Tax Deed Investing (36)
What happens to the excess proceeds? This is a question that is often asked by those who have just lost their property to an individual who has purchased it at a tax deed auction or tax sale. There are many different types of excess proceeds and one that we will discuss is the amount of money above and beyond the opening bid that an investor will offer. So what happens to the excess proceeds? In California when a property gets sold it becomes known as a tax deed. The person who has purchased the property walks away with the title. The opening bid price will be the amount of the back taxes for five years plus any fees, penalties and interest that may have accrued along the way. A common amount that properties usually go for is half of the assessed value give or take. This sounds like a great price and a good way to gain properties. I can have my cake and eat it too! Since the property goes to the highest bidder there is always an overage of excess proceeds. For example, let’s say that a property goes for 100K dollars and that is the winning bid price. Now, let’s say that the opening bid price was 23K dollars. That would make the excess proceeds come to 77K dollars. Since the previous owner of the home is losing their home they are allowed to file for and keep the excess proceeds. There is one year after the sale to do this in. This is what happens to the excess proceeds if the previous property owner files a petition to receive them. It will give that person recourse for any outstanding mortgage they might have to deal with or finding a new place to live in. What happens to the excess proceeds if no one claims them is they go to the county or the state and are used in the revenue needed there. It is not a widely known factor and can be huge for the previous owner and greatly appreciated when given the opportunity to collect the difference. This particular strategy applies only to the tax deed states and not to every one. It is always best to check with the county to find out what happens to the excess proceeds before you participate in the tax sale auction. Knowing that you are helping the previous owner rather than hurting them can make a big difference in the way that you become an investor. We can move forward knowing that even though a person is losing their home they can gain some kind of compensation for the loss. This is what happens to the excess proceeds.
Many students ask "what is the fastest way to get my money working for me where I can see results quicker?' This is a question that we all want to have the answer to. Let me first say that working with tax deeds will yield more money; however, there is a bigger risk and typically requires larger capital investment. Let me explain what I mean. When you are working with a tax deed you are actually buying the property. Let's say you are the highest bidder and have won the property. Now you are a property owner. It didn't take very long, just a few hours at the auction to own this property. Now you want to go to the recorder's office and put the title into your name so that you have completed the process. This is a great way to get going in the fast zone. Once you own a property then you can do with it whatever you want. You can sell it making a profit, remodel and then sell making an even greater profit, or you can rent it out guaranteeing a cash flow every month, or you can live it in yourself and be mortgage free and rent free. With your tax deed investment, you are able to open the door to make money sooner than later, but in order to buy a tax deed you generally have to spend more money. Tax liens are typically sold through the auction for only the amount owed to the county by the property owner. But because you are buying the actual property, and not just a tax lien certificate, when buying a tax deed, you typically end up paying more. The bidding starts where the county is owed, but through the auction process bidders will generally bid up the price closer to fair market value. Therefore, you tend to spend more on tax deeds. There are many variables that come in to play when you own a property. Tax deed investing is a great way to get a jump start into the real estate world. The risk with ownership is that now you are responsible for the taxes. If you are borrowing money to get started then you want to make sure that you have an exit strategy so that you make money from your investment. This could include finding a buyer, renter, or perhaps you want to donate it to charity and use it for a tax deduction. There are many things that you can do with property once you become the property owner. Just to make sure that you have things in place, you can line up a buyer and use a real estate agent if you want to get the ball rolling faster. Working with tax deeds can be an accelerated way to make money faster.
Online tax sales auctions are a thing of the present and future. In the years past this was not something that was available to investors. Now more and more counties and states are seeing a greater result from a wider outreach through the internet by having online auctions. Most of the time when an investor decides to participate in an online auction, it is required to have what is called an ACH transfer funds account set up. This stands for "automated clearing house". The way that it works is the investor will set up the amount of 10% of the bidder's purchase they are planning on buying. So if you have a property that has a tax lien worth 1,000 dollars then you would put down a deposit of 100 dollars in order to bid on that property. The property then goes to the highest bidder and funds are collected at the time of bidding from the winner. If you are not the winning bidder then your funds are not collected and you will not have to spend any money. It also works the same for tax deeds. All of the online auction sites work this way. There are several different auction sites that handle different parts of the country. Not all of the counties and states make this available so doing some research on our website will give you the information you need. Once you have obtained a list of properties from our website then you will be directed to the auction site, providing it is an online auction. This is such a great convenience for those of us who are afraid of the live auctions, can't leave their homes for various reasons, or would like to invest all over the country from their home. I know a gentleman who is in a wheel chair and is still able to make the most of his investing opportunities via the internet and online auctions. This is great for those of us who are limited with our travel or just don't have the time to get around and would like to do it from the comfort of our own home. All of the states are covered on our website and when you go to the various states you will gain the information necessary for the type of auction that is being held in that particular state and county.
Some of our investment knowledge of California has been talked about in previous entries, but I want to go over some of the things that are specific to California once more. California is a tax deed state and when an investor purchases tax deeds at the auction there, the investor should do all of his or her due diligence so that the investor knows exactly what he or she is buying. Once the investor has purchased the property, which goes to the highest bidder, it completely belongs to the investor. California, like Arkansas, has a litigation period of one year. That means that the previous owner has the time frame of one year to contest the sale of the property sold at the tax deed auction. In California they are referred to as tax defaulted properties. Because of the litigation period, which is offered to the previous owner, it is recommended that you don't do any remodeling or sales of the property until this time frame is up. If it happens that the owner does win in court, the county made a mistake, and the property was not truly a tax defaulted property, then the person who has invested in that property will still receive 6% interest on his or her investment. This way the person who invested in the property would not be out completely on his or her time and money that was put into the property. Doing enough research on a person and property can give you a better assurance of the time frame, if any, that would be involved for the litigation period. In other words if you find out that the owner is truly delinquent on a property then you would be safer going forward with the property and not worrying about the litigation period. California can be a very lucrative state. Being a tax deed state requires more initial investment capital, yet it can make you much higher returns on the rebound.
When we think about foreclosure we think that the bank is taking the house away due to failure of mortgage payments. Yes, this is true, but there are different types of foreclosure. Let's talk about a tax foreclosure. This occurs when an investor has purchased a property as a tax lien and it doesn't get redeemed on. So once the redemption period is up then the investor can proceed with a foreclosure process. The process is the same as far as contacting all interested parties are concerned but the reason is different. There are some states that will do the foreclosure for you and some that will have you either do it yourself or hire a lawyer to go in front of the judge to complete the process. When you go to our website you will see that there is a section that has properties for sale. These are properties that have been foreclosed on due to failure of tax payment thus making them tax foreclosures. The opportunity is great and there are many properties to choose from. Those that are listed are only a sample of what we have available to you who want to jump into ownership of properties right away. It is a great way to begin building revenue. Once you have ownership of a house you can rent it out, live in it, or sell it, or you could even donate it to charity and write it off on your taxes. There is so much opportunity that is available in our properties that have already been foreclosed on. Just go to the website and see for yourself.
It's the month of Christmas and we'll be getting ready for another year of fantastic sales for tax liens and tax deeds. This month has a good sale in Indiana for a couple of counties. You can check with the calendar to see if the areas work for you. One thing that I think is such a good focal point for anyone, beginners and those who are familiar with tax liens and tax deeds, is the date of sale. For the tax lien investors it is important to know when the sale is being held because you will either want to purchase a tax lien at the auction or purchase one after the auction. Most of us want to purchase over the counter or after the auction. That is why the auction date plays such an important role. For anything that will be assignment purchasing (which is another name for over the counter) then it will be shortly after the auction. Usually the list can be obtained within two or three weeks after the auction. For those of you that are interested in over the counter, when you know the auction date you can prepare for the upcoming list of assignment purchasing or over the counter and be prepared to purchase. You know the saying, "the early bird gets the worm'. This is the best time to approach the list of tax liens that did not sell. Then you can be the first to choose from what did not sell and receive the full rate of interest. As the year goes on the better properties get purchased up and there are not as many to choose from. Take a look at the auction calendar and see if there are any dates and places that peek your interest or are close to you where you can look at the properties that are available. As we get ready for the New Year we can still focus on the month of December and look at what's available coming soon. Make sure that the tax certificate sales are the ones that you are looking for to gain interest and if it's a property you want then the tax deed auctions will need to be attended.
Throughout our education material we mention the importance of beginning your tax lien investing in your own backyard. We get a lot of emails from phone calls from students who are concerned about this. It is either difficult to invest in tax liens or tax deeds or they want to buy tax liens and only tax deeds are available (and vice versa) in their home county. This might be a problem for investors, but there are a few suggestions. The main reason we suggest you begin in your home county is because it gives a new investor the opportunity to learn the process face-to-face. A visit to the county building to have a discussion with the right county worker isn't a bad idea. This gives the new investor a valuable education that stretches to other tax lien and deed counties across the nation. If you're interested in that then here is your solution. Since noriskinvestor.com was created it makes investing across the country very simple bringing accessibility to new levels. An investor had to either visit or negotiate by phone but now the information can just be retrieved through the site. State and county information, tax lien lists, tax deed lists, and investing education can be downloaded in just a few seconds. So an investor in California who is interested in tax liens and cannot purchase California tax liens because they don't exist could log into the site and could buy tax liens across the country with just a few clicks. Tax lien investing is an incredible strategy where returns are high and risk is low. It would be nice if executing the strategy were simple as well. Despite what you may hear at seminars, in the past it has been one of the most time-consuming and daunting tasks, but with No Risk Investor, it has become one of the most simple investment strategies. It's rewarding, safe, and simple! No Risk Investor is the most trusted resource for tax lien and tax deed investing. People all over the world have joined the ranks of tax lien and deed investors using No Risk Investor's simple resources to make money in tax liens and tax deeds. No other source provides as many quality lists and tools to help investors quickly find great investments that will return 16% - 50% every year.
Tuesday, 15 June 2010 10:12 Written by Eddie Stewart
In the last post we gave a couple examples of ways that you can run into trouble with tax liens and tax deeds. Although it's fairly difficult to lose money in tax lien properties and tax deed properties, it is possible, and we want to make sure you avoid it. So here are the due diligence steps that will help you avoid those costly mistakes. KNOW THE STATE AND COUNTY When deciding where to invest it's important to know the laws and regulations for the area. Find out when and where tax liens and deeds are purchased. Is the investor required to attend a tax lien sale, or can he or she purchase tax liens and deeds over-the-counter? When does the investor have to submit payment for the tax lien or deed purchase? If you're buying tax liens, know how long the redemption period is. This can range from 6 months to 3 years depending on the state. You should know how long the life of your investment will be and when you can take ownership of the property, if the opportunity arises. It is also important to understand the process of taking a tax lien to deed, when that opportunity arises. Although it is rare when a tax lien goes through the redemption period and you can take ownership (unless it's in the middle of the Arizona desert), you may want to understand that process just in case. KNOW THE PROPERTY This is probably the most important step during due diligence but is an easy thing to do. Find out what the property type is. Is it a single family residential home? Find out what the assessed and market values are for the property. Make sure that your investment is backed by valuable property. If you're buying a $500 tax lien certificate, the property doesn't need to be worth $1,000,000; just make sure there is sufficient value so that if you end up owning the property, you are the owner of valuable property. As you're purchasing tax lien foreclosure properties, you may want to hire a real estate agent who is familiar with the area. It is common practice to call local agents and have him or her take a look at the property for you. Let the agent know that you're looking to sell a property and you want him to take a look at it. You may also get information about how things are selling in the area. You may also want to get a real estate attorney that is familiar with tax deeds and tax liens. They would help you foreclose on tax liens, when it is necessary. The real estate attorney will help you dot your i's and cross your t's. No Risk Investor is the most trusted resource for tax lien and tax deed investing. People all over the world have joined the ranks of tax lien and deed investors using No Risk Investor's simple resources to make money in tax liens and tax deeds. No other source provides as many quality lists and tools to help investors quickly find great investments that will return 16% - 50% every year.
Tax liens and tax deeds are the Nation's most intriguing investment strategy. Returns for tax lien certificates range from 8% to 50% and tax lien foreclosure property returns can be 300% and more. It's important, though, to do proper research and due diligence for potential investments to protect yourself from potential losses. Although there aren't many ways to lose in tax liens and tax deeds, unless you're investing completely haphazardly, here are a couple ways that one might lose money. If you purchase a tax lien on a property with little value you could potentially lose money. If you were to buy a tax lien certificate on raw land in the Arizona desert 100 miles from civilization, this might be one of those situations. It sounds ridiculous, but I've seen it happen. Unless you want to take ownership of the property and move your trailer out there, there isn't much one could do with that kind of property. What we've seen in this scenario is the property owner doesn't redeem because they don't care about the property, and then the investor takes ownership of the property. The good news is the investor is a property owner. The bad news is that the investor owns property with little value and probably may not have a legitimate exit strategy. That is the main mistake tax lien investors have encountered, but can be easily and quickly avoided during due diligence. If you purchase a tax deed property that has small margins or the low property values, it may be difficult to execute your exit strategy. This is primary error for tax deed investors. Let's say you were able to purchase a tax deed for $5,000. You're probably pretty excited, but what if the property was only worth $8,000 and the property isn't desirable? What are you going to do with it? Once again, avoiding that investment error is quite simple during due diligence. So let's get into some of the main due diligence points that you should examine. DUE DILIGENCE CONTINUED IN THE NEXT BLOG POST No Risk Investor is the most trusted resource for tax lien and tax deed investing. People all over the world have joined the ranks of tax lien and deed investors using No Risk Investor's simple resources to make money in tax liens and tax deeds. No other source provides as many quality lists and tools to help investors quickly find great investments that will return 16% - 50% every year.
In our previous blog post on tax deed exit strategies, we talked about selling or flipping your tax sale property and living in your tax sale property. In this post we will finish the discussion by talking about selling your contract, renting the property, and holding your tax sale properties. In addition to the exit strategies mentioned in our previous post, you can also sell your contract to other investors. Depending on where you are in the purchase process, you can sell your purchase contract to an investor. The idea is that the investor would get the property under contract without investing money, or investing as little money as possible, then selling the purchase contract to another investor. The advantage of this strategy is the investor potentially makes money through the contract sale without using any of your own money. Due diligence and know-how are the main requirements. Another strategy one can utilize is renting your tax lien foreclosure properties. Renting provides an awesome opportunity to create a cash flow system. Instead of making $10,000 at one time, many investors prefer to rent the property and make a steady monthly income from the property. An investor may have renovation or repair costs to get the property in rentable shape, but it may be worth the costs, time, and labor. The last exit strategy we will talk about is holding the tax lien foreclosure property. This should probably be your last option because little money is made in holding the property these days, unless property is dramatically increasing in the area. In this economy, though, where property values are stagnant in most areas, holding should be your last option. In the past this strategy has been used to make money through appreciation. A better alternative is renting a property while it appreciates. No Risk Investor is the ultimate resource and tool for tax liens, tax deeds, and real estate investors all over the world. No Risk Investor takes incredible pride in its ability to help students take action, get into properties, and begin the journey to financial freedom. No Risk Investor provides county lists, property lists, online auction lists, comprehensive training and education, an auction calendar, an online auction center, an investor community and much more for its members.