Tag: properties

Indiana Commissioners Sales – Part 4

Indiana Commissioners Sales – An Advanced Method

You know what to look for, where to find it, and how to make a safe investment at Indiana Commissioners sales. The only problem? Scaling things up! You might want to participate in several sales, but traveling all over Indiana just isn’t part of your game plan. Here’s a way to get around that.

The Portfolio Approach

The portfolio approach is pretty simple – but it’s not for the faint of heart. Why? You’re likely to lose your investment on most of the liens you buy at Indiana Commissioners Sales with this method. But the winners will more than make up for the losers.

You’re going to do the best you can to eliminate obvious losers from your list, then you’re going to set a relatively low maximum that you’re willing to bid for properties on the list – say $1,000. Better yet, participate in several sales and set your limit even lower.

Once Indiana Commissioners sales begin online, buy all the liens you can for less than your limit. Don’t forget to keep some money in reserve for potential legal costs.

Now What?

Now that you’ve successfully won several liens, NOW do a little more in-depth research. Send someone over to the property to see if it’s indeed occupied. If not, have them take some photos for you through the windows.

Using this method, half or more of the tax liens you’ve won may not have a desirable property behind them. Spend only 44 cents more on each lien – send the owner notice yourself, in hopes that they might redeem.

Otherwise you will do nothing further with these liens – you don’t want to throw more good money after bad.

Important: Though you’ll look at the liens you won in greater depth, you should not enter the properties or disturb the occupants at this point. However, after the redemption period ends, and a lien hasn’t redeemed, I visit the property immediately and attempt to make contact with the tenants. If I’m somehow 100% sure the property is vacant, I try to get inside to take a look (warning: this may not by strictly legal). If I don’t like what I see, I’ll probably skip the expense of even getting the deed.

Here’s the upside: if you bought at least 5-10 cheap liens after screening them to the best of your ability, you’re likely to have at least one home run – if not several.

These are properties that you might have bid several thousand for if necessary, having done more in-depth research.

In other words, the winners will have cost you so much less, and be worth so much more than you paid, that they easily make up for the losers.

Other Advanced Strategies to Consider with Indiana Commissioners Sales

-Learn how to do the tax sale noticing yourself for these low-dollar liens
-See if you can sell the liens you don’t want – advertise to the registered bidders list from the sale
-If you keep the home for rental, don’t spend money on a quiet title

Again, these are advanced strategies that you should look into later after you get a feel for things.

Return on Investment – Indiana Commissioners Sales

Return on investment for funds you invest at Indiana Commissioners sales can be breathtaking – even unbelievable.

Here are some examples from our recent past:

Indiana Commissioners Sale Property for About $1000

We picked up this house for $1057 - and after a few thousand in repairs it has been a money pump.

Paid $3260 for an occupied house that was already rented section 8 for $450. Got our money back in less than 8 months and have collected an additional $5000+ with no end in sight

Paid $3188 for an occupied house and quickly found a renter for $450. Got our money back in less than 8 months and have collected an additional $5000+

Paid $3093 for an occupied house that was already rented section 8 for $425. Collected $5950 from Section 8, then got a new tenant that pays $695 per month.

Paid $1057 for a house that needed about $3k in work and has been renting for $595 for almost 2 years.

Until recently, the dirty little secret about rentals in Indiana was that the property tax bills were outrageous and made it challenging to profit even from properties that were free and clear (see this post from last year).

However, a new amendment to Indiana’s constitution now sets maximum tax rates at 2% of assessed value, which is supposed to be aligned with real market value. And market values are REALLY low.

Translation – taxes are now dirt cheap, even for landlords!

Why Get Involved in Indiana Commissioners Sales Right Now

The planets have aligned, and it’s now a great opportunity to invest in Indiana Commissioners sales using the method I outlined. Here’s why.

Past Reassessment Problems Have Created TONS of Discounted Liens

For almost a decade, Indiana counties have been in turmoil as we switched to a market valuation model for assessing taxes. The confusion resulted in many counties skipping one or more tax sales, which allowed high taxes to accumulate on many “borderline” properties.

Therefore, when a tax sale was eventually held, many, many properties went unsold due to years of piled up taxes. Expect to see them on the Indiana Commissioners sales list this spring – the buildup of taxes has caused the list to swell, a good thing for us as buyers. However, we will still pay the discounted bids offered by the commissioners.

Nearly every county is on the same “tax sale cycle” now also – so the commissioners sales should be a lot more predictable.

Taxes Are Now Low and Predictable

As mentioned earlier, a recent Indiana constitutional amendment capped rental property taxes at 2% of value. With values extremely low at this point, tax bills are going to be tiny on these properties for the near future. If and when they do increase, it will be due to an increase in the value of the properties – a great thing for you.

In my county, where taxes are notoriously high, my rentals are now down to around $1000 per year each – somewhat reasonable (though their assessed value is still several TIMES market value). In some counties I have no doubt there are $100-$200 tax bills for these properties.

Number and Quality of Renters Increasing

As more and more people lose their homes, they will need to rent. Increases in average rents have already been seen nationwide. And if you play your cards right, you might even have a renter ready to pay you when you obtain your property – the current occupant.

Also, Indiana is set to gain jobs and population due to its low taxes and lack of debt. This lack of debt will enable Indiana to retain its low taxes instead of having to raise taxes like other states.

The Deals are Crazy!

You can buy a house for as little as $1000 and with a little minor repair, have a solid rental that you own free and clear. Or you can pay a few thousand for a house, and go down to the Section 8 office to have them start immediately sending rental checks to you. Now that’s cool.

Everyone needs somewhere to live – and this is a great chance to “get in at the bottom”, risk very little, and earn great cash flow almost immediately. With a little luck, you’ll even see nice increases in your properties’ values and saleability as time goes by.

Check out some Indiana Commissioners sales online this spring, and start building your free and clear portfolio for peanuts!

Indiana Commissioners Sales – Part 1

Indiana Commissioners Sales information

Indiana Commissioners Sales About to Kick Off Again

Indiana Commissioners Sales will be kicking off in earnest right after the new year. What’s a commissioner’s sale?

It’s a tax lien sale with special rules, where liens that weren’t purchased at the last sale are offered. More details here and in future installments.

I’ve decided to do a 4-part series to give you everything you need to know to profit at Indiana Commissioners sales. Even if you don’t plan to come to Indiana to invest, pay attention because a lot of the principles here apply to most “second chance leftover” sales.

First, let’s talk about several reasons why Indiana Commissioners sales present a rare opportunity to actually buy at a public auction and still come out ahead if your goal is to acquire properties.

Inherent Reasons Indiana Commissioners Sales Are a Rare Opportunity to Acquire Property

I stay away from most tax lien sales because there is bidding competition and also a long wait period before I can acquire any properties. Plus, by the time the waiting period is up, my experience is that all worthwhile properties will have redeemed. Only the “needle in the haystack” liens remain unredeemed and lead to a windfall property acquisition.

However, Indiana Commissioners sales are different – and you CAN get a good deal on tax sale property (at a public auction) and in a reasonable time. Here’s why:

1. Reduced Minimum Bid – Indiana Commissioners sales are held to liquidate liens that did not sell at the regular tax lien sale.

Presumably, these properties were not worth even the amount of taxes owed in the eyes of investors at the original sale. Or, without seeing the property condition, the investors were not willing to take a chance that they would end up owning the property, even though it appeared to be a good property from the outside.

Since the lien did not sell at the original “treasurer’s sale” for even the minimum bid, the commissioners slash the minimum bid on the liens offered. This is simply to get the lien sold and to try to get the properties back on the tax rolls. Sometimes the new, lower minimum bid is as little as 10% of the original amount or $25.

Now, properties that were unprofitable before, become profitable. Or properties that weren’t taking a risk on, worth taking the risk! Plus you can buy more liens with the same amount of money, increasing your chances of getting some properties.

2. Owner Must Pay Full Redemption – Since the property didn’t sell at the first sale, even MORE taxes have likely piled up since then.

While you as a tax lien investor are offered an attractive, discounted minimum bid to get involved, the owner must pay the FULL amount owed plus penalties to redeem their property. With many installments now late, and fees piling up, it can be very difficult for them to redeem.

The result: Indiana Commissioners sales have a MUCH LOWER redemption rate than regular tax sales. Meaning, you have a much better chance of getting the underlying property for just the amount you spent on the lien.

3. Little or No Institutional Competition – Many large companies roll into town and bid on liens at the regular “treasurer’s sale” – and this pushes prices of Indiana tax liens to the limit of profitability.

These buyers largely do not attend Indiana Commissioner’s sales. This is because the institutional buyers usually DO NOT WANT properties and they know that a large percentage of liens “become” deeds when purchased at the Indiana Commissioner’s sale.

These buyers want to borrow money at 1-2%, earn 10% interest when their tax liens pay off, and move on. And they want to invest millions in one shot, which they can’t do at Indiana Commissioner’s sales because the value of the liens is much, much smaller than those offered at the regular treasurer’s sale.

4. Short Redemption Period – Perhaps best of all, Indiana Commissioners sale properties only have a 120 day redemption period. This is obviously a much more reasonable time to wait than the 1 year given to the owner in the regular sale.

Now you know the outcome of your investment sooner, and get your hands on any properties you acquire in a shorter time. Plus there is less chance that the property condition will significantly worsen during the redemption period, or that the real estate market will change drastically. These can be major problems with long-term lien investments of 1 year or more.

For those liens you buy that redeem nevertheless, you still get a full 10% return on the minimum bid over only 4 months if the lien does redeem. If I’m not going to get a property, at least 30% APR return helps ease the dissapointment.

5. Online Auctions – One more minor benefit is that many of these auctions are held online over a period of a couple weeks. So, you don’t have to travel to the auction but you still really need to come to the area to do due diligence on the liens you’re considering.

So there are the benefits of Indiana Commissioners sales, and why I occasionally break my “no tax lien auctions” rule and invest in them.

Nothing in this world is without downsides and traps, however – and we’ll talk about the dirty side of Indiana Commissioners sales in Part 2 of this series.

Tax Sale Property – By the Boatload

Tax Sale Property An Epidemic

When properties are taxed at outrageous rates, they can become worthless (even as a tax sale property) in a hurry!

Tax Sale Property - A Result of Chronic Property Tax Burden

When it becomes too much to bear -- most just walk away - and a tax sale soon follows.

I

n a previous article, “Second Chance Tax Sales“, I briefly mentioned the irony of ANY property not selling at a county tax sale.

Any given property, you would think, should be taxed at some relatively small percentage of its actual market value each year. Voters in California pioneered the idea that homes should only be taxed at 1% of their value all the way back in 1978.

And Indiana recently passed a state constitutional amendment limited taxes on homestead properties to 1% of value or 2% for rentals. See the results for more information – it received over 78% approval by voters. Tax sale property should have been greatly reduced.

The Debate: What is an appropriate yearly tax burden to guarantee only a small percentage of value is owed at any tax sale: 1%? 5%? 10%?

Even if it were appropriate to tax a property at 10% of its value every year (preposterous in my opinion, by the way, and 10 times the rate of some areas), properties would have no more than 30-40% of their value accrued in taxes by the time a tax sale would be held.

In most states, much less would accrue before sale (most get the property to a sale before 3-4 years of delinquency piles up).

Even in today’s terrible market, investors line up to pay 30-40% of current market value for tax sale property sale. By definition, it’s “free money”.

Sure, some tax sale property is truly worthless, and yet might have to be assessed for SOMETHING. And so the county should eventually acquire those properties.

But many very useful properties are taxed the entire amount of their value in the span of just a few years are not worth what owed at the first tax sale held.

With over-taxation rampant, especially in low-income areas, this brings up a an interesting question:

Is it really possible to lose money on a properly-managed, free and clear tax sale property as a rental, where there is demand for rental housing?

One would hope that this couldn’t possibly be so, but unfortunately it is, at least for now.

The Sad Truth About Tax Sale Property Perpetuating Itself

Overtaxation is a vicious circle. Once taxes reach a point where cash flow cannot be obtained by renting free and clear properties, property values in that neighborhood get very close to zero.

A viable rental strategy can be to buy houses so cheap that they are disposable – in other words, you never pay the taxes on the property.

Rent it out unti it’s eventually becomes a tax sale property again. Between delays in holding tax sales, and waiting for subsequent “second chance” sales to be held, several years can go by where rent is collected. Yet with property taxes paid (the main expense in this property), and a tidy profit can be made.

This is also known as “milking the property”.

You can probably imagine the effects this kind of business model (which is forced upon landlords by overtaxation) can have on a city. See my recent post on Gary, Indiana.

Tax Sale Property Examples

Let’s look at some typical tax sale property in East Chicago, Indiana, or Gary, Indiana.

Both communities still have well-kept, though low-income, neighborhoods where rental demand is adequate.

Say you get your hands on a well-kept, clean property in Gary’s Horace Mann neighborhood for only $2000. It has a built-in renter getting 100% section 8 assistance. Sweet!

Section 8 pays $450 per month for the property, and the tenant is a pleasure. $5400 per year is direct-deposited into our account each and every month.

Just get some more tax sale property like this and we’ve doubled our social security benefits, right?

Let’s run the numbers:

1. Generally accepted operating expenses for property (includes vacancies and maintenance): 45% of income.

Never mind that in lower income examples, this figure is actually higher because renters are more transient (higher vacancies) and maintance is generally consistent on a property regardless of market value. Cost: $2430

2. Taxes: Taxes in Gary can run as high as $2000 for properties worth no more than $10,000 in reasonable, rentable shape. Cost: $2000 per year

3. Insurance: Insurance for properties in lower-income areas has exploded in cost the past few years. With the mortgage crisis, most low-income areas have a high number of vacant properties, and the opportunities for thugs to cause trouble (and insurance ) abound. Yearly insurance premium: $1000.

Rental income: $5400
Expenses: $5430
Profit: $30 loss for well-managed, free and clear property.

The Solution:

This setup leaves an attractive, high-profit option for the entreprenuer (but potentially devastating for the community)…become a slumlord!

Note that $3000 of the expenses shown here don’t NEED to be paid for a landlord to receive the rent.

So it’s possible to pay $2000 for this tax sale property at a second chance tax sale. You could then turn around and earn almost $3000 per year while paying no county property taxes or insurance. This wave could be ridden for for 4-5 years or more before the property is lost again.

I hope you find the numbers I presented here (and the effect they will have on overtaxed communities) as outrageous as I do. The solution is to spend less and/or obtain city/school revenues from some other source than property taxes. The market will severerly punish any jurisdiction that doesn’t heed this warning, tax sale or not!

Get all kinds of tax sale property with no bidding or waiting – get my “Underground Tax Sale Strategies” guide below.

Over the Counter Tax Sales

At nearly all tax sales, there are parcels that do not sell for even the minimum amount of taxes owed.

An interesting thing to note about this phenomenon is that it indicates overassessment of a property to an almost unbelievable degree. The property is being taxed in excess of its true market value over the course of just one or several installments of taxes! This is shown by the fact that nobody is even willing to pay the current taxes owed for the property.

Of course, delays in holding tax sales can result in more installments building up than intended by law, before a sale is held. See my article, “Tax Sales – Essential for Every Community”, for more information on this effect.

Tax Sales - Leftovers

In most states, counties re-offer the properties that do not sell at second-chance tax sales. Let’s look at a few ways we might be able to get involved.

Opportunities at “Second-Chance” Tax Sales

If a county re-auctions properties that did not sell at the original sale, but doesn’t give special terms, bargains will still be elusive.

Even if the bidding starts at 1 cent for leftover parcels, competitive bidding will usually eliminate any opportunity to get a property for less than market value.

However, since the properties offered at these tax sales are more “bottom of the barrel”, these tax sales may attract fewer bidders and bargains may be had.

Other times, counties will sell the properties “over the counter”. It’s possible to make small profits on these properties occasionally. In general though, even minor bargains that are openly available to the public for any significant amount of time will be snapped up.

“Second chance” sales in tax lien states, however, can be one of the rare opportunities to participate directly in tax sales, enjoy low prices, AND eliminate negatives associated with tax liens.

This is because the county can “sweeten the deal” in more ways than one in the second chance tax sale.

Indiana Commissioner’s Sales

One example is an Indiana commissioner’s sale. Commissioners can drastically cut the minimum bid for properties offered in the sale, especially after multiple failed attempts to obtain what is actually owed in previous sales. In addition to this benefit, redemption periods for owners are also cut to a very attractive 120 days. Return on investment remains at 10% flat amount for the 120 days (30%+ APR!)

Because county officials in many Indiana counties seem unable to perform reassessments in a timely manner, delays in the tax sale happen often as mentioned above. So, in a typical example, taxes on a servicable single family home in Gary, Indiana can reach almost $10,000 from one sale to the next.

The market value of a home like this is around $10,000, and redemption rates are not as high as the rest of the county, so few bidders will participate in the sale of a home like this.

However, the county may cut the minimum bid of a properties like this to $2000 or less, and just as importantly, reduce the redemption period down to 120 days. Because of the volume of properties offered, and the fact that this is not a deed sale, bidding remains subdued in many cases, and bargains can be had.

In a recent sale I was able to acquire 4 homes, 2 of which were rented Section 8, at $450 apiece, for a total of less than $10,000. The two vacant homes required less than $10,000 total to fix up and are now rented at $450 and $600 apeice, for a yearly gross rent of $23,400. At first, the deal sounds unbelievably good with a less than 12 month payback on investment. I was indeed happy with the investment but it’s not nearly as great as it seems.

Work Second Chance Property as a DeedGrabber?
In my experience, it only pays to be involved in second chance sales as a bidder. Typically, if the owner of a “second chance” property wants to redeem (HINT: this is you if you buy it from the current owner), the full amount of taxes must be paid. In the example above, you would have to pay $10,000+ to redeem the property that you observed sell for $2000 at the second-chance sale.

Tax Deed Sale Bidders (Money Wasters!)

Tax Deed Sale Bidders Kill Each Others Profits

Ha, Ha, I Wasted More Money than You!

Will These Tax Deed Sale Bidders Kill Each Others’ Profit?

At least these tax deed sale bidders can laugh about it!

Apparently, Don Hecht and Jim Dietz of North Dakota have run into each other before at tax deed sales, and helped each other pay more for properties at the sale.

In a recent article in the Grand Forks Herald, several bargain properties were bid up to several times their original starting bid.

A property starting at $6,070 was bid up to $24,000. A house in Manvel, ND started at an amazingly low $1329 and ended up at $8,000.

Another notable property in the sale was a 160-acre tillable farm that sold for $65,000. All to tax deed sale bidders who paid something approaching retail price for these properties.

I think it’s safe to say that if we had gotten in front of any of the former owners of these properties, we would have had a great chance at a decent payday. And this is in North Dakota!

The article went on to mention that the length of time of tax delinquency before tax sale in North Dakota has recently been reduced from 5 years to 3 years, and all properties on this sale were only 3 years delinquent.

In my article “Tax Deed Sales – A Way to Get Good Property?”, I describe the main disadvantage of tax deed sales – competitive bidding. This bidding almost always turns great buys into mediocre or even terrible buys.

This is all thanks to multiple tax deed sale bidders. But bidding at tax deed sales can be very good for us. Tax deed sale bidders creates “overbids” that are often due to the owner who lost the property, when they compete for properties.

We make a very good living locating and collecting those surplus funds for the owners who lost their properties. Most don’t know about the money and wouldn’t have the first clue how to collect it.

Did you think that Tax Deed Sales Create An Unexpected Profit Source, for tax sale bidders? Nope, it creates an opportunity for you.

Unfortunately, North Dakota doesn’t want to share and they do not let the owner get his surplus.

The county forecloses tax delinquent properties completely, without public bid, THEN auctions them off once the county is the owner!

Now why didn’t I think of that?

Get out in front of tax deed sale bidders to buy properties, then collect their overbids in many states. Learn more in 9 minutes than most tax deed sale bidders know, with my “Underground Tax Sale Secrets” report, below.