Tuesday, September 30, 2008

Tax Deed Investing: A Better Way to Purchase Property for Pennies on the Dollar

This is the second article in a series about advanced strategies for buying tax delinquent properties. You can read the first article in the series at http://taxlienconsulting.blogspot.com/2008/09/tax-deed-investing-can-you-still-get.html. In my last article "Tax Deed Investing: Can You Still Get Property For Pennies on the Dollar," I introduced you to Jack Bosch and his Land For Pennies system of buying tax delinquent properties. In this article, I'd like to tell you a little more about Jack's method and explain how it's different from investing in tax lien certificates or tax deeds.

When you purchase a tax lien certificate you very rarely get the opportunity to foreclose on the property. On the very small percentage of liens that you might get to foreclose on, it can take years from the time you purchase the tax lien certificate to when you actually get the property. You have to purchase the lien, wait the redemption period, and then go through the foreclosure process. This can take 3 years, or even longer in some states. So tax lien investing is not a good way to get property for pennies on the dollar.

A better way to purchase properties for a fraction of market value is tax deed investing. But tax deed investing is getting very competitive. It is not uncommon in some states for properties to get bid up to 80% of market value at a tax deed sale. In most states, when you purchase a deed at a tax sale, you do not get clear title. You have to then go and clear the title before you can sell the property to someone else. This takes more of you time and money, reducing your profit in your investment.

There are a lot of advantages to using the Jack Bosch's Land for Pennies system of buying tax delinquent properties over investing in tax deeds or liens. With his system, you don't even go to the tax sale, so you avoid a lot of the competition. You purchase the property from the property owner before it ever goes into the sale. By focusing on land in more rural areas, you can further reduce your competition. Since you are purchasing the property directly from the owner, you get clear title to the property and can sell it fast for quick profit. And you can even get these properties at a lower price than if you you had to bid on them at the tax sale.

This Land for Pennies system is a way that you can purchase tax delinquent properties for pennies on dollar without going to the tax sale, with minimal competition from other investors, and get clear title to the property. Tune into the next article in this series to learn about Jack's steps for success. You can find out more about Jack's Land for Pennies system and his new Land Profits Formula on my podcast blog at www.TaxLienInvestingTips.com

Sunday, September 14, 2008

Tax Deed Investing: Can You Still Get Properties For Pennies on the Dollar?

I’ve been investing in tax lien certificates for a while now – since 2002, and I’ve been fairly successful at it. I now invest in 2 different tax lien states, and this past year I’ve started investing with money in my self-directed IRA. In spite of what you may have seen on a late night infomercial, tax lien investing is not a good way to obtain property.

In my experience, when you purchase a tax lien certificate on a good property, it almost always redeems. I’ve purchased hundreds of liens and have never actually got a property through foreclosure. But I have always wanted to own investment real estate. I believe that the buy and hold strategy of real estate investing is the fastest way to wealth, but I could never get myself to sign my life away and put a whole bunch of money down on an investment property. So three years ago when my husband and I moved our family to the Commonwealth of Pennsylvania, I dabbled in investing in tax deeds.

At first I thought that tax deed investing was a good way to get property for pennies on the dollar. I saw that it was possible to buy vacant land for as little as a couple of hundred dollars – less than I pay for most of my tax liens in New Jersey. But then you have to pay the realty transfer tax (2% of the value of the property in PA), and you have to pay the auctioneers fee (2% of the bid price), and the recording fee. On top of that you need to clear the title to the property (in PA that’s a minimum charge of $750 if all goes well). So now your $200 property has cost you about $2000, but you still have to pay the taxes and since most property in my area exists in communities, you may also have to pay a hefty association fee. For one of my lots that I purchased at a tax sale I pay over $800 a year to the homeowners association. That’s twice what I pay for taxes – and I don’t have a home, just a lot.

After all this you still may not be able to sell the property. Only a couple of developments here in the Pocono Mountain region are hooked up to city water and sewer treatment systems. Most of the properties have wells and septic systems, and there are strictly enforced state regulations regarding how far your well has to be from any septic system. This alone limits if and where you can build. If the property doesn’t pass a perk test – which can cost more than $1000, then for all practical purposes it is un-buildable and almost impossible to sell.

Now before you start thinking “Why didn’t you just purchase a property with a house on it instead of vacant land,” there’s something that you need to know about tax deed sales. Tax sales can be extremely competitive and anything with a house on it is going to bid up to 80% or more of its value. So when you see a picture on a late night infomercial, or anywhere else, of a cute house that somebody bought at a tax sale for a couple of hundred dollars, ask to speak to the person who actually purchased it and get the full story. In my experience and in my neck of the woods, it just doesn’t happen that way. But don’t take my word for it. If you live in a tax deed state, go to a tax sale and check it out for yourself.

After realizing that purchasing property at a tax deed sale was not the best way to get property, I kept looking for a way to purchase property at a fraction of its real value. One day, quite by accident I found what I had been looking for. I stumbled across a gentleman – a German immigrant by the name of Jack Bosch, who has perfected a system for buying tax delinquent properties for pennies on the dollar – without even going to the tax sale.

Jack had left a post on one of my blogs, and with that he left a link to his website. I went to his website to check it out and I was impressed by what I found. Jack had developed a system for contacting delinquent taxpayers – months, or years before their property would be in a tax sale. He had a method for finding the delinquent property owners who wanted to get rid of their property and would make them a very low offer. In the last few years, he has done over 5000 of these property transactions, and has become a millionaire in the process.

In part two of this series I’ll tell you more about Jack’s, Land for Pennies system. In the meantime if you’d like to find out more about Jack Bosch and how he got started you can listen to podcast #19 on my podcast blog at http://www.TaxLienInvestingTips.com. Look for the sequel to this article, Advanced Strategies for Buying Tax Delinquent Properties, for more about Jack’s Land for Pennies system.