Tag: sales

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!

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 Sales Increasingly Outsourced to Private Companies

Private Companies Taking Over Tax Sales

Responsibity for Tax Sales Now Often Contracted Out

More counties are outsourcing their tax sales to private companies. This has some definite implications for us as investors.

Whereas government often doesn’t have an incentive to create efficiencies, private companies do. As a result we’re seeing greatly enhanced information access almost immediately when a private company is brought in to do tax sales.

This USUALLY makes it easier for us to obtain the information we’re looking for about upcoming tax sales. An exception can be when the private company collects information and hides behind their private status to deny public record requests.

For the most part, this has not proven to be an issue.

Improvements To Tax Sales By Private Companies in Indiana

For years, many Indiana tax sales have been run by a company called SRI out of Indianapolis. SRI developed the proproetary software that tracks the status of properties offered or sold at county tax sales in Indiana. They also hold the actual auction itself onsite in each county.

SRI has also conducted online tax sales (usually second-chance commissioner’s sales) and developed an ebay-like auction system for those sales. It’s quite good, complete with proxy bidding. This allows you to set a maximum bid you’ll pay, but only pay slightly above the second-highest bidder.

Finally, SRI’s website gives stats for completed tax sales and allows for download of upcoming sale lists.

The stats are very useful for determining which counties had significant activity the year before and are therefore prime targets for pre-redemption period purchases.

Another company, Government Utilities Technology Service (G.U.T.S.), has entered the scene of late, and appears to be developing excellent online resources as well.

Significantly, they have been awarded the contract for Marion County tax sales (Indianapolis). This is the county with the highest tax sale activity in the state.

G.U.T.S even posts the bidder lists from tax sales on their website. Amazing the access that is granted to tax sales when there is no conflict of interest, as with the county.

Tax Sales: Blunders and Other Concerns with Private Companies

You may want to take note when a brand-new private company is awarded a contract to perform a sale in your target area.

Onyx, a Valparaiso company hired by Lake County, Indiana to perform tax sale work in 2010, failed to cause the appropriate notices to be filed in local papers as required by law. As a result, the tax sale conducted they conducted had to be totally reversed as a result.

Millions of dollars had to be refunded to tax lien investors, and all of their efforts to participate in the sale were wasted. I wrote about that in a previous post.

Another concern with private companies is that they will become the sole custodians of what should normally be public information (tax sale results). They could then potentially share this data only directly with the counties. This could make our job of obtaining records of tax sales more difficult.

Costs

Finally, when private contractors are paid by the parcel to run a sale or earn a commission, the fees borne by the county can be quite high. A relatively small county in Indiana, Boone County, recently paid G.U.T.S. $70 per parcel for a total of $16,030 to conduct their tax sale.

This seems to indicate that 229 properties were offered at the sale.

Responsibilities of private companies usually include providing initial notice by certified mail for each owner involved in the sale, arranging for publication of notice as required by law, conducting the actual sale, and providing software necessary to track status of the properties in the sale.

For smaller sales where several hundred properties are offered, these rates seem somewhat within reason. But larger counties would pay up to $770,000 or more for tax sales to be conducted privately. Lake County, Indiana for example has recently had tax sales where more than 11,000 properties were offered.

SRI was recently awarded a contract to perform a tax sale in Lake County in which a 10% commission on all proceeds were paid over to SRI. The amount of taxes being offered? $48 million!

Do you think you could remember to place the required newspaper ads if you were awarded a contract for $770,000 or a share of $48 million?

You’ll learn several ways to profit from tax sales in my Underground Tax Sales Secrets report, which you can get below for free.

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.

Tax Deed Sales – A Way to Get Cheap Property? Not Usually

Tax Deed Sales and Cheap Property

Are tax deed sales an effective way to acquire property for bargain prices? The short answer is: hardly ever. Let’s look at a few reasons why purchasing property at tax deed sales can be problematic.

The first obstacle you’ll encounter is that you will have to research each and every property on the tax sale list. In many areas, hundreds or even thousands of properties can be listed on a county’s tax sale list. When there are this many properties listed, it becomes a huge expenditure of time to drive to each property (if you can even find some of them without an address) and assess a value you’d be willing to pay for each one.

Tax Deed Sales - Bidding Ruins the Fun

Bidding Kills Bargains At Most Tax Deed Sales

Also with a large list, there will be mostly garbage properties available that will not even be worth the taxes owed. It’s easy to confuse an adjacent lot, next to a valuable property, with the property you’re looking to bid on, and make a bad purchase.

Now that you’ve spent hours researching the properties, you’ll have to have cash available to purchase the property at the sale. Don’t think that the amount listed in the list is necessarily what you will be able to purchase the property for – – this is just the minimum bid.

At the sale, you’ll be joined at most tax deed sales by several other bidders with deep pockets. They’ll almost always bid the property out of the bargain range and closer to retail value.

The last significant item is that most properties purchased at tax deed sales do not have marketable title at the time you buy them. Though any mortgages or liens are usually wiped out by the tax sale process, title companies want an additional step performed, called a quiet title, which can take 3-4 months and cost an additional $500-$2000 to perform. Many times during the quiet title process, interested parties who were not sufficiently noticed about the sale will come forward and attempt to overturn your deed. This is the whole reason the title companies want the quiet title done successfully – – they have been burned too many times by insuring tax deeds bought at auction.

The only way you will succeed at tax deed sales in buying a cheap property, is if you manage to attend an auction where nobody shows up, or everybody who does show up misses a valuable property on the list and does not bid.

These experiences will be few and far between, and you’ll have to research all tax deed sales in the meantime to be prepared in the event you get lucky.

However, tax deed sales do present a great investing opportunity. You can simply contact the owners of property going to tax deed sales and buy the property directly from them. Much of the time, the reason the property is going to tax deed sale is because the owner doesn’t want it. In these circumstances you can offer the owner as little as $50 for the deed to the property and pay the amount owed in taxes, with no quiet title or bidding necessary.