How to buy tax deeds at below market value, sometimes for only 10 cents on the dollar or less, is explained in detail in this video from a recent workshop.
But first, let’s lay some groundwork by undertanding the tax deed process.
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Understanding Tax-defaulted Property
About half the states in the United States have been selling tax deeds to the investors since soon after the country was established. Buying tax deeds offers investors the opportunity to get the property well below market value sometimes for only 10 cents on the dollar or less.
There is always a tax on property – whether its a home, a business, vacant land or even just a ditch. Every property is charged taxes.
For example, a home with $250,000 value will pay approximately 1% tax (some could be a little higher than that). So 1% is your general rule but some states are probably going to be 2% (e.g. Jersey) because that’s a very socialistic state and what they do is they charge a lot of taxes.
The tax is always due to the local government (municipality or county)
What Happens With Unpaid Property Taxes?
About half the states in the USA are tax lien states, which means that if taxes aren’t paid, a lien is placed on the property and a tax lien certificate is issued, giving the owner of the certificate the right to collect the money owed, plus any applicable interest.
The other half of the states are going to issue a deed where you’ll end up owning the property.
Where Do My Property Taxes Go?
In every municipality in every county, the local police are being paid from property taxes, as are fire department, hospitals, roads, libraries, and whatever other social programs that you might have.
If you don’t pay those taxes the government is going to have a shortfall and they’re going to have to do something with the tax-delinquent property to recoup their money.
So it’s a good idea to pay your property tax because the government will ultimately take that property.
The First Step To Buying a Tax Deed
The first step to buying a tax deed is to obtain a tax-defaulted property list from the county that you wish to invest in. This can generally be found online on the local county’s website.
When reviewing the list of properties you want to bid on, have a clear plan of how much you want to spend. When you find a properties with a big enough profit margin (high value and low opening bid) in your budget, then you must do your homework. A good resource for determining proeprty value is zillow.
Step 2 in Buying a Tax Deed: Homework
An absolute ‘must’ when investing in tax-defaulted property is that you should always get visual confirmation of the property’s condition before you bid at a tax auction. This is true even if you’ve seen pictures of the property online. Why?
Any number of things may have happened to the property in a short amount of time. There may have been bad tennants on the property who caused damage, there may have been a fire, or a tornado, or any number of possible scenarios. This will dramatically cut into or eliminate your profit margin. Or worse, end up costing you money.
Also check to make sure there are no other liens on the property. We won’t discuss in this article what liens may take precidence, but this is an important piece of information to know before you bid.
Step 3 in Buying a Tax Deed: Enlist an Expert
This article has only skimmed the surface on what you need to know about how to buy a tax deed. While this is a potentially lucrative investment strategy accessible to everyone, we highly recommend hiring a coach or enrolling in a course to understand how to minimize your risk.
If you’d like to get started today, you can begin now at no cost by taking advantage of Ted’s FREE Master Class. It’s only about 1 hour of streaming video and will open your eyes to the incredible opportunities available in tax delinquent real estate investment.