There can be a lot of potential profit as well as risk associated with properties sold at tax sales.
Here are some things to take into consideration when you are looking to invest in this area:
Evaluate the property types and make sure viable option for that area and desireable property type
What are the different uses for the property? does it have potential at surface value or would you have to chnage the zoning or something to make it a profitable property?
Are there any pending or outstanding EPA Issues listed on file and associated with that property?
Are there any Title Issues? What is currently outstanding as far as liens are concerned on this property?
Your True Rate of Return may change Based on the Redemption Period and when the taxes are redeemed. You might actually lose money on the deal if it is redeemed early on in this timeframe especially if you bid a premium amount.
The Struck off Properties from past auctions might be flawed or not worth the taxes owed. Double check these properties and make sure you do a thorough analysis of the risk associated with these properties. There might be a reason why they did not sell at past auctions. Likewise, you might see some potential that others did not see on the surface.
You need to know the maximum premium bid amount for each tax lien certificate you are bidding on so you do not over bid and potentially lose money on the deal.
It is always important to make sure that the current Property Value is not less that the amount of taxes owed. Obviously, this would not be a good investment. It would be good to know before you bid at the auction if there is a Tax Lien Certificate Expiration Date associated with that tax lien, so you can mkae sure you petition for foreclosure on the tax lien certificate that is unredeemed within the appropriate time or else you loose your invested amount and the rights to that property. If you are buying Tax Deeds, you will find that more often they will come with clouds on title. You will need to file an action with the local courts called a "quiet title action" to clean up these title issues. There are fees associated with this lawsuit and would could result from this action in regard to removing these additional liens/clouds from title. These additional expenses should be considered when making your bid at the tax deed auction.
If you would like the chance to work with me or one of my fellow real estate investor coaches and our advanced training programs, give us a call anytime to see if Dean's Real Estate Success Academy and our customized curriculum is a fit for you. Call us at 1-877-219-1474 ext. 125