Tag: property

Indiana Commissioners Sales – Part 3b

Indiana Commissioners Tax Sales

Indiana Commissioners Sales Strategies (Continued)

What should we buy at Indiana Commissioners sales, and where do we find it? We answered that in Indiana Commissioners sales Part 3 – be sure to take a look at that if you haven’t seen it yet.

We’re looking for single family homes in at least fair condition, that are currently occupied. We don’t care too much about the neighborhood as long as the subject property itself meets our standards. There are dozens of cities in Indiana where these properties are plentiful on the Indiana Commissioners sale list each year.

Now how do we minimize risks, and what do we actually have to DO to make our investment safe? That’s what today’s installment will cover.

Due Diligence

In most cases you’re going to want to come to town for at least a day or two to investigate the properties on the Indiana Commissioners sales list. However, there are a few strategies that greatly reduce (or can even eliminate) this need.

1. Online Investigation – While you cannot really confirm that a property is “good” from home, you definitely can confirm that a property is “bad” and eliminate it from your list.

In fact, 90-95% of the properties on a typical Indiana Commissioners sales list should not be purchased. This is because they have no practical use, are in terrible condition, or are otherwise worthless.

Unless you have a well thought-out strategy involving land, eliminate it right at the beginning – especially in the areas we’re looking for houses. A notable exception is land with a billboard, cell tower, or other similar improvement – but these can be hard to detect and confirm.

Don't buy an  indiana commissioners sale property like this

No need to do any more research on a property like this - move on.

Try to find a county website that has assessed values, square footages, and/or actual pictures of the properties. You should be able to eliminate a lot of properties that are obviously unsuitable. Look for houses that are too small (less than 750 square feet), assessed for very little, or such bad condition you can see it in the photograph.

2. Send Postcards – You can reduce the size of your “short list” further by sending an inexpensive postcard to each property left on your Indiana Commissioners sales list before coming to town.

You can either put a “we buy houses” message on the postcard (see my post, “Tax Lien Auctions: How to Get 500% More Properties”) or you can even send a blank postcard.

All you’re trying to do is see if the postcard comes back undeliverable, and if so, you should consider eliminating that property from consideration.

The Postcard Technique
Notice that our strategy is completely opposite from regular tax lien sales when we work Indiana Commissioners sales. We want OCCUPIED properties with the commissioners sale because it makes property condition more likely to be good, which is our main unknown. We are not so concerned with the chances of the property redeeming, because the owner would probably have to pay more than the property’s value at this point to redeem.

Contrast this with regular tax lien sales, where there are plenty of good properties but almost 100% of them redeem. There our biggest issue is that the redemption rate is so high, and the property condition is less a problem. So there, we look for VACANT properties because that increases the chance the owner won’t get notices about the tax sale and won’t redeem.

Indiana Commissioner sale home

We purchased the lien on this home for $3093 - and immediately had Section 8 start sending us the checks once we acquired it.

One last thing to check for the remaining properties, is that the actual parcel number listed in the Indiana Commissioners sale list contains the house you want to acquire. See if the county has GIS online, and if so, check each parcel number to make sure the house actually sits on the parcel. Don’t buy any liens on parcels that only contain part of a house.

At this point, it makes sense to take the 1-2% of parcels remaining and a GPS unit, and go drive by each property. Remember, you’re looking for occupied properties in an nice of shape as possible.

An Advanced Strategy For Indiana Commissioners Sales – The “Portfolio Approach”

There is another way to approach these sales, especially if you live out of state. You will still perform the preliminary step of eliminating land and other obviously unsuitable properties. You should even send postcards as mentioned above so you can get down to a good “hot list”.

However you will not necessarily have to spend a lot of time examining properties in person or traveling around if you want to participate in several online sales. We’ll cover that in the final installment of Indiana Commissioners sales – Part 4. We’ll also discuss why RIGHT NOW is the perfect time to get involved in Indiana Commissioners sales.

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.

Property Tax Sale – Free Lists Online

Property Tax Sale / Delinquent Property Files Often Found Online – Free!

Property tax sale lists used to be a bit of a pain to get a hold of – you either had to make a public records request and wait for that to be fulfilled, or purchase a property tax sale list from a vendor online.

But now that more and more counties are “going online”, you can often find and download these lists for free.

Why the County’s Property Tax Sale Lists Are Better

Not only are the lists that you can get right from the county usually free, but they have a number of other advantages:

1. The lists are often updated very often, even daily, to reflect properties that have dropped off the list.
2. The lists contain not only property tax sale records, but even properties that are slightly to moderately delinquent but not on a property tax sale list yet.
3. They are in electronic format – easy sorting and filtering using your computer instead of dealing with a paper property tax sale list.

How to Locate Property Tax Sale and Delinquent Lists Online

You’ll have the best luck in the midsized to large counties, as smaller counties don’t seem to have the budget to have good online resources.

All you need to do is start Googling! Use words like “delinquent tax file”, “download delinquent list”, “delinquent property file”, “delinquent tax roll download”, and other terms like that.

Let’s see what happens when we do a search for a property tax sale / delinquent list using the term “download delinquent list”:

Property tax sale search on Google

Results for a propety tax sale / delinquent list search on Google

It looks like each of the first few listings has its own property tax sale list or even complete delinquent roll file for download. Let’s look at the first one:

Property tax sale listing online for a tax lien sale

An online list for a tax lien sale

Now, this list is from the last tax lien sale. So that’s an OK start. But look a bit further down in the results – Milwaukee has posted its entire delinquent file online! Over 25,000 records for you to download, each representing a delinquent parcel on its way to a property tax sale soon.

The list contains everything you’ll need to begin marketing to tax-delinquent owners BEFORE the actual property tax sale list even becomes officially available.

Michigan Tax Deed Sale Affects 3000 Owners

Michigan tax deed sale foreclosure with equity

Michigan Tax Deed Sale Foreclosure with Equity!

Unjust Michigan tax deed sale system and others like it continue to rip off property owners

It probably doesn’t come as a big surprise to you that there was a big Flint, Michigan tax deed sale this year. It didn’t surprise me in the least. After all, Flint may be one of the hardest-hit towns in today’s economy, and real estate values and sales are reflecting that unfortunate reality.

But what really knocked my socks off was a partial listing of the EXTREMELY VALUABLE properties that went through this particular Michigan tax deed sale. These properties were worth anywhere from $400,000 to over $2 Million dollars according to a recent article about the tax deed sale on mlive.com – and I thought the title (“Gems Among the Junk: Genesee County gets Seven Properties Worth More than $400,000 Each”) was most fitting! Already, a number of lessons can be taken from this event:

– Extremely valuable properties can and do go ALL THE WAY to tax deed – resulting in a total loss by the owner.

– Millions of dollars worth of property can be up for grabs before the sale – and not just “war zone” properties – even with a Michigan tax deed sale.

– Any one of US could have had a tremendous, life-changing opportunity if we could have gotten involved with even one of the properties that ended up in the county’s hands.

– And – if you don’t happen to know much about the Michigan tax deed sale system – the government will keep all the spoils if you don’t get in front of that owner to solve their tax problem!

Counties Reap Undeserved “Michigan Tax Deed Sale Spoils”

You may have read some of my previous articles, like “Tax Deed Sales Create an Unexpected Profit Source”, where we talk about the owner being eligible to collect substantial amounts of money in the event they lose a valuable property. In most states, if a property with a 6- or 7-figure value went up on the auction block, it would bid well in excess of the taxes owed.

This would then create a surplus. A surplus is the amount the county collected above and beyond what they were owed, after auctioning the property at the tax deed sale. So while the owner of a property like the one you see above would probably lose the property forever, it would be likely that as a “consolation prize” there would be a large surplus that the owner could collect to make the whole situation more just.

Don’t get me wrong, though I feel badly for anyone who loses a property to tax deed, I agree that at some point strict action must be taken and this can include loss of ones’ property after an extended time. So I’m not against the whole tax sale system per se – in fact it’s what gives us so many opportunities to make a great living even when the real estate market is down. The surplus being available to the owner is a sort of “check and balance” to help make the situation a little more just for the owner losing a property to a tax deed.

We even create another profitable business connecting people with their long-lost surplus funds for a contingent finder fee (see some of the hundreds of checks our trainees have obtained at our Hooked on Overages Site!)

How About Some Checks and Balances in the Michigan Tax Deed Sale, and Others Like It?

What I DON’T agree with is government deciding that at some point the taxpayer’s property became THEIRS. 100% theirs. Despite the fact that the taxpayer likely owes only 5-10% of the property’s value in taxes, states such as Minnesota, Wisconsin, Michigan, and Oregon want more. In fact, they want it all. So they foreclose the property completely, and they make sure to do it well ahead of the tax deed sale. Now, because of a relatively low tax bill that was owed, they’ve become 100% owner and wiped the owner out.

But, as usual in most tax deed states, they let the bidding go wild several months later at the tax deed sale. And the county loves it – because THEY now own the property, and as such THEY get all the surplus funds from the sale! And the owner is truly left blowing in the wind with NOTHING.

I wanted to write about this today not to complain about government – in my opinion that will get you nowhere. Rather, I want you to see the HUGE opportunities that exist in these “backward” states to snag tax sale property BEFORE the county can get their hands on it. Remember – by the time a tax deed list comes out, there is only one owner and they don’t sell except at auctions! Take a little time and delve into the FORECLOSURE process that the county performs prior to the sale and you will find a wealth of properties that nobody but you has access to.

Finally, make sure the owners realize that the final date to redeem their property may come and go with as little as a notice in the mail – no big auctions or evictions when that day passes. The big Michigan tax deed sale windfall will be savored by Uncle Sam (or rather his local counterparts) several months down the road!

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.