Monday, January 22, 2007
This is the most important step in the process and whether you do this properly or not could mean the difference between being extremely profitable and losing money on your investment. You need to do due diligence on tax sale properties before you bid at the tax sale. The exact procedures that you follow will vary depending on which state you are investing in and whether you are investing in tax lien certificates or tax deeds. You will have to be a little more rigorous when doing due diligence for tax deeds than you than you do for tax liens.
When you buy a tax lien, you are not buying the property, you are only paying the taxes and putting a lien on the property. But when you buy a tax deed, whether it is a regular tax deed or a redeemable tax deed, you are actually purchasing the property and you are now the owner of record. That means that you are now responsible for paying the taxes and any assessments on the property and you are liable for anything that happens on the property. If there is an environmental problem with the property, you're responsible for cleaning it up and that could cost you more than any profit that you might make on your investment.
Another reason that you’ll want to check out tax sale properties for deed sales a little more rigorously than tax lien properties is that not all tax deeds are sold “free and clear” of any other liens. You may have been told that when you buy a property at a tax deed sale you are not responsible for any other liens on the property, like an existing mortgage, for instance. Depending on the state, this may or may not be true. Different states have different laws regarding what liens survive a tax sale. You need to know if there are any types of liens that do survive the tax sale and you need to look for them before you bid on a property in the sale. Even for liens that do not survive the tax sale, you still need to check to see that proper notification was given to all lien holders. If proper notification was not given to a lien holder before the tax sale, the lien holder could contest the sale.
Whether you are investing in tax liens or tax deeds you will still have to find the value of the property to make sure that it’s worth it. You do not want to buy a tax lien certificate on a property that is not worth a few times your initial investment. You have to plan on your expenses for recording your tax lien certificate, paying subsequent taxes for the duration of the redemption period (in states that allow you to pay them), and any foreclosure costs that you might incur if the lien is not redeemed. The property should be worth at least 3 times what you determine your investment will be, taking all these expenses into account.
You can use one of two different methods to find the value of tax sale properties. You can find the tax assessment data, or you can check with a web site that gives recent sales prices of properties in the area. Some states have assessment data online. If the tax assessment information is not online, you will have to make a trip to tax assessor’s office to find the information that you need.
This is the fifth article in a series of eight articles about the seven steps that you need to follow in order to build a profitable portfolio of tax lien certificates or tax deeds. If you missed the previous articles in this series you can read them on this blog.
For more information about how you can build your own profitable tax lien portfolio, I invite you to listen to my mini seminar at www.taxlienlady.com/ProfitablePortfolio.html.
In my first two articles on the Women’s Power Summit, I summarized presentations from Jeanette Cates, the Technology Tamer and Loral Langmeier, the Millionaire Maker. I consider both of these women to be my mentors, since I have taken their courses, read their books, and heard them speak before, though I had never met them in person. So of course I was looking forward to meeting these two very successful women that I continue to learn from. But the presentation that I really needed to hear at the Women’s Power Summit was “How to Play to Win with Your Business,” given by Barbara Hamphill.
Barbara Hamphill is a nationally renowned professional organizer. She is a past president of the National Association of Professional Organizers and has appeared on many television shows including Today, Good Morning America, and CBS This Morning. She is a sought after speaker and who counsels major corporations on organizing for efficiency. She is the creator of Taming the Paper Tiger Software and the Author of Taming the Paper Tiger at Home and Taming the Paper Tiger at Work. Her presentation, “How to Play to Win with Your Business,” was all about how to organize your business for success.
Her organizing SYSTEM is an acronym for Saves You Space, Time, Energy, and Money. According to Ms. Hamphill there are three essential components to any system of organization. Your individual methodology, or a way to think about organizing that works for you. Tools that you will need to get organized. And maintenance, which is the actual system that you will use to stay organized. Ms. Hamphill argues that there is no one organizing system or method that works for everybody, but that you have to find a method that works for you.
Start with a productive setting or environment. A productive environment is one in which everything around you supports who you would like to be. One of her favorite statements in her organizing seminars is “have nothing which you do not know to be useful, think to be beautiful, or love.” You know that you have a productive setting when there is no clutter, there is a place for everything, you can find anything you need, and you have a beautiful environment.
Although there is no one “system” that works for everyone, there are six tools that everyone needs to have in order to get organized. Barbara calls them the “magic six.” These consist of: your desk top tools, she recommends a 3 tired box consisting of an in box, an out box and a “to file” box; your waste basket; your calendar, which is actually three different calendars – a planner pad, your personal calendar and your family calendar; your database; your action files; and your reference files.
Barbara teaches the FAT system to get rid of clutter. FAT stands for File it, Act on it, or Toss it. She says that when it comes to clutter, these are the only choices that you have. One of the skills that you need have in order to deal with the clutter in your home or office is something that she calls “the art of wastbasketry.” When you go through the mail or anything that comes into your inbox, ask yourself these questions:
Does it require action?
Is it recent?
Is it difficult to get again?
Does it have legal or tax implications?
Does it have a specific use?
If you answer yes to any of these questions either file it or act on it. If you answered no to all of these questions, then ask yourself what is the worst possible thing that could happen if you tossed it out. If you and your organization can live with the consequences, then toss it, if not, file it.
For more help in the clearing clutter and getting your home or office organized, you can read one of Barbara Hamphill books. Her books are also available on CD and she also has a Taming the Paper Tiger software program.
This is the third article in a series about the Women’s Power Summit that was held in Atlanta in October of 2006. If you missed the previous articles, you can read them on this blog.
Joanne Musa is a tax lien investing consultant and creator of taxlienlady.com, an educational web site to help people that want to learn how to invest in tax lien certificates and tax deeds. To find out more about tax lien investing, go to http://www.taxlienlady.com/.
Sunday, January 07, 2007
Once you determine where you are going to invest, the next step in the process to building your profitable tax lien portfolio is finding the tax sale information. You need to find out when and where the tax sale is held and obtain a list of properties that are in the sale. For most areas this step will be easy, you just need to know where to go and who to contact to get this information. Sometimes you will have to pay for it and sometimes you will be able to get it free of charge.
In my e-book, Tax Lien Lady’s State Guide, I tell you who to contact in each state to find out about tax sales. I also give links to the state and county web sites. I recommend that you first contact the county tax collector, or whoever is responsible for the tax sale and ask for the tax sale information. Ask for a list of tax sale properties. Usually you can get this list for free and sometimes you can even get it online.
All tax sale lists are not created equal. Some lists will have all the information that you need to do your due diligence (the next step in the process of building your profitable tax lien portfolio) and some will only list the properties tax number, block and lot, owner of record, and amount due. It may not even include a physical address. If that is the case, then you have two choices, you can buy a detailed tax sale list that includes all of the information that you need, or you can look the information up yourself, which can be a very tedious process.
Very large detailed tax sale lists can be quite expensive, even a few hundred dollars, so if there are a lot of properties in the tax sale you would be better off to limit the amount of properties that you are interested in and look up the information that you need yourself. You can limit yourself to a particular area or to only certain types of properties to make the next step in the process a little easier. If the list is not that large and costly you may want to buy the tax sale list from a tax sale list provider. It will save you lots of time in doing your due diligence. This is a summary of step three to building a profitable tax lien or tax deed portfolio. In subsequent articles I will go over the remaining four steps to building your profitable tax lien portfolio in depth to give you an idea of what each step involves. For more information about how you can build your own profitable tax lien or tax deed portfolio, I invite you to sign up for the free preview teleseminar to my new 8 week coaching course, "Build Your Profitable Tax Lien Portfolio." To register, go to http://tinyurl.com/f2hy4.