Great article re: investing in tax liens

Attorney · Chicago, IL · Member since 2015 · 142 posts · 79 votes

http://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/articles/2016-01-14/paying-off-back-taxes-can-be-good-for-investors Thought I'd share this article for those who didn't see it in US News & World Report. If anyone has questions about IL real estate tax liens/tax deeds, feel free to contact me.

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John UnderwoodPro Member

Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes

10y

Jay,

Great question.

Most of the properties I have gotten deeds to have tenants not owner occupants.

They are not surprised, they see notices attached to house.

They are happy they don't have to move. I still have some of these people years later as tenants.

One owner occupant paid rent for a while but I ended up having to evict him after I tried my best to work with him for over a year.

Another owner occupant pays like clockwork. I got a lease signed and a key via their attorney and I have never been inside of the house. I have not needed to spend a penny on repairs either. I told them I would sell it back to them after they paid on time for at least a year at 10% below market value. So we will see if they end up trying to get a mortgage to buy the house. It will already have paid off my initial investment after the first year. I made them sign a Quit Claim deed to me before I would sign a lease with them.

Getting 4 more houses that were not redeemed at the end of 2015. Just keep checking the mailbox for the county to send me the deeds! I might sell one of the houses after getting Quit Claim Deeds from previous owners (divorced, walked away from property) That will make the other 3 houses completely free.

I love Charleston too. I lived their for 9 years while I was in the Navy.

John

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Sean Edgar
Rental Property Investor · Applegate, OR · Member since 2012 · 177 posts · 51 votes
10y
Thanks for sharing that with the BP community Emmett!
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John UnderwoodPro Member
Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
10y
Great article thanks for sharing.
They mention having to foreclose on the property after the redemption period is up and the owner did not redeem the property.
In SC if this happens the deed to the property will just show up in your mailbox. No foreclosure required.
Then you send a letter to the occupant, unless it is vacant of course, and let them know how to start paying rent to their new landlord. Most people want to stay and willingly sign a lease with you and start paying rent.
John
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@John Underwood JOhn this is great.. we have been building in Charleston last 2.5 years and we love it there..
I will now start to follow tax sales... I have bought a few lots in Charleston were the seller picked them up at tax sale and had to quiet the title... I suppose if your buy and hold you don't really care about title insurance you got your tax deed and its a rental and your not selling
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Andy Bagley
Investor · Tri-Cities, WA · Member since 2015 · 10 posts · 0 votes
10y
John Underwood Do you find that the people who have been foreclosed on, make good tenants? It seems that they might harbor some resentment because they are now paying rent on a house they used to own. Also if they weren't paying the taxes why would they pay the rent?
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Alex Saleeby
Rental Property Investor · Beaumont, TX · Member since 2015 · 161 posts · 77 votes
10y
Emmett McCarthy . Good article. Thanks for sharing.
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John UnderwoodPro Member
Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
10y
Jay,
Great question.
Most of the properties I have gotten deeds to have tenants not owner occupants.
They are not surprised, they see notices attached to house.
They are happy they don't have to move. I still have some of these people years later as tenants.
One owner occupant paid rent for a while but I ended up having to evict him after I tried my best to work with him for over a year.
Another owner occupant pays like clockwork. I got a lease signed and a key via their attorney and I have never been inside of the house. I have not needed to spend a penny on repairs either. I told them I would sell it back to them after they paid on time for at least a year at 10% below market value. So we will see if they end up trying to get a mortgage to buy the house. It will already have paid off my initial investment after the first year. I made them sign a Quit Claim deed to me before I would sign a lease with them.
Getting 4 more houses that were not redeemed at the end of 2015. Just keep checking the mailbox for the county to send me the deeds! I might sell one of the houses after getting Quit Claim Deeds from previous owners (divorced, walked away from property) That will make the other 3 houses completely free.
I love Charleston too. I lived their for 9 years while I was in the Navy.
John
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John Semanchuk
Charleston, SC · Member since 2013 · 380 posts · 157 votes
10y
So are you buying these without title insurance? And now that the market's back, are there still unredeemed decent properties to be had? I was under the impression that anything decent was being bid way too high on (much like the current Master's sale auctions)
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John UnderwoodPro Member
Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
10y
John,
There is no title insurance. However and mortgages or liens (except Federal ones) are wiped out as long as the county properly notified all of them that are recorded.
A tax deed is still considered to have a cloud on the title until you do a Quiet Title action or buy Title Insurance yourself.
I have never had one of my Tax Deeds overturned and I did have to go to court one time. Judge looked at my deed and ruled that I owned it. Case closed.
Yes it has become very competitive nut you can still find some deals. Also smaller counties have less competition as the big money goes to the larger counties with more liens for sale.
If you have never been to a tax lien auction I would recommend you go at least as a spectator one year to see how high or low properties are going for and get a feel for how the auction works.
John
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