If you have been considering buying tax delinquent property by bidding at a tax sale auction, think again. Besides the fact that you can’t inspect the property before you buy it, and the fact that you’ll have to wait at least a year to own the property, there’s one important reason to avoid the tax sale: competition, the great equalizer. You won’t get a great deal on a great property this way. Here’s a quick guide to buying tax-delinquent property outside of the tax sale, and for $200 or less most of the time.
1. Buying tax delinquent property is easier when you buy directly from the owner. Wait to approach them until the end of the after-tax redemption period. Homeowners who have not yet paid their taxes are often homeowners who have decided to leave the property; therefore, they do not care much what happens to the fact. This is the state of mind you want them to be in when you offer to buy their deed.
2. Tell the landlord that you can’t afford much, but while you’re already renting the property, you’d love to see if you can do something with it. Offer the owner a token amount – $200. They may be content with only getting a few hundred dollars, but if it’s a nice piece of property or a more savvy landlord, they may want more than that. Offer to give them a percentage of what you eventually get from the property, but keep the $200 to buy the deed up front.
3. Quickly pass the property to another investor. It’s best if you have a list of investors interested in buying tax delinquent properties; That way, you can set up the deal with the new buyer just like you do with the current owner. This way, you won’t even have to have your name on the deed, OR pay the taxes. The new buyer can take care of that. He can walk away from a double lock with nothing but cash in his pocket.
This is the correct way to buy tax delinquent property. And of course, if you want to keep the property and pay the taxes, this is also an option.
If you’re smart, you’ll avoid tax selling, especially with the “gold rush” of inexperienced investors that has been going on since the bubble burst. Use these techniques and you can profitably start buying tax delinquent properties, even if you don’t have a lot of cash on hand to begin with.