Learn How to Buy Tax Lien Properties in Texas from Ted Thomas, America’s leading authority on tax lien certificates and tax defaulted property investing.
Ted will show you how to get Texas-sized profits in this redeemable tax deed state, where the rules are a bit different.
My name is Ted Thomas. For the last 30 years, I’ve been involved in helping students purchase tax lien certificates, tax defaulted properties and even redeemable tax deeds. Today I’ll answer your question about how to buy tax liens in Texas.
Table of Contents:
- What is the Interest Rate on Tax Liens in Texas?
- Texas Has Unusual Rules for Tax Lien Properties
- Am I Bidding on a Tax Deed or Tax Lien?
- Texas Tax Sale Auctions
- Why Tax Liens in Texas are a Good Investment
- Where in Texas Can I Invest in Tax Liens?
- Right of Redemption in Texas
- Tips on Texas Tax Sales
- Conclusion
What is the Interest Rate on Tax Liens in Texas?
Texas is a popular state for tax delinquent property investing because the rules in Texas allow you to earn up to 25% in the first year. That’s a pretty powerful rate of return.
Texas is pretty serious about the collection of taxes. If a tax lien is filed on the property, the county will take action. The action they’ll take is selling a deed to the property to the public. That deed is a redeemable tax deed.
A redeemable deed simply means that the public will purchase like they would at any auction. They’ll bid the deed up, and whatever that deed sells for, the county will collect that money.
Once the county has the money, the property owner could come in anytime within the redemption period, pay back the money that was owed for the taxes and so on, and pay a 25% penalty. Then they’ll get their deed back.
So that’s the good part for the person that lives within the state. The other side of that is if you’re a tax deed buyer, which in this case is a redeemable tax deed. You can earn up to 25%, or if the deed is not redeemed, you get the property.
Texas Has Unusual Rules for Tax Lien Properties
There are a lot of unusual rules that have to be learned along the way. Does that mean that you can’t do this? No, you can do it, but you need to understand the rules.
For example, when the auctioneer sells, they’re selling a redeemable deed. That means the tax delinquent property owner can come in and pay you a 25% return.
However, it doesn’t mean that they’ve wiped out the mortgage as they would on a tax lien. So when you buy, the property could still have a mortgage there.
Can you kick the people out? Yes, you can go through a process of doing evictions and so on, but do you want to do that?
If someone’s in the property and they redeemed and you’ve kicked them out, then there’s a whole bunch of challenges. So you need to understand the rules.
A tax lien is filed, but what they sell in the state is the tax deed to the property.
Am I Bidding on a Tax Deed or Tax Lien?
Let’s get into more detail on how to buy tax lien properties in Texas.
All 254 counties in the state of Texas are authorized to hold property tax auctions, in other words, defaults.
When you buy the property, the property owner can come in and redeem it. So that makes it very much like a tax lien certificate. However, the county is actually selling a tax deed.
The state of Texas is going to be different than Georgia, which is going to be different than New York, which is going to be different than California.
In all instances, no matter where you are in the United States when taxes are due, the counties can take action.
The county treasurer starts out by making a levy, then after that, they’re allowed to go collect those taxes. If they can’t collect the taxes in some states, they’ll just go ahead and issue a tax lien certificate. They don’t do that in Texas.
Redeemable Tax Deeds in Texas
In Texas, the lien will be there, but they will auction the deed to the property. That’s a pretty severe and actionable thing that they’re doing.
If you’re in a large county, there could be 200 or 300 of these deeds available.
When you buy the tax deed in Texas, you’re going to pay whatever the maximum bid is. You’ll be the maximum bidder. Since you’re buying a redeemable tax deed, the property owner could come in and redeem the deed, then you’d earn 25% on the penalty.
In other states, the deed is eliminated, but it’s not eliminated in Texas. If the property owner doesn’t want to leave the property, you’ll have to think about doing an eviction.
Did I say it was easy? It’s not, but it’s not that difficult either. You need to learn the rules on how to buy tax lien properties in Texas.
The property tax is just a small percentage of what the property value is. Property taxes are generally 1% or 2%.
A tax lien is filed, but in Texas, they’re serious. They’re going to sell a redeemable tax deed.
Texas Tax Sale Auctions
Texas tax deed auctions usually take place in a large hall or sometime the courthouse steps. It could be a Constable. It could be someone representing the school district. It could be the sheriff. They’re going to have an auction.
They might have multiple auctions going on. Thousands of property owners will go into default. When they do, once the lien is filed, then they’ll ultimately auction the deed.
Every month they’re going to sell redeemable tax deeds at auction.
Keep in mind a lien is an encumbrance against the property, so it must be paid. Those liens are filed on every property in the United States. So every property has that lien against it.
In Texas, they’re going to sell the deed to the property, and then they’re going to leave the mortgage in place. So keep all that in mind.
The Texas legislature made all these rules, but the county treasurer has power, the school districts in Texas have power. They have the power to not only levy taxes, but to collect taxes. If they can’t collect them, they have the ability to confiscate or sell the properties at auction.
Why Tax Liens in Texas are a Good Investment
So what’s in it for you? Well, what’s in it for you is a huge profit, a 25% return.
They might get all that paid in six months time. If they don’t pay it in six months, you get the property. Think about that. So that’s pretty darn good.
Once I realized years ago that I could get properties for 5, 10, or 20 cents on the dollar, I gave up on regular real estate.
I’m not suggesting you give up on anything, but when I found out, I changed my whole investment strategy because each one of these counties was a little gold mine as far as I was concerned.
Where in Texas Can I Invest in Tax Liens?
Is Houston or Dallas or San Antonio the only place? There are 254 counties in Texas.
You might just specialize in a small county. Will there be a lot of tax deed properties for sale in a small county? No, it could be as many as 50.
I’ve been in this business for a number of years. I need to tell you, it’s getting easier and easier every year.
The counties were pretty old-fashioned. Now, are they changing rapidly? No, but they’re changing, and they’re starting to do things online.
Tax delinquent property auctions come online more and more. You need to spend a little time with one of our facilitators, and learn how to do this online. We teach that at least once a week.
You will never have to worry about a shortage of tax lien investment opportunities not even in Texas. Two and a half million properties will end up in some kind of tax default in the USA this year.
The public doesn’t know a lot about this. There are some specialists out there that know about it, but this is a chance for you to make some really good money.
I started teaching my students over 25 years ago, and I can tell you it got easier and easier every single year.
Right of Redemption in Texas
When you buy that redeemable tax deed in Texas, the owner only has 180 days. That means if they don’t pay you all the money you invested plus a 25% return in 180 days, you’re going to get the property.
I didn’t say the mortgage was wiped out. I did say you might be taking over that mortgage or be required to pay it.
Delinquent taxes is where you started, or you might end up getting all your money back plus a 25% return.
I don’t know where you’re going to get a 25% ROI on anything. So that’s a real powerful return in Texas.
Tips on Texas Tax Sales
The rules are a little different in Texas, but the 25% rate of return is phenomenal. What you need to do next is learn more.
You need to get the county rules. If you don’t understand the rules, don’t go to the auction.
The winner doesn’t necessarily get possession right away.
You need to find out:
- Are you going to get possession?
- Are you going to have to make evictions?
- What are you going to have to do ?
It’s going to be up to you to learn. I couldn’t possibly know all the rules in 254 counties in the state of Texas, but they will have rules. Every one of them is accessible online.
How Much Money Do I Need to Invest in Tax Liens in Texas?
How much money do you need to get started investing? Well, if you want to buy a little tax lien certificate, you can do it for $500.
I would say to get started you need $10,000 to $30,000, which scares a few people away.
Yes, I have people that buy for $300. Yeah, I’ve got clients that buy houses for $300. I don’t want to tell you that you’re going to do that. I’ve never done that.
I don’t want you to buy junk. Junk is always going to be junk.
If you can get a $100,000 house for 20 cents on the dollar, that’s a cost of $20,000. But if you got it for 20 cents on the dollar, your margin is $80,000.
For me, I would sell that house for $50,000 overnight or even $45,000 to make a quick sale, and make myself $25,000.
That’s my investment philosophy. I buy it low. I sell it low, but I do it fast.
How Long Do Texas Tax Sales Last?
How long do the tax sales last? The longest one I’ve ever seen or even heard of was a tax lien sale in Cook County, Chicago.
In the old days, back when I had black hair, they took out a three by five card. They read the property number, and then they started the bidding.
If they had 100,000 of those, the auction could take 100 days, seriously, 100 days. That’s ridiculous. Now they do that online in a matter of hours, so they eliminated that.
I’ve been in Los Angeles, where it took all day and ran into the second day. It’s not unusual in New York for them to have so many properties they couldn’t get finished in one day.
So you’re going to have to make a plan, and they will tell you how many days the auction is going to be.
They know because they’re going to have people help them. Or if the county does it, they’ll have to keep changing county employees every hour because people just run out of voice.
They’ll know how long it’s going to take, so check with the individual county. They’ll tell you.
Avoid These 2 Mistakes When Attending a Property Tax Auction
There are a couple of things you want to be careful of. There are two mistakes that people make at these auctions that can cost you a lot of money.
Mistake number one is don’t buy any property that you haven’t looked at. What if it was next to a chicken farm that had a terrible smell? What if it’s next to a railroad? What if there was a fire?
When you buy a property at an auction, you’re buying as-is. So you need to look at it relatively close to the auction.
The second big mistake people make is they get so excited about getting a property that they’re just going to buy something. So they keep bidding until they get something.
The objective is to buy a property that has plenty of margin. You don’t want to buy a property if you don’t already know what that margin is.
You’ve got an exit strategy. The exit strategy is just as important as buying the property.
So don’t buy a property if you haven’t looked at it, and make sure you’ve already planned your exit strategy. If you don’t, you may pay too much, and then you’re in trouble.
Conclusion
In “How to Buy Tax Lien Properties in Texas,” Ted Thomas explains what makes Texas a bit different, but also a lucrative place to invest.
Texas is a redeemable tax deed state, where the property owner is given 180 days to redeem the deed.
If the property owner redeems it within the redemption period, you’ll make a 25% ROI. If they don’t redeem the deed, you’ll get the property.
Be aware that when you purchase a redeemable deed in Texas, you might be taking over the mortgage or be required to pay it. Don’t assume that it will be wiped out.
Before you buy tax defaulted property in Texas it is important to know the rules and do your homework.
If you’d like to know more, Ted can teach you how to buy tax lien properties in Texas safely and securely. Ted offers video tutorials, home study courses, live web classes and workshops, group Q&A sessions, and personal coaching.
Ted Thomas has developed a top-notch training program with an amazing support system because he takes your education very seriously, so seriously that he wants to make it easy for you to get started today by offering you this Free Gift.
Ted Thomas is America’s Leading Authority on Tax Lien Certificates and Tax Deed Auctions, as well as a publisher and author of more than 30 books. His guidebooks on Real Estate have sold in four corners of the world. He has been teaching people just like you for over 30 years how to buy houses in good neighborhoods for pennies on the dollar. He teaches how to create wealth with minimum risk and easy-to-learn methods.
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