All Forum Posts by: Jim Reynante

I agree with @Kyle J. about the wording and actual process. Negotiate the deal with the homeowner so that you've got an agreed upon price. Execute the sale through escrow, at which point the back taxes owed would get paid. seller would receive the net proceeds and you would get title/deed.

Hello Starting Out-

Lots to unpack with your question, so I will only hit the some of the bigger items.

Investing in tax lien certificates as a method of foreclosing on the property is not a valid strategy in my opinion. For me, I invest in tax liens because of the return rate. I have found that most only will redeem before they lose the property at auction.

As I look at my numbers, historically I have only been able to acquire about 4% of the properties that I hold the liens on. So if my goal is to own a property, I will use different methods other than a tax lien certificate.

I believe that all counties in the United States (over 3000 counties) have laws in place that allow them to collect delinquent property taxes using different approaches. Some counties sell tax liens certificates and some counties sell tax deeds. You’’l need to research the county that your interested in and find out which method that they use.

I invest in REITs as well as directly held real estate. Each strategy has advantages and disadvantages, but having both in my portfolio works well for me. But back to your original question... 

Here's a list of pros and cons I have found with my REITs:

Pros of Investing in REITs:

1. Diversification: REITs let you invest in different types of real estate, like shopping malls, apartments, and office buildings. This spreads out your risk because if one property doesn't do well, others might.
2. Easy to Buy and Sell: You can buy and sell REITs like stocks on the stock market, which is much simpler than buying actual buildings.
3. Regular Paychecks: REITs pay you dividends, which are like regular paychecks. They have to give most of their earnings to investors (typically 90% of profits), so you get some income from your investment.
4. Experts Manage Them: You don't have to be a real estate expert. Professionals handle everything, from buying properties to collecting rent and maintaining them.
5. Anyone Can Invest: Even if you don't have a lot of money, you can invest in REITs. It's a way to be part of big real estate deals.
6. Potential for Gains: As the properties owned by REITs make money and grow in value, your investment might also grow over time.
7. Some Tax Perks: Depending on your situation, you might get some tax benefits from investing in REITs.
8. Transparency: REITs provide information about how they're doing, which makes it easier to know what's happening with your investment.

Cons of Investing in REITs:

1. Risk of Losing Money: Just like stocks, the value of your REIT investment can go up and down, so you might lose money if the market isn't doing well.
2. Interest Rates Matter: When interest rates go up, it can hurt REITs because they might have to pay more to borrow money, and people might prefer other investments.
3. No Control: You don't get to decide what happens with the properties. The REIT's managers do all that, and you have to trust them.
4. Fees to Pay: REITs might charge fees, which means they take some of the money you make from your investment.
5. Taxes to Consider: You might have to pay taxes on the money you get from REITs, and it could be higher than some other investments.
6. Not Great for Big Profits: While you can make money with REITs, they might not give you the same chance for big profits as buying and selling properties on your own.
7. Sensitive to the Economy: Some types of REITs, like those with shopping malls or office spaces, can be affected by how well the economy is doing.
8. Prices Can Be Unpredictable: Sometimes, the prices of REITs can be hard to predict because they depend on what people think they're worth.

Remember, investing in anything involves risks, so it's important to learn more, do your homework, and maybe talk to someone like a financial advisor or a trusted adult before making any investment decisions.

Whenever I consider a property for a tax lien or tax deed investment, I always have to perform my due diligence to assess its potential and risks.

Yes, a tax lien certificate will pay me a rate of return… but only if the certificate is redeemed. If not, what happens? I would get the opportunity to foreclose and acquire the property. So then the question now becomes, would I actually want to foreclose and own the property?

For tax deed investing, I ask the same question... "Is this a property I want to own?"

When looking at the possibility of owning a property through an auction process, it comes down to two things for me:

1 - Is the property useable?

2 - Is the property valuable?

If the answer “Yes”, then I would spend some time researching the property.

Here are some key things I look for as a part of my due diligence of a property before you decide to invest in its tax lien:

 - Property Location

 - Property Condition

 - Property Type

 - Ownership History & Existing Title and Liens

 - Research the tax records and assessments

 - Local Real Estate Market (is it growing or shriking?)

- Property Zoning and Regulations (can you add an ADU?)

- Code compliance (did the city/county issue any code violations?)

 - Redemption Period (is there one? If so, how long?)

- Easements (is the property required to provide access, restrict modifications?)

- Environment issues (if a commercial property, is there any special clean-up required. For example, an old gas station may need to have the underground tanks removed... that alone can cost $20K-$30K!)

 - Potential for Profit and Exit Strategy

That is a brief list of what I research and look for in a property BEFORE I actually bid on a tex-default auction.

Fees and other costs can vary from state-to-state and from county-to-county.

But in general, the winning bidder will pay:

- The winning bid amount

- Auction processing/handling fees

- County court fees (processing, paperwork, filing fees)

- Any outstanding county fees and/or penalties

If in doubt, contact the County Tax Collector’s office with your payoff questions about the specific property you are interested in.

Here's are a few things to consider when participating in a sheriffs sale/auction for real estate:

Tax Trouble: When someone doesn't pay their property taxes for a while, the local government can put a lien on the property, which is like a claim to the property.

Public Auction: The Sheriff's sale is like a public sale where anyone can try to buy these properties. They usually happen in a public place like the county courthouse.

Minimum Price: The starting price for these properties is the total amount of unpaid property taxes, penalties, interest, and other costs. This is called the minimum bid.

Bidding War: People who want the property bid on it, and the one who offers the most money wins. It can get competitive. In your scenario that you describes, there was no other bidders... which is a huge plus for you!

Owner: If you win the auction and pay the highest bid, you get a legal document called a Sheriff's deed. This means you now own the property, but there might still be other debts on it.

Redemption: In some counties, the old property owner has a little time after the sale to pay what they owe and get their property back. If they do, you get your money back plus some extra (e.g., interest, penalty fees). Please keep this in mind, do not make any upgrades on the property until AFTER the redemption period expiration. For example, let's say the redemption period for a property you won at auction is 6 months. Now during the 5th month, you decided to put a new roof on the property. Then, the original owner redeems the property after 5 month and 28 days have passed. The original owner get the property back, you get your original purchase price amount back plus the interest and penalties that were collected. But what about the $20k you spent for the roof? Unfortunately, that is a sunk cost and you lose out.

Risks and Homework: These auctions can be tricky, so you need to research the property to know if it's a good buy. Look into the property's condition, its history, and any other problems.

Rules and Laws: The rules for these sales can be different depending on where you are. Make sure you follow the rules and get legal advice if you need it.

So, Sheriff's sales can be a way to buy properties at lower prices, but you have to do your homework and be aware of the rules and risks. It's a bit like a competitive auction for houses with tax problems.

Some counties use the sheriffs office as the means to sell tax-defaulted properties. When the owner of a home doesn’t pay their property taxes, it becomes in violation of the local county’s right to charge homeowners for the services that the county provides (e.g., police, fire, libraries, teachers, maintenance of county buildings). As a result, they county will exercise their right to levy a lien on the property and then the county may even confiscate the property if non-payment of taxes continues.

Now keep in mind that when a county seizes the property, the county does not actually want the property. The county wants a responsible owner to own the property and pay the property tax every year.

So then what can a county do if they confiscate a property? Well, the county is within their rights to sell the property to recoup the outstanding taxes. The county tax collector office can facilitate the auction themselves, but sometimes counties will delegate the activity to the local sheriff’s office. This is sometimes referred to as a “Sheriff’s Sale” or “Ex Officio Sheriffs Sale/Auction”. Each county may have different names, but the general principal is the same.

Here's what you need to know for sheriffs sale/auction:

Tax Trouble: When someone doesn't pay their property taxes for a while, the local government can put a lien on the property, which is like a claim to the property.

Public Auction: The Sheriff's sale is like a public sale where anyone can try to buy these properties. They usually happen in a public place like the county courthouse.

Minimum Price: The starting price for these properties is the total amount of unpaid property taxes, penalties, interest, and other costs. This is called the minimum bid.

Bidding War: People who want the property bid on it, and the one who offers the most money wins. It can get competitive.

New Owner: If you win the auction and pay the highest bid, you get a legal document called a Sheriff's deed. This means you now own the property, but there might still be other debts on it.

Redemption Chance: In some places, the old property owner has a little time after the sale to pay what they owe and get their property back. If they do, you get your money back plus some extra (e.g., interest, penalty fee)

Risks and Homework: These auctions can be tricky, so you need to research the property to know if it's a good buy. Look into the property's condition, its history, and any other problems.

Rules and Laws: The rules for these sales can be different depending on where you are. Make sure you follow the rules and get legal advice if you need it.

So, Sheriff's sales can be a way to buy properties at lower prices, but you have to do your homework and be aware of the rules and risks. It's a bit like a competitive auction for houses with tax problems.

Do not look for a centralized database for tax liens or tax deeds.

I always recommend to people that they should contact the county officials for the area(s) they are interested in for investing. Call and talk to the county tax assessor office or tax collector office personnel. Often times they will answer all of your questions or point you to their FAQ website.

I know it is a lot of work to go research and contact each county, but it the only method I would use. If you try to use a 3rd party service, you may find that their information old, outdated, inaccurate, missing, etc.

Here’s a quick way to search for a county’s tax lien auction information on Google:

“<enter county name> in <enter name of state> tax lien (sales, auction)”

Just insert the name of the county and state. For example, if I want to know more about the tax lien sales in Jackson County Mississippi, I would enter:

“Jackson county in MS tax lien (sales, auction)”

Google will return to me the results that match my criteria. At or near the top of the list should be the official Jackson County website that describes tax delinquent sales, FAQs, and other important information. FYI, I always specify the name of the state in my query because sometimes there are multiple counties with the same name in different states.

Good Luck you and your investing!

Whenever I consider a property for tax lien investment, I always have to perform my due diligence to assess its potential and risks.

Yes, a tax lien certificate will pay me a rate of return… but only if the certificate is redeemed. If not, what happens? I would get the opportunity to foreclose and acquire the property. So then the question now becomes, would I actually want to foreclose and own the property?

When looking at the possibility of owning a property through an auction process, it comes down to two things for me:

1 - Is the property useable?

2 - Is the property valuable?

If the answer “Yes”, then I would spend some time researching the property.

Here are some key factors to look for in a property before you decide to invest in its tax lien:

 - Property Location

 - Property Condition

 - Property Type

 - Existing Title and Liens

 - Local Real Estate Market

 - Property Zoning and Regulations

 - Redemption Period (it can vary a LOT depending on the state and/or county)

 - Potential for Profit and Exit Strategy

That is a brief list of what I research and look for in a property BEFORE I actually bid on a tax lien certificate.

Hi Brady-

=== Step 1: Research and fully understand tax lien certificates

- Many people I talk to do not fully understand what a tax lien is, how it gets levied on a property, how it works as an investment, etc.

=== Step 2: Determine what your budget is for tax Lien investing

- Yes, “It takes money to make money” And while it is possible to get some very profitable returns from tax lien certificates, it does require money to get started (you have to be able to purchase the tax lien certificate in the first place).

=== Step 3: Identify an area that you are interested in investing in tax lien certificates

- The rules and returns vary from state to state, and even county to county. So I recommend focusing on a single county and getting to know the area really well.

Understand the area, including:

- Demographics (e.g., avg household income, avg home price)

- Growth outlook (are people moving into the are or out of the area?home prices are trending higher)

- Related influences (e.g., is Amazon going to build a warehouse in the area and require 100 new employees that need housing)

=== Step 4: Find tax lien auctions

Find out about the tax lien auctions in the area(s) you are interested in, because not all counties sell lien certificates. Some counties only sell tax deeds (BTW, ensure that you do know the difference between tax lien certificates and tax deeds)

- Here’s a quick way to search for tax lien auctions on Google:

“<enter county name> in <enter name of state> tax lien (sales, auction)”

Just insert the name of the county and state. For example, if I want to know more about the tax lien sales in Jackson County Mississippi, I would enter:

“Jackson county MS tax lien (sales, auction)”

Google will return to me the results that match my criteria. At or near the top of the list should be the official Jackson County website that describes tax delinquent sales, FAQs, and other important information.

=== Step 5: Contact the county and inquiry about the their tax lien sales.

- Do they auction online or in-person

- When do they hold their auction? Once a year? Once a month? Randomly?

- Where can you get the rules/FAQ about their auction

- Get the list of properties scheduled for the next auction of lien certificates

=== Step 6: Due Diligence

- Review the auction listing and thoroughly research the properties for tax lien certificates you are interested in bidding

This is just a quick, high-level list of the activities I perform when researching for tax lien certificates. There is obviously lots more detail about finding auctions, researching properties, participating in auctions/bidding, return rates, what to do after winning a bid, etc.