There are few things that are more important in your tax lien investing and tax deed investing than your exit strategy. If you don't have a strategy, then don't invest. Having an exit strategy doesn't necessarily mean exiting each deal but having a plan for success. If you have a plan to buy a tax lien certificate on a potentially useless piece of dirt on the side of a hill in the middle of the Arizona desert where the property owner hasn't paid their taxes in 15 years, that's not too good. Sure it's a plan but not a plan for success. Let me tell you why. What happens when the property owner doesn't pay back the taxes plus interest and penalties during the allotted time? You can take ownership of the property, but then what? Live on it? Sell it? To who? You have to make sure that there is demand for that particular property before making that purchase. If it were a piece of land within a housing development in Arizona then you're in a much better situation because you have an exit or a way to make money.
Let's look at some exit strategies for Tax Lien Investing and Tax Deed Investing.
Get my money back plus interest:
This is the most basic of all the exit strategies because it is the most common. You're not looking for the property, just your money back plus interest. This is a long-term strategy. There are certain characteristics you need to consider such as property type and the current situation of the property owner. Consider the example in the first paragraph of this post. We talk in great detail about this in our course. But you should start with the free eBook first.
Get the property:
This is always the case when buying tax deeds but can also be done in tax lien certificates on occasion. If you'd like to buy the tax deed then find a state that sells deeds and dive in. When buying tax lien certificates you need to find a property that will go through the entire redemption period in order to have the opportunity to take the lien certificate to deed. This is rare but possible. Once again, it depends on the property type, owner situation, and other factors such as whether there is a mortgage on the property. If there is a mortgage, chances are the bank will pay you off and take the house.
I have the property, now what?
This is a bad example of an exit strategy. You have to always know what you will do with the property before you buy it; flip it (buy low, sell low); buy and hold; rent; buy, fix, and sell. You have a lot of options when buying property, just make sure you have a plan before you buy.
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