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REAL ESTATE Tax Lien or preforclosure

Nate

New Contributor
Read Millionaire Fastlane
Sep 24, 2007
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Utah
A friend of mine works for one of those companies that sells expensive training ($5,000 - $15,000 depending on the package) on how to do this type of real estate.

I don't know anything about real estate, so a couple of the "keywords" that he threw around while explaining it to me were "tax liens" and "preforclosure".

As I understand it you search all over the country on the internet for these homes where people couldn't pay the taxes... you make an offer on the home (actually he said it's usually just land) and then if you get it you have to pay the back-taxes.

Supposedly people can on occasion get properties for hundreds of dollars (the exception) and more often in the low 4 digit area.

I don't plan on taking the education, but was really wondering if there is any validity to this. Is is difficult to do? How is the risk compared to other forms of RE investment. If anyone knows what I'm referring to (because I don't think I do) and could fill in the blanks, that would be awesome.
-Nate

P.S. - Where did that thread go about buying on selling mobile homes with promisery notes? That seemed interesting.
 

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Nate

New Contributor
Read Millionaire Fastlane
Sep 24, 2007
75
2
21
Utah
Sorry to bump my own thread... I hate when people do that. Just want to know if anybody might have a comment on this. Thanks.
 

NoMoneyDown

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Read Millionaire Fastlane
Aug 28, 2007
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Round Rock, TX
In one word "Yes" it is possible with both. But like anything in real estate, it takes knowledge, due diligence, and hard work.

Tax Liens

I recommend reading Profit by Investing in Real Estate Tax Liens by Larry Loftis. It gives a good overview of what tax liens are, how you can buy them at auction and over-the-counter, etc. He also has a section that gives information about each state and how they conduct the sales, etc.

States usually are classified as tax lien or tax deed states (or a third category that Larry calls "hybrid"). States have their own laws regarding tax liens from the auction to the redemption period to over-the-counter purchasing. Again, I'd recommend buying/reading Larry's book. There may be other books with more detail and/or better - I've only read his, which I found very informative.

Preforeclosures

As the name suggest are properties that have not yet been foreclosed on by the lender. Depending on the condition of the property, how much equity it has, etc., you can often times find a tremendous bargain for your efforts.

Sub2's are a good thing to get into as are Short Sales.
 
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Nate

New Contributor
Read Millionaire Fastlane
Sep 24, 2007
75
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21
Utah
Thanks for the help. They seem pretty similar. Seems like it might get confusing if you start to go inter-state.

I have never heard of Sub2's ???
 

NoMoneyDown

Contributor
Read Millionaire Fastlane
Aug 28, 2007
520
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Round Rock, TX
Thanks for the help. They seem pretty similar. Seems like it might get confusing if you start to go inter-state.

I have never heard of Sub2's ???
It's short for subject-to financing. It's where you become the owner of the property (i.e., the deed is in your name), but the existing financing is still in the previous owner's name(s). There's a lot to it, but essentially you find a homeowner that is willing to deed your their property while keeping the existing financing intact. You then make the payments to the lender each month.

A lot of issues arise, though, for instance insurance coverage and the DOS (due on sale) clause that most security instruments contain.

Be wary as some states are beginning to crack down on creative real estate investing, including Sub2's, due to unscrupulous investors who take advantage of homeowners. For instance, I heard North Carolina is not very "Sub2 friendly".
 

mglshark

New Contributor
Oct 18, 2007
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Sub2 in California can also be a problem, in the foreclosure market a famous case a number of years ago involve a old lady ready to go under, pro RE investor swoops in and make all back payments but loses in court when she refuse to leave her house. She live mortgage free for years and got her house back!

Tax liens sounds great in the seminar pitch, but reality is a lot tougher. Some states can be good but you have a lot of people showing up to bid on stuff, you also have to research the the title and the home before making a bid to buy, problems can be an EPA toxic site or former meth house.

You can find out info from the state and area you want to buy in, I bought some books ($30) and one course (about $100 can find the link if you want) that covered just about everything! Much cheaper then overprice seminars and guru's!

Careful of companies that "invest" for you, they can run off with your $$$ or charge up expenses before you get your cut.

In California they finally do tax liens by once a year RE auction, some postings and newspaper stories talk about how every Joe lunch bucket showed up, paying more then the going RE value worth to get these.

Other states the repayment rate varies 8 - 20 % but remember everybody else is their bidding. Factor in your costs of flying somewhere, getting a room, checking title, visiting all the properties then hanging out all day to bid! Some states the person can pay off the tax lien early, dropping your % of return. Some folks average $10/hour at the end of the day!

Hope this helps

Marc

PS - somewhere I have "deals on Wheels" for mobile home investing, forgot the guys name but good info for $30, recommended!
 

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