@Rita Koroll There are two types of tax sale: tax liens and tax deeds
With a tax deed you are buying the property at auction. The local government has taken the property back and is selling it at auction.
With a tax lien you are getting a lien against the property. Essentially the city or county is selling you the right to become the tax collector. When the owner pays the taxes you get both the original tax amount plus and interest and penalties. In Maryland that can be as high as 20% interest on the tax amount.
If the property owner does not pay off the tax lien you can foreclose and get the property free and clear. You wipe out any mortgages. So tax liens are theoretically a win win . You either get high interest or you get the property.
Of course the devil is in the details. There are a lot of details in the tax lien business and the rules vary tremendously by state and even county. Because on the surface it is such a good deal, tax auctions tend to be very competitive.
@Jolene U. as @Boyd McClean implied, each county and state are different, so go learn from the office you will be working with and hopefully you can make some connections in the process.
In Indiana (which I am from) there are MANY discrepancies in dates, process, etc... Especially amongst the northern counties.
I'd suggest you get on the county's website (or municipality that hosts the sale), and see. Most of the north states are happening RIGHT now, or just recently past, but are generally held annually.
@Rita Koroll There are two types of tax sale: tax liens and tax deeds
With a tax deed you are buying the property at auction. The local government has taken the property back and is selling it at auction.
With a tax lien you are getting a lien against the property. Essentially the city or county is selling you the right to become the tax collector. When the owner pays the taxes you get both the original tax amount plus and interest and penalties. In Maryland that can be as high as 20% interest on the tax amount.
If the property owner does not pay off the tax lien you can foreclose and get the property free and clear. You wipe out any mortgages. So tax liens are theoretically a win win . You either get high interest or you get the property.
Of course the devil is in the details. There are a lot of details in the tax lien business and the rules vary tremendously by state and even county. Because on the surface it is such a good deal, tax auctions tend to be very competitive.
@Rita Koroll Are you asking about Indiana liens (original topic)? I could help here but unfortunately they are going on now and you will have to wait a year before the next ones. If you are interested in Florida sales there is plenty of people doing those on BP. States are different and so are the strategies.
The marion county one is the 20th and 21st so pretty soon. They have about 3800 of them. If they redeem in first 6 months you get 10% of opening bid + 5% of the overbid. 6-12 months the opening bid you get 15%. After 12 month get the property. Hope that helps. You can find the list on the Marion County website (treasurer)
@Rita Koroll I started by learning the rules, so I would have some clue as to what I was doing.
Then I went through the list of leftover liens that did not sell at the auction. In many areas these are called over the counter liens. You buy them first come first served at face value.
The list in Baltimore was literally thousands of leftover properties. However most were junk or not worth the taxes. However I was able to find two liens worth buying. I foreclosed on both of them and made a killing. It was beginners luck but I will take that. I also had the benefit of a rising market
It is important that you learn the rules, where you want to invest. Like all types of real estate investing there are hidden costs and risks to be aware of.
One note, expect the unexpected from the county offices. I purchased two Indiana liens last year that were later deemed to be sold in error. I received my bid back, but no interest or any compensation for expenses (legal notifications, title searches, etc.) I've also found some of the smaller counties' officials to be less than knowledgeable of the processes themselves, although with some pushing and some "are you sure?" questioning they eventually got it right. The moral of the story is that even after the upfront due diligence, the investment is not as passive as it would seem.
The company that handles tax sales for the various counties in Indiana (if not all the counties in Indiana) is SRI, Inc. They have a lot of info and dates for the sales on their website specific to Indiana here:
I am a newcomer, gravitated towards REI after surfing the web discovering tax liens and tax deeds. What book do you read on these topics?
Your brief sharp descriptions answered my questions. The websites US Tax Lien Association and the Tax Lien Certificate School, are these recommendable? Thank you. Am eager to focus on these 2areas.
I took a tax sale attorney to breakfast. I picked his brain for about an hour. He answered by basic question about the risks and costs to foreclose and take a property. I still do business with him today.
Now I read the state tax sale statutes looking for loopholes or how to get some new little advantage. I also read the county websites. It is often hard to find but the will usually have tax sale information. I am sure you will learn something from any course you take. However none will tell you everything there is to know. Whether it is worth it to you is a personal decision.
I have been meaning to do a review of the tax lien association's promo videos. Much of it is pumped up half truths. Some of it could be called downright lies. A person that has often come to me for help, was teaching for them at one point.
I am from a neighboring state. The tax lien process is rather complicated. I also find that the properties forfeited are of lower quality. A lot of people make a decent spread based upon the interest rate that you get when the property eventually gets redeemed.
@Lance Marshall no, if the homeowner pays the taxes then there are no taxes due. You have to determine yourself if 10% within 6 months is worth it or not.
Dennis-just to make sure I understand, even though I profit 10 percent, I pay no taxes on the profit? My math was I put down 6,000, they redeem in 5 months, I make $600. I don't have to pay taxes on the $600 profit? Thanks-sorry if this is confusing.