Tax Sale Help & Advice

[Christian Walker]

Hey everyone! 

Okay so I’m thinking about getting some properties in the tax sale (Texas) and was wondering if I could flip a tax sale house or do I need to rent it out for 2 years before I’m able to sell. I keep hearing different things and need a more clear answer. If someone could help me out with this I would greatly appreciate it!

Thanks,

Christian Walker

[Bruce Lynn]

Just a couple of thoughts....normally I say plan on holding for two years before selling due to both redemption rules and title insurance issues.

Typically you would not want to make the improvements needed to flip due to redemption rules before that 2 year period is up or their ability to contest the sale.   While it might not be common, it just seem inevitable that as soon as you do that $50,000 rehab, someone is going to want to come back and redeem it, and they don't pay you for that rehab.  The only thing you could collect like that is something that would protect the safety and security of the property....maybe new door locks, fixed broken windows, leaky roof, etc.   Not the new floors, paint, granite, etc.

I never buy in SE Texas so don't know the market there, but I do look at the lists every month and familiar with other parts of the state.   One trick I think is how much rehab most of these properties need.  I won't say there aren't good deals out there, but out of 1000s of properties I've only seen a handful that didn't need a fair amount of work that actually go to the sale.  Sometimes they get listed, but those favorites often get paid before the sale or even the morning of the sale.  If there are mortgage loans, the lenders are notorious for paying them off day of or day before the sale.   So what's left?   Grandma and Grandpas home that is paid off, hasn't been lived in for 20 years, kids and grandkids had good intentions, but got tired of paying taxes, didn't think they could sell it in such poor condition, and finally just let it go or move and don't leave a new address for the tax bills, so they go unpaid.  Point of the story is they often need extensive rehab for flip....and will not sell for minimum.   Most lenders probably will not lend on the rehab for tax sale properties...unless you're doing something like personal line of credit, charging on credit cards, or have the cash to fund the rehab.   That's just a thought that is a roadblock for many people.

Have you been to a sale yet? Take your list for March 1st.....prepare your ARV and rehab budget and back into your MAO= Maximum Allowable Offer and see where things sell....and see if there are opportunities there.

Not sure where your area of focus is, but Montgomery county seems about as good as any just looking at the list...and pictures of the outside of the houses.