That is, if you don’t make a lot of newbie mistakes right out of the gate. Buying back tax property is hands-down the easiest way to make money in the real estate industry, but it’s also a very easy way to buy worthless properties and money pits. If you’re going to invest this way, you can get rich doing it, but you’ve got to know what you’re doing– read on.
Many new investors think that buying back tax property is as simple as going to the tax sale and paying the back taxes for something, and walking away with a deed. You’re not one of them, right? Common sense will tell you that there will be other bidders there, and that nice properties will get bid up close to retail value. It’s almost impossible for a one-man show to do any real damage there.
Also, you can’t inspect the properties you’re bidding on. What if they’re infested with rats and roaches? What if there’s a giant hole in the roof you can’t see, or a poisonous vapor issue? Maybe the owner took all the copper wiring out of the house before he left, or let the tub overflow for three days and now there’s no ceiling below the bathroom anymore. Buying back tax property without seeing it first is an incredibly foolish move.
Not only that, but in most states, you’ll end up holding a lien or the deed for at least a year before you can ever step foot in the property. This is called the redemption period, where an owner can come in and pay the taxes off and reclaim the property. How well do you think that owner is going to take care of a property he already lost during that year? A lot can happen to a property in a year. A tree branch could fall and damage the roof. Gang members could break in and completely trash the place.
When you’re buying back tax property, you need to be able to get it without going the tax sale route, and you need to be able to see it first so you know what you’re getting into. There’s only one way to do this: make a list of back tax property you’re interested in, and contact the owners directly.
Very few investors take this route, so you’ll usually find you are the only one who’s bothered to call these owners– who surprisingly, are often happy to hear from you– no joke– and more than willing to make a very nice deal with you to buy the property. After all, if they don’t, they’ll lose everything. Desperately motivated sellers, anyone?
If you’re serious about buying back tax property, you absolutely have to put aside your awkward feelings about contacting owners and dive right in. They don’t bite. And in this economy, they’re everywhere. With almost no one competing against you for these properties in this way, you’re crazy not to strike while the iron’s hot.