Tax liens - what do you know?

[Jake Thorpe]

I have been doing flips the last two years, and its been rough. I have stayed profitable, for now. I am thinking about investing in tax liens. From what I understand you could be buying something that is completely dilapidated but even if that was the case if it was for 10k or less, you could sell the land. 

What are some things to be aware of doing tax liens? I know I am in a tax lien state 

[David Krulac]

I've bought hundreds of properties at Tax Sale, but only Tax Deed Sales, and have posted on the subject many times on BP. It is the Most Hazardous way to buy real estate and not quite as easy as you state.  In the Bigger Pockets free book, "Real Estate Rewind", as one of the 11 co-authors I wrote about one such Tax Sale purchase and made money but not enough money to warrant the risk involved. Some of the properties that I have seen on Tax Sale include:

1. An expired land lease

2. Army bombing range

3. Land at bottom of man made lake (literally underwater)

4. Delapidated building not worth the cost of demolition.

5. Toxic waste site on Super Fund List  

6. Former gas station with leaking under ground storgage tanks

7. woodland with all the trees clear cut

8. Landlocked property

9. former Chromium factory

10.Multiple properties with multi-million Federal Tax Liens

11. Wetlands, flood plains, endangered specices, historic sites, architectural significant property

12. Failed septic tested properties

13. Condemnation properties

14. Zoning violations properties

15. sliver of land 2 feet wide

16. unusable/unbuildable land

17. junk yard salvage property

18. Title problem properties

19. Many properties are abandoned by the current owners because of some problem

David Krulac

Bigger Pockets Podcast #82

[Jake Thorpe]

Quote from @David Krulac:

I've bought hundreds of properties at Tax Sale, but only Tax Deed Sales, and have posted on the subject many times on BP. It is the Most Hazardous way to buy real estate and not quite as easy as you state.  In the Bigger Pockets free book, "Real Estate Rewind", as one of the 11 co-authors I wrote about one such Tax Sale purchase and made money but not enough money to warrant the risk involved. Some of the properties that I have seen on Tax Sale include:

1. An expired land lease

2. Army bombing range

3. Land at bottom of man made lake (literally underwater)

4. Delapidated building not worth the cost of demolition.

5. Toxic waste site on Super Fund List  

6. Former gas station with leaking under ground storgage tanks

7. woodland with all the trees clear cut

8. Landlocked property

9. former Chromium factory

10.Multiple properties with multi-million Federal Tax Liens

11. Wetlands, flood plains, endangered specices, historic sites, architectural significant property

12. Failed septic tested properties

13. Condemnation properties

14. Zoning violations properties

15. sliver of land 2 feet wide

16. unusable/unbuildable land

17. junk yard salvage property

18. Title problem properties

19. Many properties are abandoned by the current owners because of some problem

David Krulac

Bigger Pockets Podcast #82

 number '3' had me laughing, sorry. That all sounds rather terrible, so how did you make money on all of that?

[David Krulac]

@Jake Thorpe  I did NOT say that I bought all those, only that I saw those properties offered for sale at Tax Sales that I attended. Many if not most of them WERE bought at Tax Sale.  Here's another one:  Went to a Tax Sale where there was a "vacant" lot for sale of about 1 acre in a desirable suburban area.  Unlike some buyers, I ALWAYS go look at the properties before the sale and discovered that the vacant lot had an active railroad track on it and therefore was unbuildable, and would remain unbuildable until the railroad removed their track.  At the sale, some people, who it must be presumed did not look at the property and there were several bidders.  There was a news reporter at the sale and they interviewed the high bidder, who admitted that they had not seen the property, but were certain that they would be building their family home there.  At another sale, a farm house was to be sold.  A few days before the sale the frame farm house was burnt to the ground and all that was left was the standing brick chimney and a lage pile of ashes.  Multiple people bid on that property as well.  At yet another sale there was a brick row house/town house for sale that looked good from the street, but since it was in the middle of the row, to see the back of the house, you had to walk around the block and see the house from the alley, where the entire 3 story brick back wall of the house was laying in the back yard, and there was no back wall standing.  Somebody bought that house at Tax Sale.   

[Jake Thorpe]

Quote from @David Krulac:

@Jake Thorpe  I did NOT say that I bought all those, only that I saw those properties offered for sale at Tax Sales that I attended. Many if not most of them WERE bought at Tax Sale.  Here's another one:  Went to a Tax Sale where there was a "vacant" lot for sale of about 1 acre in a desirable suburban area.  Unlike some buyers, I ALWAYS go look at the properties before the sale and discovered that the vacant lot had an active railroad track on it and therefore was unbuildable, and would remain unbuildable until the railroad removed their track.  At the sale, some people, who it must be presumed did not look at the property and there were several bidders.  There was a news reporter at the sale and they interviewed the high bidder, who admitted that they had not seen the property, but were certain that they would be building their family home there.  At another sale, a farm house was to be sold.  A few days before the sale the frame farm house was burnt to the ground and all that was left was the standing brick chimney and a lage pile of ashes.  Multiple people bid on that property as well.  At yet another sale there was a brick row house/town house for sale that looked good from the street, but since it was in the middle of the row, to see the back of the house, you had to walk around the block and see the house from the alley, where the entire 3 story brick back wall of the house was laying in the back yard, and there was no back wall standing.  Somebody bought that house at Tax Sale.   

 That all sounds horrific, but how do you inspect the property while at the auction?