What tools do real estate investors use? What are the necessary real estate investment tools a tax deed investor needs in his or her toolbox? Let’s take a look at what you need at hand to get started in this lucrative investing field.
You’re going to need physical as well as mental tools. Here’s the quick list of the hardware you must have:
- Computer. A lot of your work is going to be done online.
- Fast Internet connection. With more and more auctions going online, a fast connection is key to winning when the bidding gets competitive.
- Good telephone. You’re going to be making phone calls.
- Camera. If you are investing locally, you need to get pictures of the property. If you have a smartphone, the camera in it is probably good enough.
- Money. You have to have the cash to pay for your bid.
You’re also going to need some business sense, the ability to stay calm during an exciting auction and have the ability to walk away from a sale no matter how much you may want that property.
Now, let’s look at all these things in detail.
REAL ESTATE INVESTMENT TOOLS – A GOOD COMPUTER
Of all the real estate investment tools, nowadays a computer is among the most important. You need a computer to search for tax deed sales and bid in online auctions. But, your computer is going to do so much more.
With good accounting and organizational software, you will track your investments each step of the way.
Your computer will tell you the things you need to know, provided you keep the records updated. Some of the information you need is:
- How much you have invested in each tax deed.
- Where and why you spent money on the tax deed.
- The status of any repair and renovation work you ordered to the property.
- A lawyer’s work on the deed, any foreclosure proceedings and the bills for those services.
- How far along the foreclosure process is.
- A buyer’s status on the property if you are selling it.
- Electronic copies of the deed, receipts and any foreclosure notices.
- A calendar to let you know when you need to take an action. That includes reminding you about upcoming tax deed auctions.
A lot of this is just jotting down notes. You can do that in a spreadsheet or a word file. Just make sure you put a date on each entry.
Good records will come in handy at tax time. Your accountant or tax preparer will tell you what’s deductible and what’s not. That’s why you need to keep records of your travel, postage and anything you pay other people to do for you.
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REAL ESTATE INVESTMENT TOOLS – TELEPHONE OR CELL PHONE
You are going to be making phone calls, so a phone is one of the essential real estate investment tools. A short list of the people you probably will call is:
- The local tax office;
- A local attorney who handles real estate deals;
- The newspaper.
You will talk with the tax office to make sure all your registration paperwork is in order.
If you have to send your payment by wire or overnight courier, you must call the next day to make sure it was received. You may need to call later to check on the status of the paperwork the tax office has to send to you.
A real estate attorney is a good idea because you may need to file a foreclosure notice. If you are bidding across state lines, you need to have someone in that state familiar with the tax deed foreclosure laws.
If the property is occupied, you’re going to need help to either begin collecting rent or asking the people to leave your property. You’ll have to talk with the attorney by phone as well as send records back and forth through email or fax.
You will want to talk to the public notice department in the newspaper to find out when foreclosure notices need to run and how much they cost.
Your attorney will also give you this information, but getting that information yourself is a good idea. Once the notice appears in the paper, you need to get a copy sent to you.
Keep notes of your conversations, including the date, time and whom you spoke with. Then, follow up your phone calls with an email.
REAL ESTATE INVESTMENT TOOLS TO ASSESS THE PROPERTY
Look at the prices and decide which ones you can afford. With this narrower list in hand, it’s time to begin due diligence and do your real estate investment screening.
This means you check out the property and the neighborhood as much as you can.
If at all possible, drive by and look at the property from the road. This article tells you what to look for and why.
If you can’t get to the property, try to hire someone to drive by the property and take pictures for you.
Find a photographer in that area by looking online. If you can’t find one, the local newspaper may have a reporter or photographer willing to do it.
Call the local building inspection department and ask the people there about the condition of the house. In smaller communities, the building inspector probably knows quite a bit about the properties in the tax deed sale.
Here are some real estate investment tools you can use.
This satellite view program often provides a “street view” of properties. It’s not universal.
Rural areas especially may not have street view scenes and what it does provide may not be useful. If a house has a lot of red tip shrubs in the front yard obscuring the house, street view is going to show you the red tips, not the house.
Some street-level pictures may be a bit out of date. The Google street view van could roll through one day and the very next day a tornado could come through and flatten the house.
The tax office and building inspector should be able to tell you if the property has suffered any recent serious damage.
Use Google Earth to also examine the neighborhood. In a tax deed, you are getting the property in short order. Is the neighborhood somewhere you actually want to own property?
Get the Property Value
Zillow is the Internet’s top location for getting property values for specific pieces of real estate and neighborhoods. It’s one of the top free resources for real estate investors. You can check out the value of the house in the tax deed sale and the houses to either side.
Go beyond that and look at the property all along the street and neighboring streets. With this, you can get an average value of the property. You can use this information to help decide if the sale is worthwhile or not.
If you plan to own and rent the property, Rent O Meter can give you a look at what neighborhood properties are generating. This does not mean you’ll get that much for rent. You could get more; you could get less.
Local real estate professionals can give you a much more accurate estimate of rental income for the property, but they may charge you for that or ask that you sign a real estate maintenance contract with them.
A maintenance contract, which lets them collect rent and manage the property within the limits you set, is a good idea if the property is some distance from you.
Beware of Problems
The Modesto Bee has a warning story about not doing due diligence.
Ken Carlson writes, “Art Rossetti, a semiretired businessman, tried to warn people about an abandoned lot at 419 S. Conejo Ave., one of the 67 parcels in Stanislaus County’s delinquent tax auction last week. The county spent $20,000 in August removing a fire-damaged house and weeds from the airport neighborhood parcel but did not record an abatement lien before it was put up for auction.”
This one has been handed over to attorneys to try to decide who has to pay for the demolition lien.
Title Search and Title Insurance
This is not vital when you are buying a tax deed at an auction, but if you plan to sell the property later, it needs to happen, making these nonnegotiable real estate investment tools.
The title search makes sure you have a clear claim to the property. The title insurance protects you if, as happened in The Modest Bee story, a lien or claim comes up after the sale.
If the person buying the property is getting a mortgage, then they probably have to pay for the search and the insurance.
REAL ESTATE INVESTMENT TOOLS – MONEY
If you win the auction, you’ll be expected to pay for the tax deed very quickly. You do not have time to arrange a loan. This is another reason why you need to set a budget and stick to it.
Cash is king. Some auctions will accept wire transfers, personal checks, certified bank checks, money orders and a few will take credit cards. Most don’t accept cards because of the fees associated with them.
The tax office will tell you what forms of payment are accepted.
When the auction is online, the tax office has a short grace period to get the money to the office.
If you are bidding in person, you’ll be expected to pay as soon as that property is sold or when the whole auction is over. Again, the tax office will tell you when the bid must be paid.
Just having the money to pay for the tax deed may not be enough. You’ll need to check on other past due taxes, recording fees and money to take care of any foreclosure paperwork.
The Ramsey County, N.D., County Auditor’s website says, “Prospective purchasers are advised that some assessments which are levied by agencies or offices other than the County may still be outstanding after the tax sale; in addition, the IRS has the option of redeeming, up until 120 days after the sale, any property on which there is an IRS lien recorded.”
If you plan to do any repair or renovations, that needs to be a part of your total budget for the property. If a property needs work, that’s not a deal-killer, especially if you can get the tax deed at a very low cost.
REAL ESTATE INVESTMENT TOOLS – A TAX SALE LIST
You can’t bid in a tax deed auction unless you can find the sale, so a list is one of the must-have real estate investment tools.
Tax deed sales are advertised:
- In the local newspaper;
- In the Public Notices section of each state’s newspaper association website;
- Sometimes on the tax collector’s website.
Some states have a comprehensive list, like New Mexico. This website directs people to the specific county for more detailed information.
Take this list and narrow down the properties you’d like to invest in. You can check the list at the online locations to make sure the taxes are not paid and the deed is still set for auction.
The day before the sale, call the tax office to make sure the properties are still on the list. Most of the past due taxes listed in these sales are paid before the sale.
Don’t get discouraged. Property tax deeds are held all around the nation regularly.
REAL ESTATE INVESTMENT TOOLS – COMMON SENSE
While some wags say common sense is now so rare it should be called a superpower. Regardless, it has to be a vital part of your investing strategy.
You need to be level-headed, think clearly and understand what you are getting into. It is no stretch to say common sense is one of the most important real estate investment tools in your investing arsenal.
First, understand what you are getting into. If you can’t grasp exactly what is involved, don’t invest. Talk to experts until you know what to expect and how to react.
At the end of this article, I have a link to a lot more information that will help you. Here’s a quick look at what you need to know.
Tax Deed vs. Tax Lien
Understand what you are bidding on. Property taxes are sold as a lien or as a deed.
A tax lien sale is not the same as a tax deed sale. Both kinds of sales can generate excellent profits, but you must know what to do if you win an auction in either one of these sales.
Learn more about making huge profits from investing in tax liens and tax deeds. Sign up today for Ted’s FREE class.
If you want to invest in a tax deed sale, here are some important questions to ask yourself:
- Am I ready to own the property immediately or almost immediately?
- Do I have a plan for the property?
- Do I really want to own the property?
- Do I have the money to make this investment?
If you say “no” to any of the questions, then tax deed investing is probably not for you. You’d be better off as a tax lien investor.
Forbes has a 12-point short slide show that any future landlord should watch.
You may say “I’m not going to be a landlord,” but if you get a tax deed for a property that has renters living in it, you’re going to be a landlord for at least a short while. You can’t just show up and evict someone from what’s now your property.
Understand the Process
These sales are auctions. If the auction is online, you have to register ahead of time.
Broward County, FL., has its sales online and you have to sign up ahead of time. There’s no fee to do this in Broward County.
Sumter County, FL, does require a small deposit with registration. If the auction is in person, sometimes you have to register. Sometimes you have to include a deposit. Sometimes you don’t.
Call the tax office in the community where the sale is taking place to get the specifics.
Tax deed sales are auctions. Auction fever is a very real thing.
As Ken Rockwell says, “If you win an auction but paid too much, you lost. If you paid the right price, you won. If you paid the wrong price, you lost. You never lose if some other idiot pays too much. Just like elevators, there is always a similar item coming along in a few more minutes.”
Well, in the case of a tax deed auction, another property may be a few minutes away, a few days or weeks away. Regardless, don’t get so excited that you overbid.
If you lose one auction, don’t let your frustration take over and cause you to overbid on the next one.
Set a budget and stick to it. If you plan to bid X amount on one property, stay with that. If there’s another property you plan to bid on, set a budget for it as well. Do not use leftover money from the first sale for the second sale.
If you put the work into preparing for a tax deed auction and you don’t show up, virtually or in person, that’s a waste of your time, money and other resources.
Yes, people do expend all that and then forget to attend the sale. Set several reminders. Make sure you clear your calendar during the time the sale takes place.
Leave your cell phone turned off when the sale starts. You do not need distractions and interruptions.
These are just a few of the things you need to know about investing in tax deeds. What other questions do you have?
If you want to succeed at investing in tax lien certificates and tax deeds, you need to have a solid foundation, which includes the proper real estate investment tools.
The right real estate investment tools will keep you organized, informed, and make your research go a lot faster.
You must, at the very least, have a computer with a fast internet connection, a phone, camera, and the funds you need to make a bid. Using real estate investment tools, like Zillow and Rent O Meter, will also streamline your process.
Of all the real estate investment tools, knowledge is the most important. You must know the rules and do your homework. You must know what you’re doing.
There’s no one more qualified to teach you than Ted Thomas, America’s leading authority on tax lien certificates and tax defaulted property investing.
For over 25 years, Ted’s been teaching students the secrets, strategies, and safest ways to profit from distressed property investing.
Ted is the only one who provides full support and complete training with home study courses, Q&A webinars, live tutorials, workshops & web classes, and personal one-on-one coaching.
Knowledge, training, and mentorship are the most valuable real estate investment tools you can acquire for yourself, and you can start today at no cost by taking advantage of Ted’s FREE Master Class.
So act now and learn the secrets of tax lien and deed investing that have made so many of Ted’s students into 6-figure income earners.