Recap of 12 years of Property Tax Sale investing (Louisiana)

How I got started

I have to thank my real estate agent at the time and now friend, Marc for letting me know about property tax sales. I was a part owner of a company that was building house back in 2003-2008. When the housing market tanked we were lucky to make it out without going bankrupt (many local builders in the area did). At the time, I was trying to figure out what I could do next to make money investing in real-estate.

That is when Marc suggested I try going to the Property Tax Sale. He explained how he was at a closing with one of his buyers, who was buying a property from someone who had acquired it from a property tax sale. He asked the seller about the tax sales and he replied " it's complicated and hard to make money, don't waste your time" and blew the question off. Thankfully, Marc was intrigued and went to the Property tax sale a few months later and saw the same individual there, spending tens of thousands of dollars buying more properties. It become obvious the gentleman tried to discourage Marc and didn't want to let on how good of an investment property tax sales could be.

I started researching to try to find out more about property tax sales. My first step was to look online, but you couldn't find much back then except eBooks, "how to" guides, etc. I paid for an eBook that basically just gave me a list of the LA Statutes (Laws) that I could have found myself. Marc recommended a local attorney who he had used on a few properties he was able to acquire from the tax sale. I met with the attorney for a consultation and probably asked him a 100 "what if" type questions and tried to learn as much as I could.

Armed with my new found knowledge, I went to my first Property tax sale in May of 2009, in Washington Parish. The first two properties I purchased were parcel numbers 0100081610R and 0100081610Q, The description said "Improvement on the property of Weyerhaeuser (Camp)". I paid almost $700 for both properties. At the end of the year I received the tax bill and paid another $350 in annual taxes due for both properties. They weren't redeemed by the following year so I started doing a little investigating to see where these camps were located. I soon found out that the property tax assessment was for the "improvement only" and not the land... That sucks, but a camp would still have value even if you are leasing the land. After making a few phone calls I found out the company that owned the land, Weyerhaeuser had given the camp owners long term leases, like 50 years ago, but the leases had expired a couple years ago and the company was not offering to renew the lease. So, the people who owned the camps (not worth much money) just abandoned them, stopped paying taxes and that is how they ended up at the Property tax sale. After having an attorney send a letter to Weyehaeuser, the most they were willing to offer was to allow me to move the camps from their land. The cost alone to do that far exceeded the value of the camps. I lost over $1,000 on my first two property tax deals, and learned a $1,000 lesson, NEVER buy just the improvement. Read the property description and if it says "Improvement only" it's just the structure and not the land, then don't bid on it. As a side note, I had an acquaintance a few years later tell me he also had purchased just the improvements at a property tax sale, it was right after a hurricane. He paid for several years on the property just to find out it had been destroyed and demolished by a hurricane. Bider Beware!

Later that year (2009) I purchased a vacant lot in St. Bernard parish. After paying the taxes on it for a couple years, I received a tax bill for $4200. The previous years the tax bills were just $72. Come to find out, the parish had been cutting the grass and the property was assessed over $4,000 in grass liens. At the time, lots in the area were only worth about $5,000.  When I had purchased this property at the tax sale I knew it was going to be a small deal, I had spent about $500 in taxes so far and was going to spend about $1500 in legal fees to quiet title. My plan was that I could double my money from selling it. Now I had to let it go back to tax sale and lost the $500 I had spent on taxes to that point. No one purchased it at the tax sale (no surprise) and the property was adjudicated to the parish. At least this one has a good ending... Fast forward 5 years and property values started going up in St. Bernard Parish. Lots were now selling for 20-25K. Since no one had purchased the lot after me at the tax sale, it was adjudicated but still in my name even though I wasn't paying on it. I inquired to find out how much it would cost to pay all the past taxes, liens and penalties and the total was close to $7,000.00. I paid all the fees and brought the lot current, sued to quiet title bringing my total expenses on this lot close to 10K. After I won the suit, I sold it a few months later for 20K.

The Good Deals

As of the time I am writing this blog, I have successfully quieted title on 9 properties and made money from 4 quit claims. Most deals were from vacant lots or abandoned house that needed a lot of work, the stuff that is easy for people to walk away from. I've never sold any of the properties I quieted title on for less than 18K and at the very least always doubled, tripled or more my money over the 4-5 year investment.

All of the times I have sued to quiet title the owners were unable to be found. It was a pretty easy, open shut case. The few times that the owners were found and wanted to keep the property, we negotiated an amount for them to pay me back what I had invested (plus some extra) and I gave them a quit claim, removing my ownership from the property and giving them clear title again. To date, I have never gone to court and fought someone who after the redemptive period expired, surfaced and wanted to keep the property. It is usually best for everyone if you can work out a deal and end it with a quiet title. However, everyone is different and some tax sale purchasers will fight the case, and if they lose, they appeal. To each their own, I'm not going to judge.

Of the 100's of properties that I have purchased, I do have one "home run" eBook worthy, deal I will share. This is not the norm and I mention this only to show you it's possible (but rare). By chance more than anything else, I bid on a nice house that was owner occupied. A year or so later the roof was damaged in a storm and the owner, who was going through a divorce, moved out of the house. There was a SBA loan that was for more than what the house was worth in it's current condition. The owner had stopped paying the loan payments and didn't try to redeem the property since there was no equity for him, he let it go. Three years had passed and there was no foreclosure proceeding by the SBA. They were included in the suit to quiet title, they were served and do not respond to the suit. A judgement was rendered in my favor and the SBA mortgage was cancelled. I then started making repairs to the house. My intention was to sell it but I couldn't find a title insurance company that was writing policies on tax sale properties at that time. So, I rented the house out for 3+ years and made enough money from rental income to repay myself not only for the cost of the repairs but all of the money I had spent on taxes and legal costs to quiet the title. After one of my tenants moved out, I was able to find a title insurance company to write the policy and sold the house. The check I received at closing was pure profit. With the exception of what I had to put aside for income taxes, I was able to take that money and pump it back into property tax sales the following year. I had gone from purchasing 5-10 tax sale properties a year to 50-60.

The Bad Deals

The more you know, the better chances you have to avoid making a bad decision and losing money. The common misconception with Property Tax Sales is that you can't lose money; either the property is redeemed and you make good interest on your money, or you get the property. That is not entirely accurate.

Here a few deals where I lost money:

I purchased a lot that was on a street that I later found to find out the street had not been constructed. It had been like this for decades with no plans to build the street in the future. There was no way to access the lot making it virtually worthless.
Lesson learned - Always know the location of the property you are biding on.

As I have already explained, 99% of the time stay away from "improvements only" property tax assessments.
Lesson learned - Read the property description and tax assessment and make sure there is nothing on it indicating that it is just for the improvement and doesn't include the land.

I once paid on a property for almost 5 years before I found out it was a dual assessment. I was doing the title search work in preparation for the suit to quiet title and noticed the error. Under Louisiana  law (RS 47:2132) you only have 3 years to request a refund for taxes that were erroneously made. (A Dual assessment is when there is two property tax bills for the same property. This is more common in rural areas like the North shore.) I lost a couple thousand dollars for the amount I paid at tax sale and the tax bill that was paid 6 months later because it was over 3 years.
Lesson learned - title research the property at the very least before you go 3 years so if there is a dual assessment you can get all of your money refunded.

The house that was demolished by the parish... The parish demolished the house and then placed a lien on the property. The cost of the lien, the taxes and legal cost to quiet title exceeded the value of the land.
Lesson learned - This is a tough one. If you going to purchase houses that are in bad condition know this can happen. You can also intervene by getting a writ of possession and making the repairs but that process is a little more complicated and would take more than a few paragraphs to explain.

Always watch out for those HOA green space tax liens, I can say I've never purchased one of those but I've seen people who didn't know better do it.

In summary....

Education is your greatest tool. Property tax sales are complicated and there is so much that goes into selecting the property to bid on, research, noticing to the legal process of quieting title and trying to get title insurance. Even in a quiet title suit, depending on the judge and the circumstances you may lose your case. You will deal with municipalities saying you are responsible for the upkeep of the property even though you don't own it. You will have to make decisions on making repairs / maintenance or letting the parish do it and them putting a lien on the property. There is also strategies to consider, do you want to try to acquire property or are just interested on making money from the interest etc.

I've met many people at property tax sales that would ask question like " Do we get the property if we win the bid". Most people have no clue what the hell they are doing when they go to bid, they just heard about it from a friend that it was a good investment. Speaking first hand, even doing a lot of research and meeting with attorneys before going to your first tax sale, you still going to make some mistakes. You will no doubt learn a few things the hard way. It's impossible to cover every possible scenario before you start and know everything...  I am still learning. But it is very wise to learn as much as you can to avoid at least the obvious mistakes and try to cut the cost of your learning by trial and error to as little as possible.