Investors have begun adapting to changing real estate tax deed investing opportunities.
Over the past several years, the real estate market in the United States has recovered in most parts of the country, which has had an affect on real estate tax deed investing.
That means that prices are rising at tax deed auctions. You can sell those properties at a higher price, and selling quickly becomes easier.
Over 20 years ago, no significant information was available online regarding real estate tax deed investing.
Even a marginally well informed investor could buy properties at an auction for less than 25% of full value on a regular basis and sell at a good profit.
Today the competition is much greater, and it is increasingly important to be a well educated and informed investor before bidding at a defaulted tax auction (tax lien certificate or tax deed auction).
REAL ESTATE TAX DEED INVESTING – A RECENT AUCTION
At a recent auction, I heard one of the bidders say that he knew of a person that paid the full assessed value for a condominium apartment at a tax deed sale then resold it three days later for a $20,000 profit.
He bought it at $65,000 and sold for $85,000.
Ted and I are not suggesting that you pay full assessed value for any property at a tax deed sale. Paying such a high price is not common.
This is an example of a tax deed buyer, who knew the market, and probably had a list of potential buyers for the property before he bought it.
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REAL ESTATE TAX DEED INVESTING – AUCTION PRICES
My point in bringing this up is that some properties are selling well above traditional tax deed auction prices right now. Many of those properties are livable homes in middle income areas.
If you know the market well and know potential buyers in the area, especially if you are using your own list of potential buyers, you can make a good profit quickly even if you buy a property at 50% of its full value.
When doing real estate tax deed investing, you clearly must know the true value of what you are buying and how to sell it quickly. Thorough research is critical to success.
Knowing the true value is sometimes not possible for the average investor, because in most cases you cannot inspect the property’s interior before buying.
Viewing the property (or having someone personally view and evaluate the property for you) is an essential step, especially if you are bidding more than 20% of its value and there is an expected valuable structure on the property.
Caution: Bidding 50% for a property is for the more advanced investor, NOT for those just getting started in the real estate tax deed investing business.
REAL ESTATE TAX DEED INVESTING – VACANT LAND
Another type of property that Ted has spoken of often and still offers a good buying and selling opportunity is vacant land in a developed area.
With easily developed vacant land, there are far fewer unknown factors.
Such property will typically sell at a tax deed auction for well below market value, leaving a good profit margin.
Some examples are from individuals from Canada.
Shannon and her son Quin purchased a vacant residential lot in a nearly fully developed, upper-middle-income neighborhood at their first tax deed auction for under $34,000 and sold it for $135,000.
Samantha also purchased a residential lot at her first auction and paid under $9,000 and sold it for $27,000.
Both parties more than tripled their investment in about six months.
REAL ESTATE TAX DEED INVESTING – FLORIDA AUCTIONS
I recently bid at two auctions here in Florida on two vacant properties. One was a residential lot that was sold online and the other a commercial lot at an auction where the bidding was in person.
The residential lot was worth about $30,000. I stopped bidding at $15,100, and the winning bid was $15,400.
The commercial lot was worth about $105,000. At that live auction, there were quite a few bidders, including myself, who rapidly bid up the price to $34,000. That was my bid, and I heard the auctioneer say, “Going once…”
Then something I didn’t want to hear was a new bidder say, “$35,000.”
The bidding rapidly went up to $53,000. That was not my bid. I stopped at $52,000.
My point is that both of these properties went for about half price, not 25% of value like Ted suggests.
In a market where you know the value of what you are buying and are confident you can sell quickly for a profit, bidding above Ted’s 25% limit can work out well for an educated and experienced buyer.
REAL ESTATE TAX DEED INVESTING – RESEARCH
When real estate tax deed investing, never bid on any property without fully researching it and knowing all the expenses you will incur to own it, such as city liens, special assessments and current taxes due.
Another point is that in the case of the commercial property, had the other bidder not shown up, I would have gotten that property for $34,000.
You never know what can happen at an auction, so be prepared to win big.
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REAL ESTATE TAX DEED INVESTING – OTHER LIENS
Late last year, there was an auction in Orange County, Florida. At that auction was a vacant residential lot in a very nice neighborhood, where it was the only remaining lot without a house.
The property was worth about $26,000, and the minimum bid at the tax deed auction was under $5,000.
It was on my list of properties to consider on my first review of properties coming to auction.
I was ready to bid up to $13,000, because I was confident that this lot could be sold very quickly.
After further research, I decided not to bid on it, and at the auction nobody else did either.
Why? Because in reading through the title history on that property, which was available on the county’s website, I found that there had once been a house on that property, which the county had paid to demolish and remove.
The cost of removal and associated fines amounted to over $27,000 in county liens on the property, which was not included in the selling price at the auction.
That county government lien would remain on the property after the tax deed sale.
When you’re real estate tax deed investing, make sure you do your research before you bid, and know what liens remain on a property (usually only government liens) after a tax deed sale.
REAL ESTATE TAX DEED INVESTING – PERSISTENCE
Another real estate tax deed investing success story is from two visitors to Florida from Germany, Konny and Heike.
They attended and were prepared to bid at several online auctions and at a live in-person auction, but they hadn’t bought anything until…
They were the winning bidders at an online auction in Florida for a vacant residential lot in a nice neighborhood. It’s worth about $20,000 in a rising market, and they only paid $6,000.
Persistence and understanding what properties can be purchased with the least risk and sell quickly are important to succeed in this business.
REAL ESTATE TAX DEED INVESTING – RISK
For most of us, paying full assessed value for a home is not a good idea, even understanding that the assessed value in some rising markets may be low by 25% or more.
It was for the condominium apartment buyer I described above because he knew how to sell it for a quick profit.
Paying 50% of full value for vacant land in Florida may not be right for you, but it was for me, because I have learned the local market and am confident it would sell quickly for 75% or more of full value.
I could make a 50% profit selling that property in just a few months.
Doing that two or three times a year, I can double my money. Not as well as Shannon & Quin or Samantha, but I’m very happy with a 100% annual return.
Don’t let fear of getting started or a few disappointing auctions stop you. I haven’t bought anything at most of the auctions I go to, but I still go.
Most people succeed by investing in many properties over time, some with less than $10,000 in profit, others with many tens of thousands of dollars profit and then the occasional jackpot, like the $100,000 gain Shannon & Quin experienced.
Persistence, diligent research before buying and knowing how to sell quickly are the keys to success with tax deeds.
The changing landscape of real estate tax deed investing has resulted in rising prices at tax deed auctions.
If you’re very familiar with the market in the area and know potential buyers, you can still profit quickly even if you purchased the property for 50 cents on the dollar. However, buying at this margin is better left to experienced investors.
Less experienced buyers would do better to wait until they can find a property with a value that doesn’t exceed the 25 cents on the dollar margin. With persistence you can still find these bargains.
As always, know the rules and do your homework before you bid on any property. You must know what you’re buying and what you’re doing to mitigate risk.
There’s no one more qualified to teach you real estate tax deed investing than Ted Thomas, America’s leading authority on tax lien certificates and tax defaulted property investing.
Ted has been teaching students from all over the world for over 25 years, and he’s famous for showing his students how to earn 6-figure incomes within a year of going through his training.
Ted offers full support with home study courses, live workshops, web classes, Q&A sessions, and personal one-on-one coaching.
If you want to learn more about real estate tax deed investing, you can 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 how to buy tax lien certificates and tax deeds. So be sure to get your FREE Safe Haven course today.