What is the catch with Georgia Redeemable Deeds??

Question

I'm looking at a list of 25 properties, most of them in really good condition.

Referencing this site below, if a property is worth 100k, than I pay 50k to the tax assessors office.

Scenario 1:  The owner pays me my 50k back and 20% on top to make it 60k.  That is an amazing return.

Scenario 2: The owner doesn't pay the taxes within 12 months and the property is mine and I start the foreclosure process.

What am I missing?  Why would any of these tax deeds still be available?

http://pipgrouptaxliens.com/tax-liens-deeds-subpag...

Sam Bagwell · Answer

I play both sides of the tax lien game in Georgia, both as an investor, and also as an attorney who handles the foreclosure of right of redemption as well as pursues the quiet title action after that.  A good chunk of my attorneys fees are made re-doing (or un-doing) the work of out of state turnkey providers.  Many of these companies treat a Georgia tax lien the same as a California or Texas tax purchase, and the processes are not the same.  Since I also do my own foreclosures of the right to redeem and quiet title actions, I do not incur separate attorney fees on those.  That said, if your purchase/winning bid price is too low, and the property is redeemed, the 20% you made may not cover your attorney's fees, so people can get burned.  Plan on the following in Georgia, when doing tax liens.  1.  your money is going to be tied up for almost 2 years to get clear, marketable title (most title insurers will not write a property that has only had the right of redemption foreclosed; you need the quiet title).  Much of the timeline on the quiet title is driven by a Superior Court Judge in the County where the property is, and they tend to move slow.  2.  You will also be paying at least one additional year of taxes on the property.  3.  plan on incurring $3k-$5k in foreclosure and quiet title costs.  If a government agency (State Department of Revenuem for example) has any lien against the property, plan on a little extra.  Overall, I love tax deeds.  That's why I buy them, and that's why I have this as a practice area.  Inexperienced investors, or out-of-state investors, though, can run into trouble if they don't know what to expect.

Ned Carey · Answer

@Ryan Cooper  Tax lien and Tax Deed investing sounds to good to be true. However it is absolutely true. You can get amazing returns and properties for pennies on the dollar.

But there is a catch. They are sold at auctions and there is competition driving up the prices and the returns  down.

The example they gave $100K house for $50K is only an example. The $50k price really depends on how others bid. It might be $15K or it might be $70K. The $100K "value" is simply the tax assessed value not necessarily what it is really worth. The reality is sometimes people bid more than the houses are worth in their current condition. It can be a great business but it is not as easy as the sales pitches make it out to be.

PS I am quite skeptical of the  PIP group. There was just a post asking about them in the last few days.

Joel Owens · Answer

You have to watch out for previous tax liens for earlier years that have been bought on the property.

You have to make sure you are not bidding on a drainage ditch or a property with environmental issues.

Sometimes with lenders their departments are so big they do not get the tax notice it hasn't been paid. So if their is  a mortgage and you buy a tax lien some investors send to the mortgage company  and they pay right away. The owners of a property tend to wait until almost the last day to redeem to pay.

Georgia can pay out some good rates but if it gets bid down to a point where the return is minimal then there are other investments where your money is not tied up for as long.

Ryan Cooper · Answer

I think it does lend to being complicated so I'll focus on tax deed or redeemable states.

Texas is close and appears to be the consensus best state  I'm going to focus on counties that aren't as popular to see how I can warm up in the minor leagues  I went to the auction in Houston and it was ridiculous.  People bidding at full price if not 20% over.

I've heard that hedge funds come in and flood the auctions so I'll start at the smaller counties/cities. Possibly El Paso, Amarillo, Lubbock and some counties/cities inbetween.

I'll play this one out for a year and see where it goes.

Matt Sicignano · Answer

Yes, absolutely. That's why if you don't escrow funds for taxes the mortgage company will step in and pay them, billing you. What do you mean by "per rule'? Where did you get the 200K figure on the 100K value? And 20% return on your invested capitol isn't bad these days; in fact, its great! If you could find properties that will net at least 10% after a foreclosure sale, you'd have a nice investment model.

Tim Lindstrom · Answer

I attended a tax deed auction once.  I had my eyes on a few properties.  I did drive-bys prior to the auction, and determined what my max bid would be on each.  All 3 properties were bid way past what I thought they were worth.   My guess is no one is going to pay the prices that were bid (plus 20%) to keep those properties.  So the winning bidder has their money tied up for a year, and then after waiting, they have to foreclose on a property that is probably worth even less than when they bid on it.

Roy Oliphant · Answer

@Ryan Cooper

Tax deed invest can be great!  We big in the Texas area.  It does have significant variations state to state.  One thing I do not yet understand about Georgia is that possession is not immediate.  You make your investment and then have to wait the 13 months before you can begin any process to take the property.

As to why these would be available, the taxes owed may be considerably higher than the current value of the property.  It may have been burnt, vandalized or just badly deteriorated due to lack of maintenance.  Maybe the property is ok but the neighborhood has been lost.

Are there good deals out there?  You betcha.  You need to work with someone who understand the local regulations as well as the market.

Good hunting!

Charles Sells · Answer

Lots of good information here, but since our website is what generated the original post, I would like to chime in.  At the advice of our IT team, I have only recently joined BP, so my apologies on late replies to our own subject matter.  I will try to be brief as possible and cover as much as possible. @Ryan Cooper since you started the thread, I will start with you.  Georgia auctions are certainly a property/foreclosure play, because the odds of foreclosure are strong, but 20% on principal within a year is also indeed a good potential return.  You can manipulate those odds a bit by focusing on vacant land (which likely would not be redeemed), or focusing on property with mortgages attached (which likely would be redeemed).  We have invested millions in Georgia and Texas, under numerous scenarios.  To correct @Ned Carey, the $100k "value" is indeed a county recorded value, but not a PIP valuation.  You will notice in nearly all of our documented examples, we provide our own valuations to our investments.  Those valuations take into account the time value of money, the potential deterioration of the property during redemption, vandalism, etc.  PIP valuation is based on these facts and are almost always LESS than a county valuation, who does not take this into account.  Thus, if "we" say it is worth $100k, then it is worth $100k and we are not going to bid any higher than $50k in that example.  If another bidder thinks it is worth $120k and are willing to pay $70k, then we just lost out on that investment, due to our policy of placement.  @Ryan Koahler, if you went to a Cobb, or Gwinnett auction, what you witnessed was likely a total circus.  Attendees today are spending upwards of full market value and beyond at these large sales.  Same issue in Texas.  When I got into this business nearly 20 years ago, I would go to Harris County (Houston) and there would be about 150 people at the auction, with about 20 "qualified" buyers.  Now, there are hundreds in attendance, along with busloads of "Guru Monkeys" spending way more than they should be on redeemable deeds.

Ryan Cooper · Answer

Hell, if I could get something at 60% or get 20-50% interest than I'll be a happy camper.  The competition here in NM is absolutely unbelievable.  People are purchasing HUD homes above list price and I'm not even sure how they are renting them out for a profit.  It's insane.

I really wasn't looking at PIP but they had a link on how Georgia tax deeds worked so I clicked the link.

I have to assume that foreclosure will be at lest 8-10k for Texas and take approximately 6 to 18 months.

Tom Yung · Answer

@Ryan Cooper

I think waiting out for one year is the biggest catch for investing in GA tax deed. Like @Roy Oliphant said anything can happened during the redemption period. Most of the properties that I had foreclosed has experienced some kind of vandalism or at least has a squatter. Also as mentioned by@Tim Lindstrom, most good properties will get bid up very close to retail in bigger counties. I think PIP invested in smaller counties, even that; sometimes good properties get bid up to more than 60%.

The other being HOA lien.

Competition is fierce in the last couple years. Not only from outside big fund holders, also the local investors.

Some properties have both the city & county tax, quite a few of the property owner forget(or do not know ) one or the other. So they are very good choice to bid; if you are after interest.

What is the catch with Georgia Redeemable Deeds??

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