I am new to real estate investing and am trying to learn as much as I can. I am currently part of a local mastermind group being led by an attorney and local broker/investor and get the opportunity of helping/shadowing the investor on a 'land flip' that he is working on. This month we were supposed to identify a couple of properties that 'should' be on the market but weren't (i.e. find a deal). My mom happens to work for the county Treasurer's office and told me about the "certificate of delinquency" that they had just filed that started the process of tax foreclosures for that year. I went to the superior court and got a copy of the case which included 70 parcels facing foreclosure. I am reading through the "Ultimate Beginner's Guide" from Bigger Pockets that mentioned tax liens can be complicated and require a lot of research, knowledge and experience.
My questions are: What makes them complicated? And what are some good educational resources on the subject?
Does anyone have any experience investing in tax liens? Where would you recommend a beginner to start?
Many thanks! I deeply appreciate all the wisdom on this site!
Very tough from what I've found....so hopefully someone here will flush out some good resources. Where are you? What I've found is much of the learning is very state and maybe even local specific. There may be some big general concepts, but the national guys that roll through are probably more trouble than help and excellent at taking your money, so be careful there.
There is the Tax Lien Lady I think in Ohio...guess she is still around. She has good info. There is a lady in Florida that teaches classes and seems good.
I'd start by going to your local auctions. Get the list ahead of time. Study it, Research it, attend and observe. See what people pay. Watch the others. Who are the players. Network with them. Talk to them. Talk often with them. Ask questions. Talk to the attorneys there. Talk to the tax authorities. Network, Network, Network. There's always someone around that will share the secrets with you and there is also someone who won't talk and tell you their info is a "trade secret".
I would attend every one of your local REIA events and ask everyone there who the tax lien/deed expert is....then network with them. Ask them to teach a class. Ask them to teach you....
What state are you in?
@Account Closed Sorry now I see you are in Bellingham. At first BP just showed me your Question Title....now I see all the detail of your post.
So you have a start....complicated....it can be...but time is probably the tough part. So now you can take the 70 parcels. ....one step is to see if there is equity in any of them, and maybe enough equity to make it worth your while.....this means there could be $10,000 in taxes due...but it's only worth $9000. So you skip that one and move to the next. The next one has $10000 in taxes due, but is worth $11000. So there's equity, but maybe not enough to make it worth your time....then you move on to the next and the next.....about 20 in...you find one that might have equity, but is unbuildable or in the flood zone or in the hood, or it is landlocked, so you keep moving down the list.
If it was easy everyone would do it.
WA is a tax deed state so if these properties are in WA there will be no tax lien sale. You bid on the deed. The best place to learn about tax sales is the county website.
@Account Closed Equity....you can also add your holding costs and realtor/closing costs/legal costs. Land/Lots are not always easy to sell....at minimum I expect to hold land for at least 2-3 years. Typically you'll have no repair costs, but you also have no income. You do have expenses....taxes and insurance, marketing costs for your realtor.
@Account Closed There are a number of experts in tax sale here on BP. I set up a keyword alert for Tax lien so I see most of the posts. It is important to understand that laws vary tremendously from state to state. You need to know these laws to avoid the pitfalls.
As an example in most tax deed states your do not get insurable title. You can't sell or refinance the property without doing a Quiet title action.
i first learned some important basics by taking a tax lien attorney to breakfast. I got an hours worth of legal advice for the cost of a modest meal. To learn ore about your states laws you can look up the statutes. There are many sites on the internet to teach about tax liens. I would be very skeptical about most of them.
Once I learned of investing in tax liens about 7 years ago, I decided that this would be the only method I use to invest in real estate. It almost seemed to good to be true. I waited to see what the catch is because surely there had a be a catch. But there is none. You have to do due diligence of course before you invest. Which is the same when you directly invest in real estate. The one bad thing that I can say is that it is very, very time consuming going through the list of properties and doing due diligence on each one and then driving to go take a look at it. That took a massive amount of time. So I decided to create a resource that consolidates all that info in a single convenient place. Its makes it so much easier.
As far as resources, I would say check the county websites in the state you're looking to invest in as one of the other posters said. I have found tons of information this way. I once went to a free seminar in Lee County Florida and they explained the whole process of how it works in their county, which is mostly the same for the whole state of Florida. Also, Trulia has tons of info on demographics for free.
Look into buying the Over The Counter Stuck Off deeds or liens. Almost every county has them but often call them by different names. Just ask the clerk that manages the tax lien or deed property "what do you do with the properties that do not sell at auction. " You will learn what they call them and what it requires to get a copy of the list.
Do your DD on the list the same as you would for a tax sale auction. Choose the best properties, try to determine repair costs, future tax costs and potential rental income once the property is ready to sale or lease. Or get a couple of real estate agents to give you ARV for the property.
Based on these amounts make the county an offer for the property. My rule of thumb is to initially start at 10%-20% of the value I arrive at, then negotiate up in they do not accept it. Some will accept your initial offer, others will insist on more. Just walk away if the price does not allow you a profit in line with the amount of risk you will take in buying the property.
Many people say that strike off properties are the rejects of the tax auction. Sometimes this is true, other times it is not. Just do your DD and you will find some properties that will allow you to earn a good profit margin.
The best thing about over the counter sales is you have no one bidding against you for the property and you don't endure the discomfort of an auction.
Most of the commentators have more experience at this than I do and may have a different recommendation or a better way to do it.
But ignore those advertisements that say you can work 4-6 hours a week at this and earn a full time income. As you have found out, if you do a good job at DD it takes a lot longer than that to find a good property for sale. And read everything you can find on the subject but I doubt it is worth paying $1500 for a book or course unless you have the right to return it within 30 days. That will give you time to evaluate the material and decide if it is worth that much or not. I know there are some good books here on the subject at a lot less than $1500 for someone just starting out.
One good course here is "Attorney's Step-by Step Guide to Texas Houses for Pennies II" by Attorney Darius Barazandeh. It costs $197 and is worth it in my opinion. ( Sold here at https://www.reiclub.com/products/174) (I have no commercial interest in the sale of this course. The above link is not an affiliate link.)
And all the standard disclaimers apply to what I wrote. :) I am not an attorney so nothing I said is legal advice. There is some risk in real estate, your job is to make the risk as low as you can by performing Due Dilenence on a property before you risk your hard earned money in buying it.
Updated almost 3 years ago
typo in first sentence, Should be Struck Off Properties or Strike Off Properties.
Hi @Account Closed I have had success with multiple Tax Lien/Deed auctions, let me know if I can be of any service.