Low budget, is tax liens the best way to go?

Question

Hi guys/gals

So here I am, a newbie in this real estate investment world.  My budget is very low around $30,000.  I am considering investing in tax liens and tax trust deed sales.  I know many of your guys/gals are experts in this field.  Would you give me some ideas on where would I start?  What would you recommend for this kind of low budget?  Is it possible to obtain loans for investments like this?

Thanks~

Raquel Baranow · Answer

i know everything about tax liens in arizona. i started out with $4000 and ended up with 120-vacant lots that I can't sell. I have sold many lots and made good profit but the current economy hit me hard. Used to be I could sell one-acre lots I got for $1000 from tax liens for $23k but not anymore . . . some people can;t even get $5000. My mistake was holding the lots as investment.

Jerry K. · Answer

Ming Huang - Joel is on the right track to begin with.  Define what you want and your current situation.  Ask yourself questions like;
- Is the $30K every penny I have saved? (What portion of my net worth does the $30k represent?)
- Do I need to shelter income from taxes?
- How quickly will I need this money if I have an emergency? (liquidity)
- Is real estate the best place for me? (Assess your knowledge)
- What excites me about real estate? (Assess your interest)  Don't go into any investment/business just for the potential money. Try different aspects to see if you like it.
- How much time do I have for real estate?
- Do I like to work with my hands?
- Do I like to do research?
- Do I want to be a landlord?
- Do I like to negotiate?
- Do I want more of a passive real estate investment? (Not owning physical properties that I have to manage)
- What are my financial goals in the long term?
- Where do I want to be financially in one year, five years, ten years, longer?
- Where do I physically want to live?
- If I lost the $30,000, how would it affect my lifestyle?

Others can add to the list of questions, but you want to have a good handle on these types of questions before you commit to a specific investment style.

You have to be interested and like what you're doing.

Chuck Catchings · Answer

Hi Ming, I can send you a website that will tell you pretty much everything you need to know about tax liens and it's free. I tried to get someone to invest in these 15 years ago in Tx. when no one knew much about them. Texas is by far the best state to do tax liens. Let me know if I can help.   Chuck.

Joel Owens · Answer

Is your goal to quit your regular job and get into real estate full time or build investments until you retire from your regular job??

Raquel Baranow · Answer

@Adrian G. Yeah, I have tons of lots left I can't sell:
http://666ismoney.com/Land.html

Mark Reynolds · Answer

While the "know thyself" answer is not wrong I don't know that its very helpful in answer to your question. Clearly you did this self examination and came to the conclusion that tax liens was an option.

I'd rather start with a different question-- Where are you located? The nature of tax lien investing varies widely around the country because each county is different. Here in cook county IL (Chicago) $30,000 wouldn't get you very far because the game is played by lots of VERY well funded investors who have bled most of the initial profits out of the game anything left for the small guy is probably junk. May not be like that where you are but my impression is that most major metropolitan areas are pretty much the same.

Assuming you have access to your MLS I might go in the bargain hunting business-- find REO's that have been on the market a long time. Lowball offer. If you get under contract flip to somebody else who will rehab. I am buying a 2 unit this week for $5,000. While I could manage the rehab I will probably just sell it for $15-20K to somebody else who will do the rehab. May take me 60 to 90 days to find somebody. When I sell I may sell on terms--$5,000 down and balance in monthly payments for up to 5 years.

Right now I am also partnering with people with that kind of money in Condos-- in certain OK neighborhoods in Chicago suburbs we can buy condos for $15,000. We sell on Land contract for $60,000 and sell off the first 5 years of the payments to get our cash back out. No rehab no muss no fuss.

Mark

Adrian G. · Answer

Raquel,
Do you have any of those lots left? Just curious.

Chuck Catchings · Answer

Ming Huang Ming, contact me directly at [REMOVED] if you don't mind, thanks.

Chuck

Ming Huang · Answer

Jerry K. Thank you very much for this detailed reply.  I really enjoy researching and looking forward to be a landlord.  As a real estate agent and appraisal trainee, I certainly can utilize some of my expertise when researching the properties in  the market.  $30,000 is basically my net worth, assuming selling all my stocks at market price right now.  I would say I can only use $20,000 for investment and the rest for rainy days.

Even more challenging now, with $20,000 in hand, with expected 20% in annual investment profit return, where in the real estate world shall I get started?

Ming Huang · Answer

Chuck Catchings, please, if you have a good website for tax liens I would love to know.  thank you.

Low budget, is tax liens the best way to go?

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