BUYING PROPERTY FOR BACK TAXES
I’m going to show you why buying property for back taxes is one of the best investments in America, especially now in the current economy, which may take several years or more to make a full recovery.
What if while everyone around you was pulling their hair out, you were quietly becoming prosperous?
I’m going to show you how buying property for back taxes may be your ticket to early retirement, even if everyone else’s retirement account is shrinking.
In our last few articles, we asked, “Are tax lien certificates a good investment?” and answered with a definite, “Absolutely!”
Then we took a look at the basics of how to buy a tax lien certificate, and we looked at an example of a California tax sale which led to today’s question about buying property for back taxes.
“Can I buy property by paying back taxes, even though I don’t live in California?” (or any other specific state?)
So I’m going to share with you how to find tax-delinquent properties in your area, and anywhere else you might be interested in.
The first thing you need to do is determine if the state sells tax liens, tax deeds, or both. Once you do, you’d go directly to the county clerk’s website to see what information they have.
You might have seen ads for “houses for back taxes list” or something similar in local newspapers, investment magazines or websites. Depending on the location, you might be looking for a “tax-delinquent properties for sale list.”
Remember, all the jargon and terminology depends upon the county and state. “Tax lien foreclosure properties” is another term you may hear, but it’s all related to buying property for back taxes.
If you’re wondering, “How do I find taxes are owed on a property?” well, it depends on where you’re looking. Generally, the places you want to look are the comptroller, tax assessor, or county clerk’s office.
For example, if you live in Florida and are interested in the tax-delinquent properties near you, you’d need to know your county clerk’s policy.
If you were in Brevard County, for example, you’d start by going to the county clerk’s office to ask them or check their website for tax-delinquent properties, tax lien auctions, or tax deed auctions.
Buying Property for Back Taxes: Not-So-Secret Market Segments
Buying property for back taxes is an especially good investment if you focus on affordable middle-class housing or affordable housing for low-income families. These two segments are in critical undersupply all over the country.
So buying a property for back taxes is one of the best investments in the country, and will continue to be for many years to come.
While stocks and other investments are likely to be a rough ride, buying property for back taxes is one of the best bets against any future we may face.
So instead of asking, “What happens when your property is sold for back taxes?” or “Can someone take your property by paying the back taxes?”
You can be asking, “Why didn’t I start buying property for back taxes years ago?” and “Where do I want to go for vacation?”
Buying Property for Back Taxes Compared to Buying Stocks
Let’s take a look at how well real estate has done against the stock market. Have home and property prices gained as much as the stock market?
Well, lets look at the performance of stocks over the last 25 years:
The S&P 500 Index originally began in 1926 as the “composite index” comprised of only 90 stocks. According to historical records, the average annual return since its inception in 1926 through 2018 is just over 10%.
The average annual return since adopting 500 stocks into the index in 1957 through 2018 is roughly 8%.
When using the past 25 years as an example, the average stock return is about 10% or less.
Now let’s compare that to the rates of return that many people buying property for back taxes make, and you’ll wonder why so many people are still betting their retirement on the stock market.
Let’s look at the rate that home prices have increased over the same 25 year period. However, keep in mind that in the last year, while the market has contracted drastically, housing demand has outstripped supply.
As of March 2019, and median home prices were almost $309,000 nationwide—a growth of more than 70% in less than 20 years. That’s almost quadruple the growth of the previous 20-year period.
Investment guru Dave Ramsey says, “According to some estimates, in March 2020, the U.S. median home price was $320,000.”
According to Zillow, the median home price in the U.S. in 2020 was just under $200,000.
That average is obviously lower in the Midwest, but on either coast, the costs are going to be much higher. In San Francisco or New York, a home could cost you over $1,000,000.00.
However, when you’re buying property for back taxes, you could snatch up properties in these key areas for pennies on the dollar if you know what you’re doing.
A house in 1980 would have cost you $47,200, or $93,400 adjusted for inflation. In 2000, that same house would set you back $119,600.
In 2016, home prices rose to double the inflation rate. And in nearly two-thirds of the country, housing price growth exceeded wage growth.
While homes in some towns remained affordable, in Manhattan and San Francisco, home buyers would need to pay 95 to 120 percent of their average paycheck to afford a mortgage payment.
Buying Property for Back Taxes in Today’s Economy, and Beyond
The effect of the virus on home prices has been surprising. Where it’s going is even more surprising. Some people assumed that the cost of houses would tumble along with the economy, but it really hasn’t.
There’s been a decline in home prices, but not nearly as much as could be expected. So buying property for back taxes is looking like one of the few investments that’s weathering the storm.
The economy contracted, businesses closed, and jobs disappeared. However, in the housing market, prices keep rising.
Home prices dove during the last recession after a housing crash caused millions to lose their homes. So some economists thought home prices would plunge this time too.
In spite of price drops in some housing markets, home prices came back and went up remarkably faster than other market segments. This is why buying property for back taxes is so attractive.
The median home price rose 8% year-over-year to $280,600 in March, according to the National Association of Realtors. Buyer demand has softened and sales fell over 8% that month from the prior month.
Recent preliminary data shows that the supply of homes on the market is shrinking even faster. However, though demand for homes decreased, so did supply.
Many sellers were reluctant to cut prices. Only about 4% of sellers cut their prices by April 25, down from 5.7% during the same time last year.
So in spite of economic chaos making demand go down, the prices of homes have not lowered dramatically. Meanwhile, total listings of homes for sale are at the lowest rate in five years, while the median listing price was up 1%.
The reason for this is relatively simple. The housing market has been undersupplied for years, and now it may get even worse.
There were 1.5 million units for sale at the end of March, down over 10% from last year.
According to real estate agents, homeowners are waiting to list their houses. That’s because homeowners have decided not to move, or they’re worried about letting buyers into their homes.
Fannie Mae, a home mortgage loan company, said in April that it expects the median existing home price to tick up to $275,000 this year from $272,000 last year.
According to Zillow, home prices are likely to drop somewhere between 2% to 3% from previous levels by December and recover sometime this year.
A forecast released by housing-data provider CoreLogic called for nationwide home prices to rise 0.5%.
CoreLogic forecast annual price declines in cities like Houston, Miami, and Las Vegas. So in spite of declines in home prices in some areas, overall property values are doing better than anticipated.
“In the next 12 months, it’s hard to anticipate price declines because of the mortgage forbearances” said Lawrence Yun who is a Chief Economist and Senior Vice President of Research at the National Association of Realtors.
“You would have to see continuing job losses for a prolonged period leading to foreclosures, and even then we may not have an oversupply.”
A tremendous opportunity has arisen for savvy investors buying property for back taxes. Housing prices didn’t drop as expected, and most housing markets, have retained their value or even gone up.
Fewer homeowners are selling right now, so tax sales are an ideal place to purchase property, which you can do for cents on the dollar if you know the rules and do your homework.
It only makes good financial sense to buy property cheaply, then rent it out or resell it affordably, especially when the housing market is already undersupplied.
To learn more, Ted Thomas and his team of expert coaches can show you how to take advantage of the best investment opportunity we may see for a very long time to come, buying property for back taxes.
If you’re ready to seize this opportunity today, Ted’s offering you a FREE course on tax liens and tax deeds, the Safe Haven Investor System – a $197 value at no cost to you with promo code: GIFT
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