A question that has come up in the past about expired tax liens and with the recent increased competition for tax deeds is: “What strategy should I use when buying tax lien certificates if I want to get the deed to the property?”
Some specifics related to that answer will vary from state to state, so know the rules where you are investing.
EXPIRED TAX LIENS – STEP 1: THE PROCESS
When buying any tax lien certificates, the first step is to research the properties to ensure they have sufficient equity to make the purchase of the tax lien certificate’s cost significantly less than the value of the properties backing those certificates.
When doing that, keep in mind that you will have to pay additional taxes, typically an additional two years’ property taxes to eventually get a deed to the property, and there will be some county and/or private legal costs involved.
The good part is those costs can total about 10% of the value of the property.
The caution when doing your research is to make sure the property value is still there; sometimes the past due taxes are based upon a property with a building and today that building is no longer there.
Some states use a process of premium bidding, meaning you can bid more than the taxes due for the tax lien certificate. In that case, just like buying a tax deed, you need to know your maximum bid.
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EXPIRED TAX LIENS – STEP 2: HAVE AN EXIT STRATEGY
Step two is to make sure the property can be sold quickly for a reasonable profit. In other words, have an exit strategy.
Some properties have value on the tax rolls, but are in a part of the county that is years away from being developed, if it ever is developed. Make sure the property is something you are confident will sell quickly if you end up owning it.
EXPIRED TAX LIENS – STEP 3: HONE YOUR RESEARCH
Step three, if your objective is to acquire ultimately expired tax liens, is to find property owned by delinquent taxpayers, who are less likely to pay the past due taxes and redeem the property.
They are often listed with out-of-state addresses.
Your research may also show that the property is owned by an out of business company or deceased individual; these situations increase the probability of the taxes not being paid.
You can pretty much be assured that the taxes will not be paid by those people.
Eventually the taxes may be paid by the former company’s owner or heirs to the property, but those taxes being paid is much less likely than when the delinquent taxpayer is living on the property.
EXPIRED TAX LIENS – STEP 4: BID
With step four you need to win the bid.
There are various bidding processes in different states, with the most common being an interest rate bid down process.
In that situation the interest rate may get bid down from its maximum, but typically, with the type of property we are discussing, not as low as homes with an owner/occupant.
There are also states that use a premium bid process, where you can bid above the minimum bid to be the winning bidder.
In those cases bidding 20% of the value of the property may eliminate your competition, and in the end you will still get a bargain.
EXPIRED TAX LIENS – STEP 5: WAIT OUT THE REDEMPTION PERIOD
States have a period of redemption of one to three years during which the past due taxes can be paid.
If the taxes are paid, the property owner retains the property, and the tax lien certificate investor gets paid his or her investment plus interest.
EXPIRED TAX LIENS – STEP 6: TAKE POSSESSION OF THE PROPERTY
After the redemption period has expired, the tax lien certificate holder can get possession of the property.
In some states, the process is very simple and done through the government agency that sold the tax lien certificate; in others a separate foreclosure process is required and may take a few months and some additional cost.
In all cases, when the redemption period has expired, the tax lien certificate holder should take the actions needed to get the deed to the property. That deed will be a tax deed.
The tax deed holder now owns the property, just as if it had been purchased at a tax deed auction.
EXPIRED TAX LIENS – STEP 7: SELL THE PROPERTY
To sell use the same techniques Ted, his visiting professors and coaches talk about:
- Use yard signs
- Sell to neighbors
- Use a real estate agent
- Small ad in the classified section of a newspaper or advertiser publication
- eBay and Craig’s List
- Direct mail to neighbors
- Market to your buyer’s list
- Buyer’s convention
- Private auction
Getting a tax deed by buying a tax lien certificate will take longer than buying property at a tax deed auction, and will sometimes result in getting all your investment returned plus interest instead of a deed.
The advantage of acquiring property through expired tax liens is that you will typically pay less for the property than in a tax deed auction.
Many of Ted’s students have used this expired tax liens technique to make some of their most impressive investments with the biggest returns.
It is not instant gratification. This is not a get rich quick process; it is an investment you can do for the rest of your life with consistent high returns.
The more techniques you know to make this business work for you, the more likely you will be successful, and Ted Thomas can teach you.
There’s no one more qualified than Ted Thomas, America’s leading authority on tax lien certificates and tax defaulted property investing.
Ted Thomas is the only one who provides full support and complete training with home study courses, Q&A webinar sessions, live tutorials, workshops & web classes, and personal one-on-one coaching.
Want to learn more? Start your education today for FREE with the Safe Haven Investor System course (valued at $197).
Safe Haven is 2 hours of streaming videos and a 100-page illustrated manual that teaches you all about tax lien certificate and tax defaulted property investing. Act now and get your FREE Safe Haven course today.
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