HOW TO BUY TAX LIEN PROPERTIES IN TEXAS
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 deed state, where the rules are a bit different.
Watch the video above or read the summary below:
Today I’ll answer your question, how to buy tax lien properties in Texas.
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.
I want to talk about those things today, and I want you to know that this is a really lucrative way to make money. It’s not very well known by the public, but it always works.
It takes a little bit of learning on your behalf to make profits, but it’s a business that’s been around for 200 years. It is available in all of the different counties, and each of the counties can have their own rules.
So today we’re going to talk about how to buy tax lien properties in Texas.
HOW TO BUY TAX LIEN PROPERTIES IN TEXAS – TAX LIEN INTEREST RATE
Texas is a popular state for doing this 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 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, 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, in this case, it’s a redeemable deed. You can earn up to 25%.
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HOW TO BUY TAX LIEN PROPERTIES IN TEXAS – KNOW THE RULES
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 that people can come in and pay you. When they pay you, you’re going to make 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.
HOW TO BUY TAX LIEN PROPERTIES IN TEXAS – TAX LIEN CERTIFICATES
Let’s get into more detail on how to buy tax lien properties in Texas.
When they do the auction in Texas, they auction a deed. It’s a redeemable deed. That means the property owner can come back at any time and redeem that deed, which means they’re going to get their property back.
To redeem the deed, they have to give you or the county all of the money that was bid plus 25%. Let’s think that out a little bit.
When you buy the property, you’re going to know that the property owner can come in and redeem. So that makes it very much like a tax lien certificate. But all of the counties are allowed to have their own rules.
HOW TO BUY TAX LIEN PROPERTIES IN TEXAS – 254 COUNTIES
That means all 254 counties in that state are authorized to publish property tax auctions. In other words, defaults. That also means they’re authorized to have an auction. So you need to learn the rules.
In all instances, no matter where you are in the United States when taxes are due, the counties can take action.
So basically the county treasurer starts out by making a levy, then after they make the levy, 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.
HOW TO BUY TAX LIEN PROPERTIES IN TEXAS – TAX DEEDS
They don’t do that 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. They’re saying, “Look, we’re going to take action and get our money,” so they auction those deeds.
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.
That property is redeemable, so it’s a redeemable deed that you’re buying. The property owner could come in and redeem any day that they want to. You’re going to make a 25% penalty.
In other states, basically the deed is eliminated. The deed is 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 easy, but it’s not 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. The government comes up with that.
HOW TO BUY TAX LIEN PROPERTIES IN TEXAS – AUCTIONS
These 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 sell at auction.
Every month they’re going to have redeemable deeds that they’re going to sell at auction.
HOW TO BUY TAX LIEN PROPERTIES IN TEXAS – ENCUMBRANCE
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. I didn’t do that. But the county treasurer has power, and 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.
HOW TO BUY TAX LIEN PROPERTIES IN TEXAS – A 25% RETURN
So what’s in it for you? Well, what’s in it for you is a huge profit. The property is at 25% return.
They might get all that done in six months time. If they don’t get it done in six months time, 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, 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.
HOW TO BUY TAX LIEN PROPERTIES IN TEXAS – ONLINE AUCTIONS
Is Houston or Dallas or San Antonio the only place? There are 250 counties in Texas.
You might just specialize in a small county. Will there be a lot of properties in a small county? No, it could be as many as 50, but you need to get to know how they’re doing it.
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.
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.
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HOW TO BUY TAX LIEN PROPERTIES IN TEXAS – ABUNDANT OPPORTUNITIES
The point I’m trying to make is the business is getting better. There’s more abundance because this there are so many tax properties. Two and a half million properties will end up in some kind of tax default 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 25 years ago, and I can tell you it got easier and easier every single year.
HOW TO BUY TAX LIEN PROPERTIES IN TEXAS – REDEEMABLE TAX DEED
Today I’m talking about how to buy tax lien properties in Texas, but they’re not going to call it a tax lien. They’re going to call it a redeemable tax deed.
You’re not going to be at a county auction in all the cases. You’re going to be in an auction room with the sheriffs and constables, people representing school districts and people representing the county.
The rules are a little different, but that 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 TO BUY TAX LIEN PROPERTIES IN TEXAS – REDEMPTION PERIOD
When you buy that redeemable deed, 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.
HOW TO BUY TAX LIEN PROPERTIES IN TEXAS – HOW MUCH A LIEN COSTS
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 TO BUY TAX LIEN PROPERTIES IN TEXAS – TAX SALES
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 it’s 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.
HOW TO BUY TAX LIEN PROPERTIES IN TEXAS – MISTAKES TO AVOID
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.
In “How to Buy Tax Lien Properties in Texas,” Ted Thomas explains what makes Texas a little bit different, but also a lucrative place to invest.
Texas is a redeemable deed state, where the property owner is given 180 days to redeem the deed.
If the property owner redeems it, 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.
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If you want to learn about tax lien certificates, all the secrets are there. If you’d like to learn about tax defaulted property, you can learn how the big profits may be made.
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