Saturday, November 25, 2006
Buying property at a Tax Sale?
The question was asked:
"After your show…I talked to someone about tax sales that had an interesting question.
What about any unpaid mortgages, leans etc
I heard of a tax sell and EPA charged the new owner millions for a clean up
Thanks, Donald"
You have to quiet the title with an attorney which involves a "legal" process. But in a corectly structured tax sale purchase, a mortgage disappears. I would suggest the investment into John Beck's Tax Sale Program. http://www.johnbeck.net. It's about $50.
Also, be aware, that the 12% interest is calculated based on:
12% of the amount owed so long as the interest does not exceed the back taxes and penalties.
Re: $2500 in taxes due - you buy property for $35,000 with a value of $125,000. 12% of $35,000 is $4200. You would only earn $2500 if they bought the property back in the 11th month.
Taxes in SC are paid: 3% if redeemed in the first 3 months, 6% 3-6, 9% 6-9 and the 12% in the 9-12 month range.
Let me explain my 2004 Charleston Real Estate tax sale experience. I visited the courthouse in Charleston County along with about 350 other people. After lunch, the room was half full and I bought a condo on James Island and a lot in North Charleston, SC for a total of $41,000. The lot was bought back by the original owner (during the redemption period) and we made $948 interest that year (or about 9.5%). See above for why 9.5% not 12%.
The condo wasn't bought back. So, we proceeded to the attorney to quiet the title. Apparantly, the original owner had decided to put it up for sale sometime after I bought it. In doing so, his potential agent told him he didn't own it any longer. He called wanting me to sell it back for what I paid for it. Obviously, I said no. However, with a value of $210,000, and no mortgage, I knew he was willing to fight the battle. So, my choice was "spend two years to win and $30,000 more in legal fees (with a slight potential of actually losing the case and the fees), or sell it back to him for (I thought it was fair), double what I paid plus interest. He took the latter option after I offered, and I walked out with an 18 month profit on 32,000 invested with $68,500 (including interest). I put that down on an underpriced piece of property which I now have rented. No hassles, no lawsuits.
My thinking is that the tax sale is for someone with lots of cash and no idea what to do with it. It's fun, it takes a long time and the payout is great. I heard once you could double your cash every two-three years in tax sales. I believe it. But, I believe in the cash leverage side of smart real estate buying. I'm in more control that way. But, the tax sale may be just right for you. Also, read the "Rich Dad Poor Dad" Series by Robert Kiyosaki; he made millions in tax sales.
"After your show…I talked to someone about tax sales that had an interesting question.
What about any unpaid mortgages, leans etc
I heard of a tax sell and EPA charged the new owner millions for a clean up
Thanks, Donald"
You have to quiet the title with an attorney which involves a "legal" process. But in a corectly structured tax sale purchase, a mortgage disappears. I would suggest the investment into John Beck's Tax Sale Program. http://www.johnbeck.net. It's about $50.
Also, be aware, that the 12% interest is calculated based on:
12% of the amount owed so long as the interest does not exceed the back taxes and penalties.
Re: $2500 in taxes due - you buy property for $35,000 with a value of $125,000. 12% of $35,000 is $4200. You would only earn $2500 if they bought the property back in the 11th month.
Taxes in SC are paid: 3% if redeemed in the first 3 months, 6% 3-6, 9% 6-9 and the 12% in the 9-12 month range.
Let me explain my 2004 Charleston Real Estate tax sale experience. I visited the courthouse in Charleston County along with about 350 other people. After lunch, the room was half full and I bought a condo on James Island and a lot in North Charleston, SC for a total of $41,000. The lot was bought back by the original owner (during the redemption period) and we made $948 interest that year (or about 9.5%). See above for why 9.5% not 12%.
The condo wasn't bought back. So, we proceeded to the attorney to quiet the title. Apparantly, the original owner had decided to put it up for sale sometime after I bought it. In doing so, his potential agent told him he didn't own it any longer. He called wanting me to sell it back for what I paid for it. Obviously, I said no. However, with a value of $210,000, and no mortgage, I knew he was willing to fight the battle. So, my choice was "spend two years to win and $30,000 more in legal fees (with a slight potential of actually losing the case and the fees), or sell it back to him for (I thought it was fair), double what I paid plus interest. He took the latter option after I offered, and I walked out with an 18 month profit on 32,000 invested with $68,500 (including interest). I put that down on an underpriced piece of property which I now have rented. No hassles, no lawsuits.
My thinking is that the tax sale is for someone with lots of cash and no idea what to do with it. It's fun, it takes a long time and the payout is great. I heard once you could double your cash every two-three years in tax sales. I believe it. But, I believe in the cash leverage side of smart real estate buying. I'm in more control that way. But, the tax sale may be just right for you. Also, read the "Rich Dad Poor Dad" Series by Robert Kiyosaki; he made millions in tax sales.
