In order to profit from tax foreclosures sales with minimum risk and maximum profit, you need to take a more intelligent approach than simply appearing at the sale and bidding against others at the sale.
Tax foreclosure sales take on two major formats, with some variations: tax deed sales and tax lien sales.
With a tax deed sale, the property is typically auctioned off to the highest bidder.
This creates problems because the bidding activity quickly wipes out most bargains.
If you attend tax lien sales, liens can often be purchased cheaply, but the investor must wait many months or years to acquire the underlying property.
And, 95% of tax liens are paid off, leaving the investor with no property.
At first glance this would really seem to make tax foreclosure sales much less attractive.
By digging a little deeper, however, you'll find that they actually present many hidden opportunities that are much more profitable that directly participating in the sale.
Let's look at a few now.
1.
Intelligent tax lien buying: The main problem with buying tax liens at tax foreclosure sales is that 95% or more of liens sold at the sale will pay off leaving no property for the investor.
However, you can dramatically increase the number of properties you'll obtain by sending postcards to the owners of the liens you're considering buying and collecting your returned mail.
Then, only buy liens against properties for which you've received returned mail.
This indicates to you that the owner is not receiving their notices and is unlikely to redeem the property.
You can also do a social security death index search and see which owners are deceased.
These properties also are much less likely to redeem.
The downside to this approach is that you will still have to wait out the redemption period and properly perform all required legal work.
2.
Specialty properties at tax foreclosure sales: Most investors overlook some excellent opportunities at tax foreclosure sales because they are a little more difficult to identify.
Typical investors will focus on valuable houses, commercial properties, and large tracts of land.
This will result in their prices being driven up to near market value.
If you take the time to examine carefully each parcel offered at the sale, you will often find billboards, cellular towers, abandoned railroad easements, and other gems being offered at the sale.
It is often not apparent that these assets exist on the properties being offered, so look at aerial maps and try to visit each property to see if such assets exist.
You will often be the only one to bid on these and will get the property for the minimum bid.
3.
Buying properties before tax foreclosure sales: When a tax deed sale is announced, contact all owners who are about to lose their property and offer to buy for a token payment, or get the property under contract and flip to an investor.
You'll find that many of the properties heading to tax deed sale are unwanted and that you can obtain them inexpensively.
4.
Becoming a "found money professional" - The bidding at tax foreclosure sales often results in a "surplus" being created, which can be claimed by the former owner of the property.
For example, an owner may only owe $5000 in taxes but their property might be bid up to $20000 at the tax foreclosure sale.
This means that the county collected an extra $15,000.
Those extra funds are usually payable to the former owner, but only for a limited time.
You can find out which funds the county is currently holding from past tax foreclosure sales, and to whom these funds are due, and locate the owner.
You can then offer to retrieve the funds for a 40-50% finder fee.
Digging a little deeper under the surface of tax foreclosure sales will expose some very profitable businesses that you can profit from with almost no risk - and you're in control the entire time.