Buying a tax lien foreclosure?

[Jerel Garner]

Hello All I am New to BP and Real Estate Investing. I am considering my first deal as a JV with a relative. Here is the situation:

My relative has been a tenant in this home for a year and a half with out any problems with the home such as plumbing, electrical, heating, etc. The thing is the property manager stop collecting rent about 5-6 months ago, and has disappeared off the face of the earth. In the mean time the current tenant (my relative), has been receiving letters, at the home, from the county stating that the home is going into foreclosure unless the back tax are paid/disputed by March 31, 2014. If the owner does not pay the taxes by the deadline we are considering paying the back taxes and taking ownership of the own.
the plan would be for my relative to stay in the home while we do some minor cosmetic updates and then flip the house or rent it out.

Oh yea one more thing the house is in Detroit.

Any comments/ suggestions would help? Thanks in advance!

[David Begley]

Originally posted by @Jerel Garner:

Hello All I am New to BP and Real Estate Investing. I am considering my first deal as a JV with a relative. Here is the situation:

My relative has been a tenant in this home for a year and a half with out any problems with the home such as plumbing, electrical, heating, etc. The thing is the property manager stop collecting rent about 5-6 months ago, and has disappeared off the face of the earth. In the mean time the current tenant (my relative), has been receiving letters, at the home, from the county stating that the home is going into foreclosure unless the back tax are paid/disputed by March 31, 2014. If the owner does not pay the taxes by the deadline we are considering paying the back taxes and taking ownership of the own.
the plan would be for my relative to stay in the home while we do some minor cosmetic updates and then flip the house or rent it out.

Oh yea one more thing the house is in Detroit.

Any comments/ suggestions would help? Thanks in advance!

 I can't speak of Michigan specific laws governing tax liens or tax sales, but you should consult a local expert on these matters because i do know it's not as simple as paying the back taxes and taking ownership. Generally, if Michigan is similar to Georgia,  the state or  local government will auction the tax lien competitively to the highest bidder (and those bids can approach the value of the property, not just the back taxes) and the previous owner will have a 1 to 2 year Redemption Period (states differ) to pay the back taxes and penalties and which time your attorney must make best efforts to contact the owner of record to ensure they have no intentions of paying the back taxes/penalties during the Redemption Period.  Then, if no one steps forward and the redemption period passes, your attorney then can start the judicial Quiet Title action, which could take another 6-9 months and $3,500-$6,000 in attorney fees and court costs.   Oh yeah, your relative/tenant may even have to vacate the premises during the 2 1/2 year Redemption/Quiet Title action since they may legally be trespassers until you gain title.  

Good luck in your endeavors.