You’ve probably heard that investing in real estate is one of the best ways to get rich. This is true, but you have to really know what you’re doing, or you’ll find yourself in a lot of pickles early on. Don’t worry– even Donald Trump didn’t get where he is without a little help; and he won’t be your competition, if you’re going to work the back taxes owed on homes angle.
If you’re going to invest in today’s economy, these properties are prime investment material– almost always mortgage free– meaning brimming with equity and ready to be flipped for a huge profit. You can’t overlook them if you want to be successful in the coming years– there’s going to be more and more of them as back taxes owed on homes catch up with their owners, and they lose their properties to tax sale.
First of all, what does this mean, “back taxes owed on homes”? Well, it’s simple. When a homeowner doesn’t pay his or her taxes and gets behind, their home will become delinquent in the county they live in. It differs from county to county, but at some point within a few years, usually, if the owners can’t come in and pay those back taxes owed on their homes, then the properties will be foreclosed upon by the county and liquidated.
The liquidation happens one of two ways- either the deed to the property is sold, or a lien on the property is sold. Sometimes this is done by auction, other times by lottery, and still other times by round robin. It can happen all different ways, even within the same state. It’s a very competitive way to get properties. Buying tax liens or deeds has become very popular, and with the rise in popularity has come a sharp decrease in the profits to be had that way.
You’re going to avoid all that. If you want to make money off of back taxes owed on homes, you’ll have to stay one step ahead of tax sale investors, and get the deed to the property before the auction, without bidding- or after the auction, in the period of redemption where the owner can still bail out his or her home (usually, around a year).
Well, it’s shockingly simple, and yet if you pay attention, you’ll see that almost no one does this. Why? Maybe they’re antisocial. Maybe they feel guilty getting involved in other people’s business when they’re “down on their luck.” Maybe they’re just plain chicken.
What am I referring to? Simply contacting the owner and dealing directly with them.
Let’s say it again: you can get rich investing in back taxes owed on homes, but only if you can be sure that property’s going to be yours once you pay those taxes. The way to do that is not to bid on the deed or a lien at the auction– the owner can still come back and pay that off, and take their deed right back from under you. The only way you’ll be able to invest in those properties with surety is if you deal directly with the owners.
It may seem counter-intuitive to you, but you’ll be surprised how often these owners are glad to hear from you! By the time the tax sale is rolling around, these owners are desperate to get out of the tax delinquent situation, and will be primed and ready to sell to you for pennies on the dollar. You’ll also find absentee owners and heirs who inherited an unwanted property that are dying to get the burden off their shoulders and sell to you for a few hundred or a few thousand dollars.