Buying Properties That Have Tax Delinquencies

[John Franczyk]

I've identified a couple of rundown single-family properties in a fair-to-middling neighborhood that have several years of tax delinquencies. I don't know why the city (Racine WI) hasn't foreclosed on them yet. One of the properties is probably too far gone to have any real value - it appears to be vacant, the back taxes and penalties exceed $60,000, and the ARV is, at best $75,000. The other is a much more interesting scenario.

The ARV on the second property is likely between $60,000 and $70,000. The property is occupied, most likely with renters. The owners live out of state and hold the property in their own individual names (i.e. no corporate ownership or LLC). They appear to owe about $28K in back taxes and penalties. The property could probably use abut $10K in upgrades and repairs, which leaves a good amount of meat on the bones.

I'm trying to figure out a strategy to approach them. They're probably getting cash flow from the renters, maybe $700 to $800 per month. I don't think the city has placed any liens on the rental income. Still, the city could foreclose on the property for back taxes and leave the owners high and dry. I'd like to approach them with an offer to pay the back taxes and take over the property, maybe with a small cash payment ($1,000 or so) to make them feel good. I would appreciate any suggestions or recommendations on how to proceed.

[Rebecca Knox]

I have come across several delinquent tax properties like this in Racine with hopeless balances.  As I talked to homeowners, I noticed that Racine garnishes wages for back taxes.....one seller told me as long as they can garnish, they aren't so aggressive in taking back the house. The times I've called City of Racine on properties with extremely high balances to make sure that the city wasn't going to take it back while we were in closing (this has happened before in Milwaukee), the clerk never had any expected repo date.  It seems like Racine is a little more lax. 

Just make sure that you look up any other judgments they may have or outstanding mortgage balance because that can throw a loop in to things.