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How to Invest in Tax Delinquent Properties

Tax-delinquent properties are an intriguing and potentially highly profitable area to invest in. More parties are becoming interested in tax-sale homes because of the upside of investing and owning a home for a fraction of its assessed value while earning a return based on interest. 

How to Invest in Tax Delinquent Properties

That said, not every home up for auction or public tender is worth investing in. Let this investor's guide to finding tax-delinquent properties provide the tips and advice you need to make the right picks.


Know What You're Looking For


Define what type of tax-delinquent property you want. Know why you want to invest. Create a budget and guidelines you can use as you look through tax-delinquent properties to determine what's worth researching and bidding on.


Browse Listings Carefully


When looking through local tax sale home listings, look at minimum bid amounts, location, and details, and make notes. Disqualify any that do not meet your standards. Create a 'yes' and 'no' divide based on listings.


Don't Settle for Less Than


You may browse listings for tax sales and find none that appeal to you or meet your standards. Don't settle for a property to bid on. Wait until next time. The more you look through tax-delinquent property listings, the more experienced you'll be at knowing when and how to bid.


Record How Often New Listings Become Available


Many governments hold auctions or public tender tax sales once a year. Others do it quarterly, seasonally, or every six months. If you don't find anything suitable for your investment portfolio this time, note when the next listings will be posted.


Note the Deadlines Carefully


If there is an auction date or a deadline to submit bids publicly, note it. If you submit an offer, you want to ensure it's done before the deadline, as there are no exceptions.


Ignore Emotion and Pay Attention to Profit


Buying a tax-delinquent property should be profitable, as should any real estate investment. If you overbid or buy a property without profit potential, you are setting yourself up for expensive disappointment.


Tax Sale Bidders From Other Jurisdictions


There are forums and social media communities where you can ask questions and speak to other tax sale bidders. You can also read stories of other bids and learn a lot about what to look for or not. This is the closest you will get to experience as a newcomer and knowing how to find the right tax-delinquent properties.


Risks of Buying Tax Delinquent Properties


Even with all the research saying otherwise, you could still get a dud investment. Tax-delinquent properties carry substantial risks for novice investors who may not have much upfront money to invest. Approach with caution.


Avoid Properties with Environmental Damage


If environmental damage has occurred, such as a spill of hazardous material or contaminated ground, cleanup becomes your responsibility once you own the land. Avoid properties where you suspect damage like this.


Title Search for Potential Properties


A title search will tell you if there are any other liens on the property. These are key things to know. If there are leans against it, it will no doubt make it more difficult to gain its title. This may leave you with minimal profits or require more work to obtain the title.


Consider the Property Area


Tax sale real estate often needs updates and repairs. Expect that. If you're questioning its value, consider its neighbourhood and land value. It's easy to overlook underutilized real estate based on appearances alone.


Calculate What the Property Is Worth


Look at home values in the neighbourhood. Calculate the average amount the property may be worth, taking into account estimates of potential remodelling and repairs.


Research Multiple Tax Delinquent Properties


Have a list of properties. Most tax-delinquent properties will be returned to the homeowner before the process is complete, so you don't want to stake all your bets and efforts on a single property.


Have Your Money Ready to Pay


If you have the winning bid, you will be expected to close the transaction within days. Have the money ready. If you can't complete the transaction, you lose any deposit you put down and lose your right to claim tax-delinquent property.


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