Category: Tax Sale Homes

Tax Sale Property Where Government Pays Itself Rent?

Tax Sale Property Where Government Pays Itself

Tax Sale Property Collects From, and Then Pays the Government Rent!

I hope the writers of “The Onion” (sarcastic newspaper) have taken note of this one in their tax sale property column. They have my permission to reprint this post in its entirety.

I have a feeling they won’t have to change a word to publish it along with their other fake articles (though everything I will say here is true). That’s how unreal this story is.

I bought a tax sale property from tax lien investor recently, and it had an upstanding Section 8 tenant currently residing in the property.

The tenant was receiving $475 per month in rental payment assistance from Section 8 – the federal government.

This tax sale property had been obtained from a second-chance leftover sale – here’s how you can get some good deals there.

Shortly after obtaining the property, my attorney got a call from the former owner of the property. He wished to buy it back for little more than I had paid (I declined).

My attorney learned that the former owner had not been receiving rental payments from Section 8 for some time. Here’s why:

Instead of sending the payment to the owner, Section 8 had begun sending the $475 rental payment to the IRS to help satisfy the owner’s IRS tax lien, which we later discovered was well into the five-figures.

A couple federal agencies (HUD and the IRS) finally communicating with each other, helping each other out, right?

This made me nervous, as the IRS could still redeem the tax sale property even though the redemption period for the property had passed.

Any time the IRS has an income tax lien against a former owner of property lost at tax sale, they get an additional 120 days to redeem the tax sale property. They never do, and this was no exception.

Like any other creditor, they get notice of tax sale proceedings.

Surely, they would redeem the property at a cost of roughly $2000 to continue their payment stream from HUD of $475 per month, right? No brainer?

Nah. Asleep at the wheel as always, the IRS let their opportunity to continue their $5000+ per year payment stream slip by.

It was then I realized, it was really for the best that this tax sale property went through the system.

CAN YOU IMAGINE THE WASTE?

Let’s trace the flow of a single dollar as it made the circuit through the governmental bodies involved in this scenario before this became a tax sale property.

1. Honest wage-earner gets taxed: A hard-working American works 1 hour and gets taxed on his income. $1.00 is taken in by the government.

2. The dollar is routed to HUD, who administers the Section 8 program. I would conservatively estimate the loss here at 10%. Remaining: 90 cents.

3. HUD routes the funds to the East Chicago Housing Authority. These local housing authorities are notoriously inefficient and wasteful. Lost: 40 cents. Remaining: 50 cents

4. East Chicago Housing Authority routes the rental payment back to the IRS, WHERE IT ORIGINALLY CAME FROM!!!!! I’m sure there’s an additional expense of 10%+ to do this.

Bottom line, the IRS paid itself, and 50% or more of the money taken in vanishes in goverment expense and waste.

This is a case where a house becoming a tax sale property was truly a good thing for all.

Get tax sale property before the sale and eliminate bidding – get my report, “Underground Tax Sale Strategies”, below.

Government Tax Foreclosures

Government Tax Foreclosures Can Be Rough!

Government Tax Foreclosures Do Not Equal Guaranteed Profit!

Government Tax Foreclosures: A Sure Moneymaker?

Contacting owners of government tax foreclosures before a tax sale deadline? Checking out properties you’re going to bid on at an upcoming tax sale (not usually recommended)?

It’s really important to weed out those pesky worthless properties. It’s amazing how many areas today have pockets with housing stock much of which shows up as government tax foreclosures, and is literally not worth the amount of taxes owed against it.

A good way to tell that you’re working an area like this is when you see government obtaining tax foreclosures and attempting to rehab them. If there were any true market, and opportunity for you to profit, there would be competition at the sales.

In the name of fighting blight, local governments will often sink vast sums into these properties at a huge loss (they call it a ‘subsidy’).

You can see how Saginaw, MI, is about to waste $17.4 million in federal funds in part by buying government tax foreclosure properties that free market individuals did not see fit to purchase. The full story is at http://www.mlive.com/news/saginaw/index.ssf/2010/10/saginaw_continues_blight_fight.html

Since you don’t have the unlimited resources of the government, and actually must make a profit, you need to actually obtain properties that are in demand by the marketplace! All for less than the marketplace is willing to pay.

The best way to profit from government tax foreclosures is to get lists of the properties nearing foreclosure from the county. Then, contact the owners of those properties while the property can still be redeemed.

A quick way to determine if low-end properties in a particular area are worth more than the taxes owed, is to type the zip code for the area into Realtor.com before you get started. See what the bottom 10-20 properties on the market are selling for.

If they’re selling for less than $10,000-$15,000, with many in the $5000 range, the area will likely not be very good for quick resale profits. You can, however, often identify properties in these areas that are rentable or may be sold to a fixer buyer on contract.

Try to find zip codes where the properties start at $10,000-$15,000 at the very low end, and quickly reach $20,000-$30,000 on the first page of Realtor.com. These areas area ideal for quick-turn profits of $5,000-$10,000.

Government tax foreclosures are not a free lunch – but can make you good money if you approach them correctly.

Learn how to profit from government tax foreclosures without bidding or waiting, in my free report, “Underground Tax Sale Strategies”, available below.