First Property - Tax Sale?

Question

Hi BP,

I am an entry-level investor looking to get into my first property. I want to purchase a multi-family property - 2-4 units with preference toward a 4-unit property. I want to utilize one of two options:

1. Purchase a multi-family property with FHA 203k financing and lease out three of the four units while occupying the fourth.

2. Purchase a multi-family property via tax sale. I can afford to wait up to another year or so before I HAVE to be out of my parents house. Obviously the shorter the time the better, but if I can get a good property at tax sale I would love to do it.

My only question is, if I purchase a property at tax sale and it needs renovations, what are my options as a newbie to finance renovations? Am I pretty much on my own at that point or can I utilize home renovation loans?

Thanks in advance.

Richard D. · Answer

I would recommend you read up on redemption of properties and the laws concerning it. Even though I specialize in tax foreclosure, my knowledge is for he state of Texas, and each states laws are different. So you may want to consider some of the following questions:

What is the redemption period for tax sales?

What is my recourse should the property be redeemed and I have made repairs?

What is my rate of return on my investment?

Would financing be a viable option in this scenario, if the property is to be redeemed?

In Texas, my simple answer is go for it, because redemption period is six months on non-homestead properties.  As long as you only do repairs within that time frame that bring the building up to code, you lose nothing and can get repaid 25% above your costs.