The drawbacks of tax deed investing can be summarized as follows:
Liquidity: If tax liens certificates are not liquid investments, then tax deeds are even worse. In some cases you will have your money tied up for several years before you can sell the property, because title companies may not issue title insurance on the property until all liens are cleared and it obvious that clear title can be granted. This process can take more than a year.
Complexity: Tax deed laws vary from state to state.
Time: Tax deeds sales require a time commitment to learn the rules of a state and its counties, research properties and attend auctions.
Risk: Purchasing foreclosed property at a tax deed sale definitely has some risk. You must do your homework. Remember, once you buy a tax deed, you will own the property including all of its potential problems. In addition, title companies sometimes will not issue title insurance for at least the first year on any property bought at a tax deed sale. This means it could be hard to get a loan until it is clear that everything is fine with the property.
Capital: You definitely will need more capital to buy properties at tax deed sales. Although it varies from property to property and from state to state, you will likely need a minimum of $5,000 to $10,000 to get started in tax deed investing. Check local rules and regulations.
Monday, May 18, 2009
Tax Deed Benefits
Obtain property ownership for 50 to 90 percent below market value:
Although it varies from state to state, in certain circumstances you can obtain an entire property for only the taxes and penalties owed. In many cases, you can obtain properties for 50 to 90 percent below market value
Investment secrecy:
If few people have heard about tax lien certificates, even fewer people know anything about tax deed sales. When we started researching tax sales, we found very little information on how to invest in tax lien certificates and no information on how to purchase property at tax deed sales. However, many states have tax deed sales and there are more tax deed sales than tax lien sales. The supply of foreclosed properties almost always exceeds the demand. In the United States there are thousands of counties that have tax deed sales every year. At each auction, hundreds of properties may be available. Many states have so many properties that they have foreclosure lists based on how many years the property has been in foreclosure.
Although it varies from state to state, in certain circumstances you can obtain an entire property for only the taxes and penalties owed. In many cases, you can obtain properties for 50 to 90 percent below market value
Investment secrecy:
If few people have heard about tax lien certificates, even fewer people know anything about tax deed sales. When we started researching tax sales, we found very little information on how to invest in tax lien certificates and no information on how to purchase property at tax deed sales. However, many states have tax deed sales and there are more tax deed sales than tax lien sales. The supply of foreclosed properties almost always exceeds the demand. In the United States there are thousands of counties that have tax deed sales every year. At each auction, hundreds of properties may be available. Many states have so many properties that they have foreclosure lists based on how many years the property has been in foreclosure.
What is a Tax Deed and How the Sale process works?
A deed is a document that transfers ownership to property. A tax deed is a special type of deed resulting from nonpayment of taxes.
In many U.S. states and Canadian provinces, Jerry Latepay is given many opportunities to pay his taxes. After multiple warnings, the county puts his property up for sale to investors, often for as little as the taxes, penalties and fees that Jerry owes. At a tax deed auction, the winning bidder receives the deed to Jerry's property. In some cases, Jerry may still have a short time to redeem after the sale; otherwise, the investor becomes the legal owner of the property.
The investor may have to wait a year or so to obtain a marketable title, but the investor may have just bought Jerry's property for a fraction of what it is worth.
In many U.S. states and Canadian provinces, Jerry Latepay is given many opportunities to pay his taxes. After multiple warnings, the county puts his property up for sale to investors, often for as little as the taxes, penalties and fees that Jerry owes. At a tax deed auction, the winning bidder receives the deed to Jerry's property. In some cases, Jerry may still have a short time to redeem after the sale; otherwise, the investor becomes the legal owner of the property.
The investor may have to wait a year or so to obtain a marketable title, but the investor may have just bought Jerry's property for a fraction of what it is worth.
Thursday, May 7, 2009
Look for uncommon places to find your diamonds
Ask your agent to point out listings in certain key categories.
Vacant properties, for instance, are often empty because the seller has bought another house and moved. Given the cost of paying two mortgages, the seller is often eager to make a deal. And because empty homes can appear sterile and cold, they scare off many other potential buyers.
Vacant properties, for instance, are often empty because the seller has bought another house and moved. Given the cost of paying two mortgages, the seller is often eager to make a deal. And because empty homes can appear sterile and cold, they scare off many other potential buyers.
Tree treasure
You should keep an eye out for homes that have attractive trees. Real estate agents say that mature trees can add $10,000 or more to the value of your house. In fact, it was the four 100-year-old pine and maple trees in the backyard that sold Mintz on her home. "They needed a bit of cleaning up so we trimmed them back a bit," says Mintz. "Now they give the backyard a great cottage feel." The moral? Look for homes with trees — and if your house doesn't have one, plant a sapling tomorrow.
Look for freebies
Always lift up carpets to see what the flooring is like underneath. Hardwood floors beneath old, stained carpeting are the equivalent of a $15,000 gift if you calculate what they would cost to install new. Oak bannisters, too, can often be found hiding underneath chipping paint.
"If you have an oak bannister and railing on a painted stairwell, simply stripping the paint off and staining the oak underneath can change the entire look of an entryway," says Scott Carr, a real estate salesman in North Bay, Ont. "There's real wood under there and that's worth money."
"If you have an oak bannister and railing on a painted stairwell, simply stripping the paint off and staining the oak underneath can change the entire look of an entryway," says Scott Carr, a real estate salesman in North Bay, Ont. "There's real wood under there and that's worth money."
Curb Appeal
The ideal diamond in the rough is a house that packs no curb appeal, often because it lacks an inviting front lawn. You can instantly add value by planting a few hundred dollars worth of flowers and shrubs or adding rocks, paving stones and other decorative elements.
"When we bought our house, the front lawn was a disaster — no flower beds, no winding path," says Martina.
"My husband and I took our trailer, loaded up $40 worth of river rock, brought them home and laid them ourselves. We then power-sprayed the whole front patio, got some new white numbers and front entrance door, and painted the garage door and front shutters. When you look at it now, it looks like a completely different house."
As serial renovators can attest, it's easier than you may think to find a diamond in the rough. Carole Dobson has accepted a job offer in Toronto and is already hunting for her next fixer-upper. "I don't have to move until fall," she says, "but I've already started learning a bit about the neighborhoods in Toronto and where some of the more attractively priced homes near my new work can be found." As for her home back in Calgary? "It's listed for $599,000," says Dobson. "That's more than double what I bought it for three and a half years ago."
"When we bought our house, the front lawn was a disaster — no flower beds, no winding path," says Martina.
"My husband and I took our trailer, loaded up $40 worth of river rock, brought them home and laid them ourselves. We then power-sprayed the whole front patio, got some new white numbers and front entrance door, and painted the garage door and front shutters. When you look at it now, it looks like a completely different house."
As serial renovators can attest, it's easier than you may think to find a diamond in the rough. Carole Dobson has accepted a job offer in Toronto and is already hunting for her next fixer-upper. "I don't have to move until fall," she says, "but I've already started learning a bit about the neighborhoods in Toronto and where some of the more attractively priced homes near my new work can be found." As for her home back in Calgary? "It's listed for $599,000," says Dobson. "That's more than double what I bought it for three and a half years ago."
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