How To Buy Property for Unpaid Taxes

Property Tax Lien investing is often advertised as a high income, passive investment that anyone can do.  Conduct a few hours of research and show up at the county auction and earn unlimited passive income.  Well, that’s complete bullshit. 

I’m sure you have seen books and courses on television touting the unlimited wealth you can generate for very little work.  The fact is that there are better and more ethical ways to make money on property through unpaid property taxes.

First I’d like to explain why I do not bother with purchasing tax liens. Only about 6 percent of delinquent tax liens end up in foreclosure, and of those, only one half of one percent is successful in that they are not redeemed (before foreclosure is complete).  That’s because most properties have liens and the taxes will eventually be paid by the lien holder.  Additionally there can be a ton of fees and if you are in the rare position of acquiring one of these properties, you are basically stealing it from the owner and evicting them as a final f#*K You.

I just can’t do it.

In the event that you find a property that has no lien, there will likely be so much competition for the property, if it has any true value, that the bidding will take down the interest rate to below an acceptable investment return.  Not to mention that you will likely be pitted against law firms and other sharks that have done a ton of due diligence.  It Sucks, and is not for the faint at heart. 

My approach is somewhat different, but it has allowed me to purchase many valuable properties over the years.  It can be a grind at times, but it also doesn’t screw the current owner out of their bounty.

 

There are over $14 Billion in unpaid property taxes every year and it is all public information.  They’re easy to find and once you learn the most efficient way to review them you can literally look through hundreds in an hour.  My favorite way is using a GIS viewer as I can probably look at over 400 properties in an hour which includes any lienholders.  I compile a list of all properties with unpaid taxes over multiple installments and begin to prioritize them by value. 

 

Value can mean a lot of things to a lot of people.  It could be proximity to another business, zoning, or ability to combine with another property in the future.  At the end of the day it’s still location, location, location. 

 

Let me give you an example of a plot of land I acquired using this technique.   The attached picture is an aerial view of multiple properties I acquired over approximately one year.  During a standard search I found close to 50 properties whose taxes were unpaid.  I prioritized them and this one floated to the top of my list (Property #2).  Why?  Because it was on a busy street, the neighbor has commercial zoning, and although it is small and difficult to develop, it has several opportunities to potentially combine with neighboring parcels.

I approached the owner to see if he was interested in selling.  The owner is paying a ridiculous amount in penalties every month from the unpaid back taxes which generally mean that he is in some type of financial trouble and is likely willing to listen to an offer.   This is the biggest difference with my approach.   The owner doesn’t get screwed.

 

But before I committed to the deal I quickly did research on the surrounding lots.  Property #1 was completely worthless.  Garbage!  It was landlocked by other properties and oddly shaped and therefore could not be developed on its own.  However, when combined with Property #2 it became very valuable.  I did a little research on it and discovered that the county owned it for unpaid taxes.  The property was so bad that a tax lien was never purchased against it.  It was going to be sold at a deed auction in the fall of that year.

 

 Excellent!  

At this point it was worth making a deal with the owner of Property #2 given the great price, location, and knowing I would be able to acquire the adjacent land within 6 months.  So I purchased the property for an unbelievable price and immediately paid the back taxes owed. 

Now, while waiting for the tax deed sale on Property #1 I did some research on Property #3.  As you can see in the picture it was an abandoned alley and easement.   Both can be acquired through the county with appropriate justification using a “Petition to Vacate” application.  I have attached an example petition from Cape Coral, Florida.  I have gone through this process myself many times, but I would highly recommend using an attorney.

 

I hired an attorney to complete the process and within a year was granted both the easement and the vacated alley.  In the mean time I purchased Property #1 at the deed auction for the opening bid, as I was the only bidder.  Now I have acquired this large plot of land for almost nothing but some hard work and well planned strategy! 

While in the process of combining the PIN numbers and applying to re-zone the property, the adjacent property owner made me an offer I could not refuse.  He had a commercial building and needed the land for expansion.  When the dust settled I made over 10X my original investment! 

I know you thinking this is once in a lifetime thing, but it’s not.  It happens all the time.  There are a lot of people in financial trouble which is indicative of their unpaid property taxes.  Many of which would be delighted to get an offer to unload the property and not have to worry about coming up with cash to pay the taxes.   

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