Investing in tax liens and tax deeds is an excellent opportunity to acquire real estate at a fraction of its market value. However, like any investment, due diligence is critical to avoid costly mistakes. Housing Market Academy provides comprehensive guides and courses to help investors master this niche, but here’s a quick overview of how to research properties effectively.
1. Understand Tax Lien and Tax Deed Basics
Before diving into property research, ensure you’re clear on the distinction:
- Tax Lien Investing: You purchase a lien against a property for unpaid taxes. If the property owner doesn’t pay within a redemption period, you may earn interest or potentially foreclose.
- Tax Deed Investing: You buy the actual property at auction, as ownership transfers to you upon purchase.
Research the rules in your target state or county since processes, redemption periods, and interest rates vary widely.
2. Choose Your Target Counties
Each county has unique laws, tax sale calendars, and processes. Key factors to consider when selecting a county include:
- Redemption periods: How long before you can take ownership (for tax liens)?
- Interest rates or penalties: How much you’ll earn if the lien is redeemed.
- Auction type: Online, in-person, or sealed bids.
- Property types: Look for counties with desirable property inventory like residential homes, commercial properties, or vacant land.
Pro tip: Start with counties that provide accessible records and support for beginners.
3. Access the Tax Sale List
Obtain the list of properties available at tax lien or tax deed sales. Most counties publish these lists online or in local newspapers. Pay attention to:
- Parcel numbers
- Property descriptions
- Delinquent tax amounts
Some counties provide GIS mapping tools to help you locate and visualize properties.
4. Perform Property Due Diligence
A. Verify Ownership and Liens
Confirm the current owner and check for additional liens or encumbrances. Mortgage liens, IRS liens, or HOA dues may survive a tax sale and become your responsibility.
B. Assess Property Value
Research the property’s fair market value. Tools like USA Housing Market, or local assessor’s records can help. Look for comparable sales (comps) to estimate resale or rental potential.
C. Evaluate Property Condition
Whenever possible, visit the property. Note its condition, location, and neighborhood. If an in-person visit isn’t feasible, use Google Maps or satellite imagery.
D. Check Zoning and Permits
Ensure the property’s zoning aligns with your investment goals. Verify that there are no unresolved code violations or permit issues.
E. Review Tax Sale Rules
Understand redemption timelines, bid requirements, and post-sale procedures. Familiarity with these rules can prevent surprises after the auction.
5. Create a Bidding Strategy
Set a maximum bid for each property based on your research. Factor in potential repair costs, unpaid liens, and your desired profit margin. Avoid emotional bidding and stick to your strategy.
6. Attend the Auction
Participate in the auction and execute your bidding plan. Whether online or in-person, ensure you have all required documentation, deposit amounts, and understand the auction platform.
7. Post-Sale Follow-Up
For tax lien certificates:
- Monitor redemption periods and track payments.
- Begin foreclosure proceedings if necessary.
For tax deed purchases:
- Clear title issues by purchasing title insurance or initiating a quiet title action.
- Secure, repair, or market the property.
Tax lien and tax deed investing can be a profitable venture if approached strategically. By conducting thorough research and due diligence, you reduce risks and maximize returns. Housing Market Academy offers courses to guide you through every step, from understanding state laws to mastering auctions and managing properties.
Ready to start your journey into tax lien and tax deed investing? Join Housing Market Academy and turn opportunities into profits!
