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 economic crisis. Not only do we have COVID-19, its effect on the economy, and the slow recovery to wonder about, but we also have elections causing chaos in the markets. Our economy is doing worse than at any time since the Great Depression. It may take several years or more for the U.S. economy to make a full recovery. To see what the experts at the Brookings institute say about the future of the world economy, click here.
What if while everyone around you is pulling their hair out, you are quietly becoming prosperous? Keep reading and I’m going to show you how buying property for back taxes may be your ticket to early retirement, even while everyone else’s retirement account is shrinking.
So in our last few blogs, we asked, “Are tax lien certificates a good investment?” We answered with a definite, “Absolutely!” Then we took a look at the basics of how to buy a tax lien certificate. Then we looked at an example of a California tax sale which led to this week’s question about buying property for back taxes. You are now probably are asking, “Can I buy property by paying back taxes, even though I don’t live in California?”. (or any other specific state?) Fair enough question. 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 you are interested in sells tax liens, tax deeds, or both. You can find that information in our last few articles, check the web, or visit TedThomas.com . Once you do, you would actually 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 or investment magazines or websites. Depending on where we are talking about, 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. It’s all related to buying property for back taxes.
You may be asking, “How do I find taxes are owed on a property?” Well, it depends on where you are looking at, but generally, the place you would want to look are the comptroller, tax assessor, or county clerk’s office. So if you wanted to know the tax-delinquent properties near me, and you lived in Florida, you would still need to know your county clerk’s policy. If you were in Brevard County, for example, you would start by checking the county clerk’s office and ask them, or check the website for tax-delinquent properties, tax lien auctions, or tax deed auctions.
Buying property for back taxes: some not-so-secret market segments
Buying property for back taxes is an especially good investment if you focus on affordable middle-class housing or even affordable housing for low-income families. These two segments are in critical undersupply all over the country. To see how much affordable housing is in critical undersupply, click the following link here.
This is an indisputable fact that makes me confident that buying a property for back taxes is one of the best investments in the country, and will continue to be so for many years to come. I’m not the only one to feel this way. Let’s see what some of the experts at Blomberg are saying by clicking the following link here.
To see more information confirming that affordable housing is in a shortage all over the country, click here.
What this means to me, and should mean to you, is that 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. It should also mean that your property has a greater chance of gaining value now than almost any other investment. Instead of asking, “what happens when your property is sold for back taxes?” You can be asking, “Why didn’t I start buying property for back taxes years ago? “Instead of asking, “Can someone take your property by paying the back taxes?”. You could be asking, “Where do I want to go for vacation?”
Buying property for back taxes compared to buying stocks
If you aren’t convinced yet, let’s take a look at how well real estate has done against the stock market. I’m constantly being asked if home and property prices have gained as much as the stock market. Well, as usual, I’m not going to let someone get off with a question like that without qualifying it by asking what period of time would they like to compare?
For example, 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%. To see what the well respected financial site Investopedia says about the average rate of return on the stock market, click here.
So basically when using the past 25 years as an example, we can still do rough math to estimate the average stock return is about 10%. I’m not comfortable with that number in 2020 and beyond because the whole world’s economy has taken a beating the likes of which we haven’t seen since the Great Depression. When you see the rates of return that many people buying property for back taxes make, you will wonder why so many people are still betting their retirement on the stock market. To see another reputable site’s opinions about the market’s average rate of return, click here.
Now, look at the rate of home price increases over the same 25 year period. Again, I will have to qualify this because in the last year, while the market has contracted drastically, housing demand has outstripped supply. Let’s see what the experts are saying.
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! Quoting Dave Ramsey, “According to some estimates, in March 2020, the U.S. median home price was $320,000.” This is investment guru Dave Ramsey’s information on housing trends, click here.
According to Zillow, the median home price in the U.S. in 2020 was just under $200,000. That average obviously is lower in the Midwest, but on either coast, the costs are going to be way higher. Believe it or not, in San Francisco and New York home could cost you over $1,000,000.00. How does buying property for back taxes look to you now, knowing that you might have been able to snatch up some properties in these key areas for pennies on the dollar?
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, homebuyers would need to pay 95 to 120 percent of their average paycheck to afford a mortgage payment.
Buying property for back taxes in a coronavirus economy, and beyond
With the effect of COVID-19 on home, prices have been surprising. Where it’s going is even more surprising. You probably think that the cost of houses has tumbled along with the economy, but it really hasn’t. There has 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 only investments that are weathering our current economic storm.
To see the New York Times opinion of where housing prices are going click here.
To see Fortune magazine’s preview of housing prices click here.
To see why housing prices are rising during the pandemic, click here.
The economy is contracting, businesses are closing, and jobs are disappearing due to the coronavirus pandemic. Though mostly in the housing market, prices keep rising. Home prices dove during the last recession after a housing crash caused millions to lose their homes. Now with the COVID-19 pandemic causing so much economic damage, some economists were thinking home prices would plunge. In spite of a major drop in home prices in some markets, home prices came back and went up remarkably faster than other market segments. Are you starting to see why buying property for back taxes is so attractive?
What we are seeing now is the drop in home prices some expected is not happening. 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. The supply of homes on the market is shrinking even faster, recent preliminary data shows.
It is true that demand for homes decreased because of an economic decline, but so too did supply. So, 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. This information comes from Realtor.com. ( News Corp, parent of The Wall Street Journal, operates Realtor.com.). Now it’s important to remember when you are buying properties for back taxes, using the right buying techniques as they teach at Tedthomas.com, you are getting the property at a steep discount. This greatly increases your potential for profits.
So in spite of all the economic chaos making demand go down, the prices of homes have not lowered dramatically. Total listings of homes for sale, meanwhile, 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. During the pandemic, it may get worse. There were 1.5 million units for sale at the end of March, according to the National Association of Realtors, down over 10% from last year
earlier. Homeowners are waiting to list their houses according to real estate agents, and that’s because homeowners have decided not to move or they are worried about letting buyers into their homes.
Hundreds of thousands of renters may miss rent payments, as the COVID-19 drags on just past a year in the U.S. For small-property landlords, that means facing their own economic crisis.
So a tremendous opportunity is arising for those savvy investors who are buying property for back taxes, because it makes more financial sense to buy property cheap, and rent it out affordably. Then when the market turns around, they are sitting on a lot of equity.
While some economists expected home sales to tumble this year, many forecasts call for prices to climb slightly or hold flat. According to 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 in 2021. In a forecast released Tuesday, housing-data provider CoreLogic called for nationwide home prices to rise 0.5% sometime between 2020 and 2021.
CoreLogic forecast annual price declines in cities like Houston, Miami, and Las Vegas. So in spite of some declines in home prices in 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.”
So while I can’t promise you how to buy a house for back taxes, for dirt cheap, without competition, the people at tedthomas.com can and will do the next best thing. They can educate and even train you with expert coaches to take advantage of the best investment opportunity we may see for a very long time to come, which is buying property for back taxes. Are you ready to seize that opportunity? If you are, check them out, you will be glad you did.