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Started By
Message
Tax Lien Auctions have a great return but are they morally ethical?
Posted on 2/28/14 at 8:39 am
Posted on 2/28/14 at 8:39 am
When a person doesn't pay their property tax, a third party(usually it's a bank but any private citizen can do this) can pay their property tax for them after the county government puts the tax debt up for auction.
The owner of the property has 1 year to pay the debt off, usually with substantial interest attached to it. In most cases, the debt gets repaid because people realize they're going to lose the value of their home for a relatively small tax debt.
If they fail to pay after a year, the person who paid the debt can foreclose on the house and gain ownership of the property.
In some jurisdictions people have lost $100,000 homes for as little as a $400 debt. I researched this yesterday, though, and found that all of the homes in my county up for tax lien auction were poor quality that I wouldn't want to own. You know, trailers on lots worth $15,000 that had $1000 tax debts. Not something I would want to own, even if I could steal it.
It's a way of legally stealing a person's house. Tax liens as an investment opportunity provide some of the highest rates of returns of any type of investment.
But is it morally ethical to make some poor person homeless can just to make money?
I would. Am I just a greedy SOB?
The owner of the property has 1 year to pay the debt off, usually with substantial interest attached to it. In most cases, the debt gets repaid because people realize they're going to lose the value of their home for a relatively small tax debt.
If they fail to pay after a year, the person who paid the debt can foreclose on the house and gain ownership of the property.
In some jurisdictions people have lost $100,000 homes for as little as a $400 debt. I researched this yesterday, though, and found that all of the homes in my county up for tax lien auction were poor quality that I wouldn't want to own. You know, trailers on lots worth $15,000 that had $1000 tax debts. Not something I would want to own, even if I could steal it.
It's a way of legally stealing a person's house. Tax liens as an investment opportunity provide some of the highest rates of returns of any type of investment.
But is it morally ethical to make some poor person homeless can just to make money?
I would. Am I just a greedy SOB?
10
Posted on 2/28/14 at 8:48 am to samson'sseed
quote:
Am I just a greedy SOB?
Simply, no.
quote:
But is it morally ethical to make some poor person homeless can just to make money?
How are "you" making these people homeless?
Honestly, if these people cannot pay $400 to keep their home, they have larger financial issues.
Posted on 2/28/14 at 9:00 am to samson'sseed
Where does someone even begin to learn more about this within their area?
Posted on 2/28/14 at 9:02 am to samson'sseed
"But is it morally ethical to make some poor person homeless can just to make money? "
No, it's not morally ethical.
I'm not sure that's what you're doing, though.
No, it's not morally ethical.
I'm not sure that's what you're doing, though.
This post was edited on 2/28/14 at 9:04 am
Posted on 2/28/14 at 9:03 am to RickAstley
quote:
Where does someone even begin to learn more about this within their area?
After I read original OP I just simply googled "foreclosures 77058" and zillow showed me what was around.
Posted on 2/28/14 at 9:07 am to htownjeep
quote:
I just simply googled "foreclosures 77058" and zillow showed me what was around.
I believe OP is referring to tax sales though. Slightly different in the sense they are auctioned at the Courthouse, opposed to the traditional real estate route. Check your local Trustee office or banks, most of the time there are listings in the newspaper as well.
This post was edited on 2/28/14 at 9:22 am
Posted on 2/28/14 at 9:08 am to OnTheBrink
Also, I am not sure if this is how I Love Bama goes about acquiring properties, but this thread seems like it is right up his alley.
Posted on 2/28/14 at 9:11 am to samson'sseed
quote:
In some jurisdictions people have lost $100,000 homes for as little as a $400 debt. I researched this yesterday, though, and found that all of the homes in my county up for tax lien auction were poor quality that I wouldn't want to own.
99.99999% (you get the point) of the time, its property that no one wants to own. But it still has some value. A lot of tax sale investors just want the interest return and not the actual property.
Posted on 2/28/14 at 9:18 am to OnTheBrink
quote:
I believe OP is referring to tax sales though.
Ah, gotcha.
Posted on 2/28/14 at 9:19 am to samson'sseed
You have a very elementary understanding of how tax liens work. If you dig a little deeper, I think you will find they are NOTHING like you think they are.
I'll post more later if nobody has explained it.
I'll post more later if nobody has explained it.
Posted on 2/28/14 at 9:43 am to RickAstley
All county governments give this information on their websites.
Some even list the properties being put up for auction.
Other counties have this information in legal notices in local newspapers.
Some even list the properties being put up for auction.
Other counties have this information in legal notices in local newspapers.
Posted on 2/28/14 at 9:44 am to samson'sseed
Pretty rare that you actually end up with a house out of a tax sale. Far more often you will simply get repaid the money with interest when the owner reclaims it - the redemption period is very generous. rmc can correct me, but I think the interest rate in LA is 10% plus some set penalty, so this can be a good investment for the interest alone, especially if you do it in volume. I have no idea how it works in GA though.
Posted on 2/28/14 at 9:48 am to samson'sseed
Posted on 2/28/14 at 10:00 am to samson'sseed
In areas where there is oil & gas development a tax sale can be a great way to get in on the action. I have seen many examples of land owned by descendants of the original owners who neglect their tax bill for whatever reason - a lot live out of state.
Obviously it takes research to find out whether you're getting the minerals or not, but lots of people have gotten rich from buying up random acreage for peanuts.
Obviously it takes research to find out whether you're getting the minerals or not, but lots of people have gotten rich from buying up random acreage for peanuts.
Posted on 2/28/14 at 10:40 am to GaryMyMan
I have some friends that formed a partnership and they do a few of these a year. They have never gotten a property out of it. However, they have gotten some nice returns (10 percent plus) on their money.
It's one of the most illiquid investments out there. Once you pay the tax bill and get the certificate, you can't cash it out or anything (not sure if you can re-sell it). On almost all of the ones my friends have done, the property is redeemed within the last week before the clock runs out.
The stories where a nice house is gotten for $1,000 and foreclosed upon are extremely rare. You get your money with interest, or, you get a crappy property. If you are someone that wants to invest in land or crappy property for long-term growth, that might be a nice side action from these deals.
It's one of the most illiquid investments out there. Once you pay the tax bill and get the certificate, you can't cash it out or anything (not sure if you can re-sell it). On almost all of the ones my friends have done, the property is redeemed within the last week before the clock runs out.
The stories where a nice house is gotten for $1,000 and foreclosed upon are extremely rare. You get your money with interest, or, you get a crappy property. If you are someone that wants to invest in land or crappy property for long-term growth, that might be a nice side action from these deals.
Posted on 2/28/14 at 10:44 am to GaryMyMan
The stories I heard from older friends about successfully buying large marsh tracts from tax auctions usually involved something shady. Like their buddy was in on it and the notices never made it out of the courthouse/sherriffs office.
Posted on 2/28/14 at 11:26 am to samson'sseed
So what do I do once I identify a property that I want to pay the taxes for? This seems pretty interesting, not so much the acquiring of real estate, but there is some nice interest rates in the southeast.
Posted on 2/28/14 at 11:30 am to RickAstley
Posted on 2/28/14 at 1:04 pm to samson'sseed
I believe in Caddo Parish, there's a 5% fee off the top plus 1% a month. I know someone that buys tax sales that will more than likely be redeemed, but where else can you find a 17% return guaranteed?
I'd love to learn more about it and try my hand one day.
I'd love to learn more about it and try my hand one day.
Posted on 2/28/14 at 1:09 pm to I Love Bama
quote:
PODCAST ON INVESTING IN TAX LIENS
Just listened to it. Pretty cool info. Thanks for sharing
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