There are many differing ways to turn a profit by investing in the USA property tax system, and four immediately come to mind.
- Tax lien sales.
- Tax deed sales.
- Front running tax deed sales.
- Overages from a tax deed sale.
As a prospective investor, or as a new investor who would like to know more about the industry, the question that remains to be answered is — “Which is the best strategy?”
Well, all of them are good. However, there are advantages and limitations to each. Let’s take a look.
Tax liens sales.
Tax liens sales are perfect for the institutional and cashed up investor as investing large sums of money are necessary to see a good return. $10,000+ will pay you $1800+ in the higher interest rate states. You may get lucky and even get the deed, however the limitations are that you rarely get the deed, as 97% are sold at a tax deed sale. And, you may have to wait up to two years to get paid! Also, you cannot approach the owner in any way. This means you cannot work front running as you are prohibited by law to approach the owner.
Tax deed sale.
A straightforward public bid auction. If you have done your research and due diligence, and are the highest bidder, you own the deed! Tax deeds are often picked up for taxes owed, and for under $1000! Simple, straightforward, and easy.
Front running.
Front running is also known as “grabbing the deed”. There are two ways to profit from this strategy. Work numerous tax deed sales in advance by seeking to contact current deed owners. Send out large numbers of letters asking owners to quit claim the deed over to you before the auction day. Perhaps one in 100 will respond. Once you have the deed you are the new owner. Your don’t have to bid for it, and you got it for taxes and fees owed. Or, you can let it go to auction and receive 100% of the overbid monies in 30 to 60 days.
Overages.
Overages are what occurs after the tax deed sale. Overages are also known as excess funds. working this strategy involves skp tracing skills to find former owners. These leads are usually cold and dead leads, with about one in 200 responding. If you’re lucky enough to find the owner and the power of attorney is given to you, you may get up to 50% of the refund. This is lucrative when it does occur, but it can cost you skip tracing and attorney fees.
Out of the four strategies, only two give you the opportunity to own the deed; front running, and the tax deed sale itself. Now, let’s recap and take another look.
- Tax lien investing takes too long to return a profit, and gives too little of a return on the investment; unless you’re investing large sums of money.
- Overages can also take too long, and can be very frustrating and time consuming to see a return of only 50% of the overbid excess funds; after skip tracing and attorney costs are incurred.
- Front running will get you the deed for taxes and fees owed, with very little cost, and in a short time frame.
- The tax deed sale will get you the deed for the highest bid, often for only the taxes and fees owed.
If your goal is to own the deed, front running and buying at a tax deed sale are the best strategies to focus on. Why?
Owning the deed is the goal! If you own the deed you have collateral, and a potential sale at a greater profit at a later date.
Once the economy rebounds your newly acquired real estate assets will also increase in value. The strategies that give you ownership of the deed are best, for “Owning the deed is the goal!”
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