Tax Sale - Focused Investors (Beginner)

10 Replies

I'm just beginning the in-depth research of investing in tax sales. My mother and grandmother have done them for years, but I want some other opinions, as they only do tax sales in Indiana. Does anyone invest in tax sales in Georgia, Texas, Florida, or Arizona? These are some places I'm just briefly considering. If so, what are your thoughts? Why did you choose any of these? Have you been having some success? How many properties do you own that you've gotten from the tax sale specifically? What has your general experience been like? Are you flipping them, buy and hold, wholesaling them, etc.?

Right now in Texas we have only a couple of counties doing them online, so if you have to do them in person long distance from IL I think that is very tough.  There are people that do it though.   I really think there is no substitute for seeing the properties in person.  I can't tell you how many properties I've been to, that looked nothing like the google street view picture that is 10 years old.  Been to plenty where the google street view shows a nice house, and you get to the address where the house has burned and there is no evidence of a house and only freshly plowed dirt.   There are redemption periods here, so I think tough to wholesale, as you would also be wholesaling the redemption period.  Some might do it, but it would be tough.  So chances are you will have to hold on to the house or property for 2 years before you sell.

Every state is different, but Texas is a tax deed state, so you are bidding on the property in most cases...that means you need cash at the time of whatever that is $50,000, $100,000 saw one last month go for nearly $1,000,000 worth about $200,000 in my opinion. So you have to pay the day of the sale and then likely hold it for 2 years before you can sell. That limits a lot of buyers. It limited me on the $1mil sale. Opening bid was $52,000 or something like that. I don't have $1mil in cash to wire the same day. In some places like Dallas county you have to have the cash on you. As soon as the auction is over for that one property you won, you walk to the front of the courtroom and pull out your cash and put it in the bill counter with the sheriff, no checks, no running to the bank, just pulling cash from your bra, boot, or briefcase right then, right there, right in front of everyone. Very common to hear $100,000 or more running through that bill counter.

There are opportunities, there are people that do it long distance, but they are few and far between, so you really have to know your stuff and maybe have some boots on the ground in my opinion.

Thank you for the insight! I didn't realize Texas had a 2 year redemption period. That's the same for Cook County here in Chicago. I have family in Texas so I wouldn't mind traveling and staying a while as my work schedule is flexible too (and work from home now too). But that's the same reason my family has just decided to invest closest to us in Indiana so they can easily drive by properties. Isn't there interest if they redeem? (or am I mixing that up with tax lien) Also too, Texas is huge so I know I'd need to narrow down specific areas. Are there different redemption periods depending on the county or city?

@Malayna Johnson tax sale tend to be very state or even county specific regarding the rules. @Bruce Lynn knows his stuff. @Jerry K. invests in AZ and has written some excellent detailed posts about his experiences.  I know we have people who do GA here. From all I can tell is there no reason to do Florida tax liens; poor returns and no upside.  FL tax deeds may make sense but I haven't noticed anyone here talking about them.

I can tell you there is a lot of big but dumb money chasing tax liens right now. It is very competitive which is driving down returns and increasing risk. 

@Malayna Johnson As Ned mentioned I invest in Arizona liens. I just moved to AZ from the Chicago suburbs a few months ago. Illinois financial problems drove me out after living there basically my entire life.

I invest in AZ liens because;

They were online

They paid as much as 16%

I could gather all kind of auction data and look at what others bid on

I could see what my competition bid each time (can't see that in an open outcry auction)

I could group the results by property type in a spreadsheet to determine what types get the best rates and least number of bids

I don't try to get the underlying property. I just want a high interest rate. I do occasionally bid on something for the underlying property, but that is usually because in researching I found the owner may have abandoned it.

Also, I was traveling to AZ every 18-24 months so that I could see the areas I was investing in. I didn't want to be totally blind. Like @Bruce Lynn mentioned, don't rely solely on Google or Bing Map pictures.

Good question about the redemption. Yes, I think you did get it mixed up with tax liens. In Texas, the redemption fee is a penalty fee and not interest. That also means that it is not pro rated- if they redeem two days after you buy it, they owe you the amount you paid plus the 25% penalty fee. Also, redemption in some tax liens states means they pay off the lien. Redemption in Texas means they pay you back what you paid plus the penalty fee. The redemption period in Texas is only for 2 years on homestead exemptions, agricultural exemptions and severed mineral leases. All other properties have 180 day redemption periods.

There are plenty of out of state investors that use local services to buy in Texas at the tax sales.  Bruce is correct about viewing the properties first and that is one of the services they can do for you.   They also can attend the auction on your behalf.

There are more than 50 counties having a sale in Texas on December 1, and the counties that are not having a sale include the biggest 4 cities-Dallas, Houston, Austin and San Antonio.  Many of the smaller counties are experiencing tremendous growth as the demand for lower priced land and bigger houses has skyrocketed.

I am curious why your Mom and Grandmother have done this and you are NOT following in their footsteps?? If it has worked well for them, why not for you??

Maybe you could buy more liens than them and scale what they have done. Get the basic knowledge from them, work with them, maybe even do some deals together with them to become an experienced expert AND THEN break out on your own.

Just my .02c

@Malayna Johnson    In my experience not that many people redeem, so I think most people are buying to get the property, not counting on the 25% or 50% penalty bonus if they do redeem.  Sounds really good, sounds really high, but chances are you never get it.   You also have to think about what kind of properties you buy or what you pay for them.  To me if you buyer $1000 lot that you think is worth $5000, you probably don't want them to redeem....other wise you make $250 vs $4000.   $250 probably doesn't pay for your time and expenses.  Everyone has a different opinion on this, but that's my thought.

I agree with Bruce. Most do not get redeemed. In my opinion, you buy in Texas for cash flow or speculation on land. You usually cannot get a title policy for at least 2 years so flipping is difficult so if you have to hold it , I think you want money coming in not going out-ergo buy for cash flow. If it gets redeemed it is usually fairly quickly so you get a good return in a short period of time. If not, you get the cash flow by renting it out.