Tax auctions better bet than “dollar home” programs

Some communities around the country have highly-touted “dollar home” programs, designed to get older, mostly abandoned homes back on the tax rolls. In theory, it’s a great idea, but in practice, it often doesn’t work very well.

Here’s an example. Here in South Bend, Indiana, the city, under the guidance of our Mayor, implemented a dollar homes program a couple years ago with much fanfare. Many other cities with blighted areas have tried similar programs. For the most part, it was nothing more than political grandstanding, and it was designed from the very beginning to fail. In fact, very few of these programs have ever worked. Here is the problem. The South Bend dollar homes program set aside homes in blighted areas, in neighborhoods where homes are sitting on the market for over a year and selling for maybe $30,000 to $50,000. That in itself is not bad, these areas are where there needs to be programs like this. But the requirements were very stiff. The buyer was obligated to put $70,000 in repairs into the dollar home within five years, and was obligated to prove to the city that they were creditworthy enough to obtain the financing to do so. This requirement did two things: First, it eliminated virtually everybody that wanted a dollar home right off the bat, because of the stiff credit requirement. Second, it made it financially impractical, even if you could get the credit. Why put $70,000 into renewing an old home in a broken neighborhood, when for the same money, you could get a home already in good condition for the same price elsewhere? And what’s more, there is no way that a home in the targeted neighborhood would ever be able to be re-sold for enough money to recoup the money spent.  It’s interesting to note that although several people applied for the Dollar homes program here, not a single person has ever qualified to get one.

Although it’s a longer-term play, obtaining a tax lien certificate at the annual auction is a much better strategy. You will of course, probably have to put money into repairs, but nowhere near the impractical $70,000 figure cited in the silly dollar homes program. There is no timeline requirement for putting in any certain amount of money into the home once you have acquired title, all you have to worry about is complying with the local code enforcement department. You do of course, have to be willing to put in some time. You have to wait for the auction in October, then wait another year to sit out the redemption period. Then it will take another month or two to complete the paperwork. But, in the end, the house is yours, with no extra requirements.

You can find out the details of how to participate in tax auctions, and how to obtain tax lien certificates, in my book, “Learning to play the real estate tax auction game.”

How long do you have to wait after the auction to get your title?

The answer is, as is almost always the case, “it varies.” It depends on your own state’s statute. Here in Indiana, it’s one year. What that means is, after you have won the real estate tax lien at the county auction, if the owner doesn’t pony up their back taxes, penalties and interest within one year, then you get title to the house. But there are some exceptions; if the lien is not sold at auction, here in my county (St. Joseph County), a second auction will be held, and then the period of redemption  is only four months.

A blog entry on “Blog the Rockies” talks about tax liens in Boulder County, Colorado, where the period of redemption is three years. Of course, if you’re interested in gaining title to homes, then three years is an awfully long time to wait, but this is one of those regions where very few homes actually switch title to the investor. In almost every case, the investor isn’t going for title, but going after the 11 percent interest they will earn between the auction date and the day the original owner pays their delinquent tax bill. So–you’re not going to be able to pick up title to a house for five hundred bucks in Boulder County, but still, eleven percent interest isn’t chump change, either.

Find out more in my book, “Learning to play the real estate tax auction game: The best recession-proof real estate investment you’ll ever make”, now available on Amazon.com or by clicking here.

“Learning to play the real estate tax auction game” now available!

My new book, “Learning to play the real estate tax auction game” is now available. This is the definitive guide to tax lien auctions–documenting my own experiences in the field, my successes, and detailed, step-by-step information on how to make big returns in the real estate market.

The book, priced at just $15.95, is a great first step for those of you who want to get high returns on your money, or get title to houses that you can live in, re-sell or rent out. Read about how I helped someone get clear title to TWO houses for just $3,000, and how today, he rents one out and lives in the other. Read about how I was able to buy a house for $235! And–read about some of the facts and fallacies about this fascinating business, and what to watch out for.

One of the main things I want to point out in this book is that this isn’t just a business opportunity for the wealthy. I’ve seen plenty of people go to the county real estate tax auction with just a couple thousand dollars, and walk away with title to one or two houses. Sure, there are people with more money than you who will be there–but Learning to Play the Real Estate Tax Auction Game will show you how to sit at the same table with the big guys and come out ahead at the end of the day.

Early feedback shows this guide to be both informative, and a fun read as well. You’ll learn everything you need to know to go into this business, even if you’re low on cash. And you’ll get a chance to read accounts of my own experiences in the business–and a look at my own philosophies of business and wealth-building. Order a copy of Learning To Play the Real Estate Tax Auction Game today for just $15.95, and learn how to grow wealth during the recession!

Investing on a slim budget

There are two types of people that go to the county tax auctions, and there is always some unfounded resentment. First, there are big investors. They have deep pockets, and they will typically bid up the price on higher-end properties, and walk away with dozens of liens at the end of the day. I’ve seen these people spend upwards of a million dollars at a single auction. Their goal is to invest for the purpose of getting financial return–that is, they don’t want title to houses, they are targeting houses that are occupied and the owners of which are likely to pay back the taxes and the substantial penalties. It’s a darn good investment, especially when banks are paying two percent on CDs!

On the other hand, there are small-timers who also attend. People who want to get just one or two properties. They’re not interested in getting interest, they want title to an actual house, either to live in or rent out. Now this latter category of person is no less worthy than the first category, but sometimes there is some resentment, which comes mostly from misunderstanding. I’ve heard a lot of these small-timers who attend county real estate tax auctions complain about the deep-pocketed investors taking all the properties, and mistakenly believing that they don’t stand a chance of getting anything. Nothing could be further from the truth! It’s just a matter of coming prepared, and waiting it out. You don’t have to have big money to play and win at this game. Here’s a few tips: Don’t walk away mid-auction in frustration. Come prepared with several properties to select from in case you get outbid on your first choice. And most importantly, remember that the guys out there with the big money are no better than you are.

There are a lot of houses out there that will slip through the cracks, that the big-time investors will not target. Remember, they’re looking mostly at high-end properties that probably will get redeemed before the end of the year anyway, so you are really targeting different areas. You want title to the house, so you are targeting a whole different category.

Come with as much money as you can muster, but don’t be intimidated because other people have more than you. All it takes is a couple thousand to win a good bid–and if you read my book, you’ll see that I got one for just $235!

County tax auction profits

Hi everybody. Dan Blacharski here. I am the author of “Learning to Play the Real Estate Tax Auction Game”, which will be available shortly on Amazon.com and also through this site. In the book and within the entries of this blog, I will share some of the secrets of this opportunity, and why RIGHT NOW is the best time to take the leap and get into county real estate tax auctions.

A short introduction to real estate county tax auctions: Every county in America depends on property taxes to fund necessary services. When property owners fall behind on their property taxes, or when they abandon their properties, the county doesn’t have enough money to fund those services; as a result, they seize the properties for delinquent taxes (by putting a lien on them), and then auction those liens off at a public auction. When you win a bid at a tax lien auction, you own the lien. That means when and if the owner pays the back taxes due, they will also have to pay a substantial penalty and interest, which goes to you, the investor. It is very common to get returns of 10%, 20%, 30% or more. On the other hand, if the property owner does not repay the back taxes within a prescribed period of time, then the county assigns title to the property to you, free and clear. Either way, you can’t lose.

Investors use this auction technique in two ways. Some investors simply go into it for the financial return, banking on owners paying up their taxes to avoid losing their homes. Other investors, like myself, focus more on properties that are vacant or abandoned, which are unlikely to be redeemed by the owner–and are able to gain title to properties very inexpensively. In a later entry, I’ll describe how I helped a friend of mine gain title to two homes he won at auction for a total of $3,000; now he is living in one and renting out the other.

Look for more information here about the specifics of how to participate safely in this opportunity, and how to make big money through real estate tax auctions during the present recession.