashish D., I think because BOTH things are true! There is opportunity but also a lot of issues and risks. So, the opportunity is not well suited for a new investor who isn't knowledgeable about those risks nor prepared to handle them.
There is opportunity building houses, but should someone who doesn't know which end of a hammer to hold start building one himself?!? The issue isn't whether there is opportunity its whether that individual investor is well suited and prepared to take advantage of that opportunity.
For example, here is a common scenario in my state. Many tax sale properties derive from estates where the heirs take no action and the property goes to tax auction. However, MANY buyers do not realize that state inheritance taxes need to be paid on the property. There is no recorded lien, but that debt is attached to the title of the property and its based on not the sale price but assessed value (because of the passage of time since the death of the owner) and also based on WHO inherited.
So, you buy a property at tax sale for $50k thinking you got a nice deal, BUT the heir to the property was a nephew and the assessed value is $200k. So, there are $30k in inheritance taxes due to clear the title! Suddenly that deal isn't so good.
That is a super common scenario. There are a number of issues with tax sale properties and I'm sure they differ somewhat between states. So, it’s just not an easy or simple way to acquire deals, especially for a newer investor.
Unlike a traditional sale there is no due diligence period as part of the sale process. You need to do research up front. Most people cannot do that on their own and would need to pay for a title search and for a lawyer to review it.
If you are bidding at tax sale, you likely need to bid on a number of properties to win just 1. So, what is the time and cost to have that due diligence done for all of those properties you want to bid on just to get 1 property.
Also, often times the list for the sale isn't published until maybe 30 days before the auction. By the time you go through the list and check out the properties yourself to narrow that list that leaves VERY little time to get title searches complete.
So, I think many investors know enough about the possible issues from their own experience to do some research themselves and then understand the possible risks and are prepared to deal with them.
Keep in mind as well that many lawyers even some real estate lawyers won't be familiar enough with the issues commonly found with these kinds of purchases. So, good legal assistance can be hard to get sometimes as well.
- So it distills down to skillset and knowledge and professional services then? I sat in 6-7 auctions and most of them, I could have easily won the properties (I had shortlisted) given where the winning bid was at. So I still am not able to see where the real problems are. You have to do all the research on a property whether you buy it via deeds or via traditional purchase.
Quote from @Kevin Sobilo:
Quote from @Ashish D.:
So why is this a deterrent? It comes down to due diligence right?Quote from @Kevin Sobilo:
@Ashish D., I think because BOTH things are true! There is opportunity but also a lot of issues and risks. So, the opportunity is not well suited for a new investor who isn't knowledgeable about those risks nor prepared to handle them.
There is opportunity building houses, but should someone who doesn't know which end of a hammer to hold start building one himself?!? The issue isn't whether there is opportunity its whether that individual investor is well suited and prepared to take advantage of that opportunity.
For example, here is a common scenario in my state. Many tax sale properties derive from estates where the heirs take no action and the property goes to tax auction. However, MANY buyers do not realize that state inheritance taxes need to be paid on the property. There is no recorded lien, but that debt is attached to the title of the property and its based on not the sale price but assessed value (because of the passage of time since the death of the owner) and also based on WHO inherited.
So, you buy a property at tax sale for $50k thinking you got a nice deal, BUT the heir to the property was a nephew and the assessed value is $200k. So, there are $30k in inheritance taxes due to clear the title! Suddenly that deal isn't so good.
That is a super common scenario. There are a number of issues with tax sale properties and I'm sure they differ somewhat between states. So, it’s just not an easy or simple way to acquire deals, especially for a newer investor.
Unlike a traditional sale there is no due diligence period as part of the sale process. You need to do research up front. Most people cannot do that on their own and would need to pay for a title search and for a lawyer to review it.
If you are bidding at tax sale, you likely need to bid on a number of properties to win just 1. So, what is the time and cost to have that due diligence done for all of those properties you want to bid on just to get 1 property.
Also, often times the list for the sale isn't published until maybe 30 days before the auction. By the time you go through the list and check out the properties yourself to narrow that list that leaves VERY little time to get title searches complete.
So, I think many investors know enough about the possible issues from their own experience to do some research themselves and then understand the possible risks and are prepared to deal with them.
Keep in mind as well that many lawyers even some real estate lawyers won't be familiar enough with the issues commonly found with these kinds of purchases. So, good legal assistance can be hard to get sometimes as well.
- Most of the online bids can be done from the comfort of your home and you are able to preset your max bid and the system can simultaneously bid for you on all properties across all counties at once, so that may only apply to in person auction. Thanks to Covid very many of top counties do this online now. You do have to put in the time to research the property and confirm if you want it or not, just like traditional purchase.
Quote from @Jay Hinrichs:
Quote from @Ashish D.:
So why is this a deterrent? It comes down to due diligence right?Quote from @Kevin Sobilo:
@Ashish D., I think because BOTH things are true! There is opportunity but also a lot of issues and risks. So, the opportunity is not well suited for a new investor who isn't knowledgeable about those risks nor prepared to handle them.
There is opportunity building houses, but should someone who doesn't know which end of a hammer to hold start building one himself?!? The issue isn't whether there is opportunity its whether that individual investor is well suited and prepared to take advantage of that opportunity.
For example, here is a common scenario in my state. Many tax sale properties derive from estates where the heirs take no action and the property goes to tax auction. However, MANY buyers do not realize that state inheritance taxes need to be paid on the property. There is no recorded lien, but that debt is attached to the title of the property and its based on not the sale price but assessed value (because of the passage of time since the death of the owner) and also based on WHO inherited.
So, you buy a property at tax sale for $50k thinking you got a nice deal, BUT the heir to the property was a nephew and the assessed value is $200k. So, there are $30k in inheritance taxes due to clear the title! Suddenly that deal isn't so good.
That is a super common scenario. There are a number of issues with tax sale properties and I'm sure they differ somewhat between states. So, it’s just not an easy or simple way to acquire deals, especially for a newer investor.
well it comes down to there is only so much time in a day.. some counties will have 2k properties going to auction.. DD how are you going to do that.. ? but yes it does come down to that.. in tax cert states keep in mind many insurance companies or large corps or hedge funds will bid down the returns to 3 to 5% there by cleaning the clock of every private investor who thought they were going to win at auction.. so what happens in reality is people burn out doing DD and never getting anything . then you hone in on a certain property and the day before the auction it gets redeemed just wasted all that time. to do this successfully you have to hone in on a 100 props thinking you might get one or two. But hey give it a try see how it works does not cost you anything but your time. Go for small counties that do not have as much competition as the large ones. thats were I would start and thats where my Dad would buy 100 plus props a year at tax sale.
- 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Ashish D.:
Most of the online bids can be done from the comfort of your home and you are able to preset your max bid and the system can simultaneously bid for you on all properties across all counties at once, so that may only apply to in person auction. Thanks to Covid very many of top counties do this online now. You do have to put in the time to research the property and confirm if you want it or not, just like traditional purchase.Quote from @Jay Hinrichs:
Quote from @Ashish D.:
So why is this a deterrent? It comes down to due diligence right?Quote from @Kevin Sobilo:
@Ashish D., I think because BOTH things are true! There is opportunity but also a lot of issues and risks. So, the opportunity is not well suited for a new investor who isn't knowledgeable about those risks nor prepared to handle them.
There is opportunity building houses, but should someone who doesn't know which end of a hammer to hold start building one himself?!? The issue isn't whether there is opportunity its whether that individual investor is well suited and prepared to take advantage of that opportunity.
For example, here is a common scenario in my state. Many tax sale properties derive from estates where the heirs take no action and the property goes to tax auction. However, MANY buyers do not realize that state inheritance taxes need to be paid on the property. There is no recorded lien, but that debt is attached to the title of the property and its based on not the sale price but assessed value (because of the passage of time since the death of the owner) and also based on WHO inherited.
So, you buy a property at tax sale for $50k thinking you got a nice deal, BUT the heir to the property was a nephew and the assessed value is $200k. So, there are $30k in inheritance taxes due to clear the title! Suddenly that deal isn't so good.
That is a super common scenario. There are a number of issues with tax sale properties and I'm sure they differ somewhat between states. So, it’s just not an easy or simple way to acquire deals, especially for a newer investor.
well it comes down to there is only so much time in a day.. some counties will have 2k properties going to auction.. DD how are you going to do that.. ? but yes it does come down to that.. in tax cert states keep in mind many insurance companies or large corps or hedge funds will bid down the returns to 3 to 5% there by cleaning the clock of every private investor who thought they were going to win at auction.. so what happens in reality is people burn out doing DD and never getting anything . then you hone in on a certain property and the day before the auction it gets redeemed just wasted all that time. to do this successfully you have to hone in on a 100 props thinking you might get one or two. But hey give it a try see how it works does not cost you anything but your time. Go for small counties that do not have as much competition as the large ones. thats were I would start and thats where my Dad would buy 100 plus props a year at tax sale.
no argument from me let us know how you make out. - What counties did your dad try this out in, like you mention? That was a in interesting data point you provided.
Quote from @Jay Hinrichs:
Quote from @Ashish D.:
Most of the online bids can be done from the comfort of your home and you are able to preset your max bid and the system can simultaneously bid for you on all properties across all counties at once, so that may only apply to in person auction. Thanks to Covid very many of top counties do this online now. You do have to put in the time to research the property and confirm if you want it or not, just like traditional purchase.Quote from @Jay Hinrichs:
Quote from @Ashish D.:
So why is this a deterrent? It comes down to due diligence right?Quote from @Kevin Sobilo:
@Ashish D., I think because BOTH things are true! There is opportunity but also a lot of issues and risks. So, the opportunity is not well suited for a new investor who isn't knowledgeable about those risks nor prepared to handle them.
There is opportunity building houses, but should someone who doesn't know which end of a hammer to hold start building one himself?!? The issue isn't whether there is opportunity its whether that individual investor is well suited and prepared to take advantage of that opportunity.
For example, here is a common scenario in my state. Many tax sale properties derive from estates where the heirs take no action and the property goes to tax auction. However, MANY buyers do not realize that state inheritance taxes need to be paid on the property. There is no recorded lien, but that debt is attached to the title of the property and its based on not the sale price but assessed value (because of the passage of time since the death of the owner) and also based on WHO inherited.
So, you buy a property at tax sale for $50k thinking you got a nice deal, BUT the heir to the property was a nephew and the assessed value is $200k. So, there are $30k in inheritance taxes due to clear the title! Suddenly that deal isn't so good.
That is a super common scenario. There are a number of issues with tax sale properties and I'm sure they differ somewhat between states. So, it’s just not an easy or simple way to acquire deals, especially for a newer investor.
well it comes down to there is only so much time in a day.. some counties will have 2k properties going to auction.. DD how are you going to do that.. ? but yes it does come down to that.. in tax cert states keep in mind many insurance companies or large corps or hedge funds will bid down the returns to 3 to 5% there by cleaning the clock of every private investor who thought they were going to win at auction.. so what happens in reality is people burn out doing DD and never getting anything . then you hone in on a certain property and the day before the auction it gets redeemed just wasted all that time. to do this successfully you have to hone in on a 100 props thinking you might get one or two. But hey give it a try see how it works does not cost you anything but your time. Go for small counties that do not have as much competition as the large ones. thats were I would start and thats where my Dad would buy 100 plus props a year at tax sale.
no argument from me let us know how you make out. - Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes2y
Quote from @Ashish D.:
So it distills down to skillset and knowledge and professional services then? I sat in 6-7 auctions and most of them, I could have easily won the properties (I had shortlisted) given where the winning bid was at. So I still am not able to see where the real problems are. You have to do all the research on a property whether you buy it via deeds or via traditional purchase.Quote from @Kevin Sobilo:
Quote from @Ashish D.:
So why is this a deterrent? It comes down to due diligence right?Quote from @Kevin Sobilo:
@Ashish D., I think because BOTH things are true! There is opportunity but also a lot of issues and risks. So, the opportunity is not well suited for a new investor who isn't knowledgeable about those risks nor prepared to handle them.
There is opportunity building houses, but should someone who doesn't know which end of a hammer to hold start building one himself?!? The issue isn't whether there is opportunity its whether that individual investor is well suited and prepared to take advantage of that opportunity.
For example, here is a common scenario in my state. Many tax sale properties derive from estates where the heirs take no action and the property goes to tax auction. However, MANY buyers do not realize that state inheritance taxes need to be paid on the property. There is no recorded lien, but that debt is attached to the title of the property and its based on not the sale price but assessed value (because of the passage of time since the death of the owner) and also based on WHO inherited.
So, you buy a property at tax sale for $50k thinking you got a nice deal, BUT the heir to the property was a nephew and the assessed value is $200k. So, there are $30k in inheritance taxes due to clear the title! Suddenly that deal isn't so good.
That is a super common scenario. There are a number of issues with tax sale properties and I'm sure they differ somewhat between states. So, it’s just not an easy or simple way to acquire deals, especially for a newer investor.
Unlike a traditional sale there is no due diligence period as part of the sale process. You need to do research up front. Most people cannot do that on their own and would need to pay for a title search and for a lawyer to review it.
If you are bidding at tax sale, you likely need to bid on a number of properties to win just 1. So, what is the time and cost to have that due diligence done for all of those properties you want to bid on just to get 1 property.
Also, often times the list for the sale isn't published until maybe 30 days before the auction. By the time you go through the list and check out the properties yourself to narrow that list that leaves VERY little time to get title searches complete.
So, I think many investors know enough about the possible issues from their own experience to do some research themselves and then understand the possible risks and are prepared to deal with them.
Keep in mind as well that many lawyers even some real estate lawyers won't be familiar enough with the issues commonly found with these kinds of purchases. So, good legal assistance can be hard to get sometimes as well.
You get the list 30 days before the sale. You need to go through the whole long list and research which you might be interested in. That involved PHYSICALLY driving to see them because some may have burned down (not uncommon). How many properties can you drive to look at per day? It will take you a while to narrow your list to what you may wish to bid on.
If you want to buy 1 property you might have a list of 10 you want to bid on. You will then pay for 10 title searches and PRAY they get done before the auction date because they will take 10-14 days on average and that's all the time left!
Once you get the property most you won't be able to resell for at least a year because the new owner will want/need title insurance and that likely won't be possible as title companies recognize the risks with the whole tax sale process.
You will need to deal with not only financial issues like inheritance taxes, IRS tax liens, etc but also potential legal issues such as interested parties not notified about the auction properly. So, often times you need to pay a lawyer to do a quiet title action. Do you do any rehab work to the property when there is still a risk you will lose it?!? Even though the risk may be small.
Add to this fact that you will not have access to evaluate the condition of the property prior to sale unless you illegally break into it. So, you might find it has been stripped of anything of value such as HVAC, pipes, wires, etc after you bought it.
EVERYTHING sounds easy when you just say it, but get into the midst of doing it and its not so much.
Also, in my state there are different kinds of tax auctions, some where the liens stay attached to the property and you inherit all that debt.
There is certainly opportunity, but not for a novice. Most novice investors don't have large reserves to handle the kind of unforeseen issues that may arise.
- Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes2y
Make sure you know all the nuances in your state. I've seen people buy at tax sale here in TX thinking they can just turn around and immediately flip them. Only to be surprised that they couldn't get title insurance for a couple years (even though the redemption period is only 6 months).
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes2y
@Ashish D.
I also bet everyone of those sites will also charge you a hefty fee to learn how to do tax liens and deeds.
Of course it’s easy and everyone should do it and make six figures. If that was the case wouldn’t everyone here on BP be talking about it and all of us doing it and making huge $…
7e investments53 Reviews - 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Ashish D.:
What counties did your dad try this out in, like you mention? That was a in interesting data point you provided.Quote from @Jay Hinrichs:
Quote from @Ashish D.:
Most of the online bids can be done from the comfort of your home and you are able to preset your max bid and the system can simultaneously bid for you on all properties across all counties at once, so that may only apply to in person auction. Thanks to Covid very many of top counties do this online now. You do have to put in the time to research the property and confirm if you want it or not, just like traditional purchase.Quote from @Jay Hinrichs:
Quote from @Ashish D.:
So why is this a deterrent? It comes down to due diligence right?Quote from @Kevin Sobilo:
@Ashish D., I think because BOTH things are true! There is opportunity but also a lot of issues and risks. So, the opportunity is not well suited for a new investor who isn't knowledgeable about those risks nor prepared to handle them.
There is opportunity building houses, but should someone who doesn't know which end of a hammer to hold start building one himself?!? The issue isn't whether there is opportunity its whether that individual investor is well suited and prepared to take advantage of that opportunity.
For example, here is a common scenario in my state. Many tax sale properties derive from estates where the heirs take no action and the property goes to tax auction. However, MANY buyers do not realize that state inheritance taxes need to be paid on the property. There is no recorded lien, but that debt is attached to the title of the property and its based on not the sale price but assessed value (because of the passage of time since the death of the owner) and also based on WHO inherited.
So, you buy a property at tax sale for $50k thinking you got a nice deal, BUT the heir to the property was a nephew and the assessed value is $200k. So, there are $30k in inheritance taxes due to clear the title! Suddenly that deal isn't so good.
That is a super common scenario. There are a number of issues with tax sale properties and I'm sure they differ somewhat between states. So, it’s just not an easy or simple way to acquire deals, especially for a newer investor.
well it comes down to there is only so much time in a day.. some counties will have 2k properties going to auction.. DD how are you going to do that.. ? but yes it does come down to that.. in tax cert states keep in mind many insurance companies or large corps or hedge funds will bid down the returns to 3 to 5% there by cleaning the clock of every private investor who thought they were going to win at auction.. so what happens in reality is people burn out doing DD and never getting anything . then you hone in on a certain property and the day before the auction it gets redeemed just wasted all that time. to do this successfully you have to hone in on a 100 props thinking you might get one or two. But hey give it a try see how it works does not cost you anything but your time. Go for small counties that do not have as much competition as the large ones. thats were I would start and thats where my Dad would buy 100 plus props a year at tax sale.
no argument from me let us know how you make out.
Northern CA.. Also keep in mind on the West coast it is rare to the extreme to have an actual house go to tax Deed sale.. its all land.. back east that completely different. @Ashish D.
There have been a lot of honest responses thus far and very fair for you to interpret. I can see that you are intrigued by the strategy. But I think the underlying tone, that has been made clear at least once, is that if it was a lucrative strategy, more people on BP would do it and discuss it in a positive light.
Here is my personal experience:
In the 90s, there were a lot of late night infomercials on this. I bit and sent in my $24.99 to get my starter kit. It came with the strategy book, a VHS explaining the entire thing, AND a book of current tax leins for the area I picked at the time, San Bernardino, CA. The book was LITERALLY over 6 inches thick!!! It was parcel number after parcel number, with little to no description. Then you have to go to the county house to get the correct addresses or Thomas Guide map/block and go drive by. Most were either burnt OR LAND LOCKED. I'm talking about wedges of land/property that requires you to make a deal with the neighbors for access or fight for easement.
I was young man, single, full of energy and life. I had just left the Army and bought a small house on a hill with a great view. I dealt with Russians in Yugoslavia, Bosnia, and Kosovo and even took out targets in Iraq at the direction of Pres Clinton to take the Lewinski candle off his back. I was willing to take on the world. I was working full-time at motorcycle shop and used ALL my free time to do DD. This endeavor defeated me fairly quickly. The cons out way the pros.
But I digress. The Internet was in it's infancy and there was no such thing as Google. Information online was scarce... or maybe not... I wouldn't know, since I couldn't afford a computer because it costs around $3000 for a complete system, WITHOUT A MODEM.
I'm posting this in hopes that it helps you to understand this is not a new strategy. It's been around. It's not as popular as traditional REI because it's not as lucrative as the Internet suggests. Those that make it happen, they often have a guide/sponsor, have the money patience, and time to follow through. They probably live at home or have a spouse that pays the bills. Most importantly, they are often in areas that have less complex barriers to clear title for resale.
Just my long 0.02
- 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Sam Yin:
@Ashish D.
There have been a lot of honest responses thus far and very fair for you to interpret. I can see that you are intrigued by the strategy. But I think the underlying tone, that has been made clear at least once, is that if it was a lucrative strategy, more people on BP would do it and discuss it in a positive light.
Here is my personal experience:
In the 90s, there were a lot of late night infomercials on this. I bit and sent in my $24.99 to get my starter kit. It came with the strategy book, a VHS explaining the entire thing, AND a book of current tax leins for the area I picked at the time, San Bernardino, CA. The book was LITERALLY over 6 inches thick!!! It was parcel number after parcel number, with little to no description. Then you have to go to the county house to get the correct addresses or Thomas Guide map/block and go drive by. Most were either burnt OR LAND LOCKED. I'm talking about wedges of land/property that requires you to make a deal with the neighbors for access or fight for easement.
I was young man, single, full of energy and life. I had just left the Army and bought a small house on a hill with a great view. I dealt with Russians in Yugoslavia, Bosnia, and Kosovo and even took out targets in Iraq at the direction of Pres Clinton to take the Lewinski candle off his back. I was willing to take on the world. I was working full-time at motorcycle shop and used ALL my free time to do DD. This endeavor defeated me fairly quickly. The cons out way the pros.
But I digress. The Internet was in it's infancy and there was no such thing as Google. Information online was scarce... or maybe not... I wouldn't know, since I couldn't afford a computer because it costs around $3000 for a complete system, WITHOUT A MODEM.
I'm posting this in hopes that it helps you to understand this is not a new strategy. It's been around. It's not as popular as traditional REI because it's not as lucrative as the Internet suggests. Those that make it happen, they often have a guide/sponsor, have the money patience, and time to follow through. They probably live at home or have a spouse that pays the bills. Most importantly, they are often in areas that have less complex barriers to clear title for resale.
Just my long 0.02
san berdo and Riverside county CA are poster childs for tax sales.. as these counties have hundreds of thousands of platted lots many with no access .. just lines on paper. - Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes2y
@Jay Hinrichs
Yup and people will buy them at tax sale then sell them seller financed for $5k after paying $100 to some sucker who wants to own vacant unbuildable land in middle of no where for $100/month
7e investments53 Reviews - 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Chris Seveney:
@Jay Hinrichs
Yup and people will buy them at tax sale then sell them seller financed for $5k after paying $100 to some sucker who wants to own vacant unbuildable land in middle of no where for $100/month
that model is a huge business bigger than most anyone can fathom frankly. - 2yDon KonipolBusiness MemberInvestor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votesEVERY aspect of real estate investing has been over hyped, over sold, and over simplified. There is money to be made in EVERY strategy; however, not by EVERYONE. Almost all require the following in some combination to execute successfully on a sustainable basis : (1) CAPITAL (2) KNOWLEDGE (3) EXPERIENCE. The gurus” selling mentorship’s and “canned” programs to a inexperienced investor oversimplify the strategy; ignore the difficulty; incorrectly claim that the education they provide is sufficient for success; lie about their own qualifications and experience and success; belittle “real” business/financial/real estate education and provide a totally unrealistic picture of lifestyle, effort, and chance of succeeding.
Quote from @Ashish D.:
I've read through hundreds of post on this website about Tax Liens and Tax Deeds, and almost every single one is discouraging investing into it stating myriad of different problems and nuances. However, when you search the internet, you find hundreds of posts and documentation talking about investors being so successful with it, big ones and small. I've spoken to few investors who have made tens of properties using it. Why are posts and documentation on this website particularly advising against them?
The people I’ve encountered in my 40 + years as a real estate investor and private lender who are successful have the following in common
They are educated as to principles of real estate; real estate law; and real estate finance
They LEARN something new about real estate investing almost every day, and are open to realigning their strategy, tactics, and portfolio to encompass new information and knowledge
They SPECIALIZE either in a strategy, property type or geographical area, and become EXPERT in that area
They have survived real estate “depressions” where property prices have dropped 20% - 50%
They understand the difference between real estate investing, operating a real estate BUSINESS, and having a real estate job.
They network, for knowledge, capital and most importantly DEAL FLOW
The key thing to consider when you watch a YouTube video, take an “introductory” seminar, or read a guru’s website, is what is the subject persons BIAS? If he’s selling you something, then there’s a very good chance his “pitch” is not truthful. There are some very good localized mentors that hang around BP and contribute with excellent advice and information on forums, podcasts, and articles. But something happens when and if they decide to
go national”. Those guys end up buying marketing programs from one of a few specialized real estate marketing organizations out of either Las Vegas or Salt Lake City; and the result is the cost of their programs goes from $3000 to $40,000, the quality of their information go from a 8 to a 4, and once you’ve entered their program all your contact is with an employee while the guru is out giving seminars, workshops, and making videos. - Best post so far. Thank you.
Quote from @Don Konipol:
EVERY aspect of real estate investing has been over hyped, over sold, and over simplified. There is money to be made in EVERY strategy; however, not by EVERYONE. Almost all require the following in some combination to execute successfully on a sustainable basis : (1) CAPITAL (2) KNOWLEDGE (3) EXPERIENCE. The gurus” selling mentorship’s and “canned” programs to a inexperienced investor oversimplify the strategy; ignore the difficulty; incorrectly claim that the education they provide is sufficient for success; lie about their own qualifications and experience and success; belittle “real” business/financial/real estate education and provide a totally unrealistic picture of lifestyle, effort, and chance of succeeding.Quote from @Ashish D.:
I've read through hundreds of post on this website about Tax Liens and Tax Deeds, and almost every single one is discouraging investing into it stating myriad of different problems and nuances. However, when you search the internet, you find hundreds of posts and documentation talking about investors being so successful with it, big ones and small. I've spoken to few investors who have made tens of properties using it. Why are posts and documentation on this website particularly advising against them?
The people I’ve encountered in my 40 + years as a real estate investor and private lender who are successful have the following in common
They are educated as to principles of real estate; real estate law; and real estate finance
They LEARN something new about real estate investing almost every day, and are open to realigning their strategy, tactics, and portfolio to encompass new information and knowledge
They SPECIALIZE either in a strategy, property type or geographical area, and become EXPERT in that area
They have survived real estate “depressions” where property prices have dropped 20% - 50%
They understand the difference between real estate investing, operating a real estate BUSINESS, and having a real estate job.
They network, for knowledge, capital and most importantly DEAL FLOW
The key thing to consider when you watch a YouTube video, take an “introductory” seminar, or read a guru’s website, is what is the subject persons BIAS? If he’s selling you something, then there’s a very good chance his “pitch” is not truthful. There are some very good localized mentors that hang around BP and contribute with excellent advice and information on forums, podcasts, and articles. But something happens when and if they decide to
go national”. Those guys end up buying marketing programs from one of a few specialized real estate marketing organizations out of either Las Vegas or Salt Lake City; and the result is the cost of their programs goes from $3000 to $40,000, the quality of their information go from a 8 to a 4, and once you’ve entered their program all your contact is with an employee while the guru is out giving seminars, workshops, and making videos. - 2yJohn UnderwoodPro MemberInvestor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
@Ashish D.
I quit my day job as an electrical engineer from buying tax liens and getting houses for cheap that I turned into rentals.
Quote from @John Underwood:
@Ashish D.
I quit my day job as an electrical engineer from buying tax liens and getting houses for cheap that I turned into rentals.
Awesome! So proud of your story. That’s the type of answer and people I am looking for. Thank you so much for reaching out. I’ll DM you.
- 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Ashish D.:
Quote from @John Underwood:
@Ashish D.
I quit my day job as an electrical engineer from buying tax liens and getting houses for cheap that I turned into rentals.
Awesome! So proud of your story. That’s the type of answer and people I am looking for. Thank you so much for reaching out. I’ll DM you.
keep in mind when you dig into John's market and his way of buying these and holding them you will find its a very unique niche that cannot be duplicated in many states. Like out west very few if any houses actually go to tax sale .. its all land. So you have to pick a state where houses go to sale and tax certs is where that happens. And of course some tax deeds . I too admire what John has done and knowing his market and how to make it work for him there is more to his genius than his modest statements.
- Specialist · Frederick, MD · Member since 2017 · 475 posts · 454 votes2y
Quote from @Chris Seveney:
@Jay Hinrichs
Yup and people will buy them at tax sale then sell them seller financed for $5k after paying $100 to some sucker who wants to own vacant unbuildable land in middle of no where for $100/month
I receive submissions from investors holding anywhere from dozens to hundreds of this seller-financed paper. The pitch generally mentions that it's easy to take the property back in default and then just keep reselling to new buyers over and over again.
That's not my model, and it's always a pass. I mention this because some instructors advertise that there's a market for this type of paper. Myself, and I believe most of my peers who make a good portion of the secondary market for seller-financed notes aren't buyers.
Keep this in mind.
- Member since 2019 · 7k+ posts · 4k+ votes2y
Quote from @Eric James:
Make sure you know all the nuances in your state. I've seen people buy at tax sale here in TX thinking they can just turn around and immediately flip them. Only to be surprised that they couldn't get title insurance for a couple years (even though the redemption period is only 6 months).
and this question about title insurance should be the numero uno of buyer checklist/DD process before even thinking of doing these.
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