When the property owner has not paid their property taxes for a set period, the municipality can claim the home and put it on a tax sale for a fraction of its assessed value. For investors, this can mean fierce competition to win real estate at a steal! Making money from tax sales involves knowing the ins and outs of putting down a bid or tender and understanding what pathways are most likely to lead to profitability.
Learn how to make money from tax sales.
Evaluate Every Listing For Profit Potential
Identify tax sales in your target area. Evaluate every listing to determine how you might make money from it. Even if a listing does not appear immediately attractive, you may discover quiet details that suggest a strong return when you dig into the research.
Have an Exit Plan to Make Money With
An investor can make money with a tax sale home in several ways. First, they can rent it out long-term for monthly income. Another option is to list it as a short-term vacation rental on sites like Airbnb. Investors might also sell the property quickly without making upgrades to see how much profit they can earn.
Holding onto the tax sale home for future value growth is another strategy. Living in part of the property while renting out the rest is also possible. Offering a lease-to-own option for renters who want to buy a home is another idea. Finally, making simple renovations may help sell the tax sale property for a higher price.
Search for Simple Tax Sale Homes with No Claims
Comprehensively research properties to minimize your risk. Run a title search and look for claims against the property. Research the neighborhood. Look at the tax sale home in person from a public area to see if anything stands out to you regarding the property’s condition.
Create an In-Depth Tax Sale Budget
Map out a tax sale budget, including a maximum bid amount. Set aside some money for potential property repairs—factor in legal fees, title clearing, holding costs, and other expenses associated with homeownership.
Comply with Every Tax Sale Rule
Some bids at a tax sale are rejected due to non-compliance and not following the rules provided. Review the rules and regulations of a tax sale before bidding.
Don’t Be Afraid to Make a Lower Tender
Most tax sales are held by public tender. If your municipality does theirs this way, don’t hesitate to submit a lower tender. The highest bidder may not always be declared such for several reasons. A low tender may sometimes be considered depending on the circumstances.
Leverage Your Real Estate Market Knowledge
Assess current trends and demand in your local real estate market. Determine when and how to sell a property to get the biggest return.
Confirm Zoning If You Have An Alternative Use Planned
If you intend to buy the property and reformat it for something different from what it is, always confirm that it is properly zoned to do so. The last thing you want to end up with is a tax-sale property you can’t profit from because it’s not zoned in the way you need it to be.
Never Assume a Perfect Tax Sale Home Awaits You
Tax-sale homes are sold as-is. It’s smart to assume repairs may be needed, and issues with the property’s condition on the inside could require immediate attention. Any debris, damage, or property expenses will fall on your shoulders once you assume ownership.
Wait for Ownership Transfer Before Renovations
If you intend to renovate or update a tax-sale home, wait for the ownership to transfer. If there’s a redemption period in which the present owner can cancel the tax sale or return the property to them, ensure this has passed before you sink renovation money into a home.
Complete a Home Inspection As Soon As Possible
Do not wait to find out what the inside of your tax sale home looks like. If you are the highest bidder and once ownership transfers to you, schedule a home inspection to thoroughly tour the property and determine what repairs must be made.
Have a Tax Sale Lawyer You Can Speak With
Many issues can present with a tax sale home, including the prior homeowner refusing to vacate. Have a tax sales lawyer ready. Waste no time or emotion on evicting a person refusing to cooperate with a tax sale. Always follow the correct legal steps to conclude such a situation.
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