You've found it! After weeks of searching through the wilderness of bidding-up prices and local random-selection for bidder rules, all the stars have aligned and you've located the dream tax sale. It's not the location, though Colorado in December and Arizona in February can be nice. It's not the people, in fact the fewer the better.

The following four conditions are the prerequisites for an excellent tax sale, which will offer you the opportunity to make HUGE PROFITS for a TINY INVESTMENT at LITTLE OR NO RISK:

Lowest Possible Opening Bid.

The opening bid at a tax sale is typically just delinquent property taxes, plus administrative costs and fees, often under 5% of the assessed value of the property!

Free and Clear.

Many times a tax lien is a “priority” lien, meaning that all other liens on the property upon purchase or acquisition of the property!

Excellent Equity .

If you end up acquiring the real estate for that opening bid, you could have very large percentage equity in the property!

No Competitive Bidders .

The only thing better than just one competitive bidder at a tax sale is no competitive bidders at a tax sale. That way, no one can bid up the lowest possible opening bid!

In all honesty, finding a tax sale with all of these characteristics is a bit unlikely. Many self-proclaimed real estate gurus present a similar checklist, and expect you to travel all around the country searching for the “perfect sale.” But what if you can't travel the country? What if you, like almost everybody else in the world, have a limited budget and limited time window? There are still methods and ways to dramatically improve your chances to make huge profits for a tiny investment, at little or no risk at any tax sale!

So if you're not at the dream sale, how do you decide what to purchase? Now that I mention it, forget about deciding! How do you even make a purchase? Where do you find tax sales? What's the bidding process about? How do you locate likely properties? Once you locate them, how do you evaluate them? What should you be looking for?

I've dedicated this section of the eBook to answering all of those questions, and many more. I want to move past the empty promises that so many other real estate hucksters might give you. It's not about a bunch of technical gobbledy-gook. It's not about the luck of the draw. It's about basic common sense and a little bit of homework! Follow the plan I'm about to outline for you, and do your homework regarding properties and local customs and laws, and I guarantee you that you will increase your chances of making HUGE PROFITS for a TINY INVESTMENT at LITTLE OR NO RISK.

This section is divided into three parts:

1. THE POINT

2. THE PROCEDURE

3. THE PAYOFF

Each is designed to specifically address, with hard-core strategy and tips, how to place yourself in a better position to make HUGE PROFITS for a TINY INVESTMENT at LITTLE OR NO RISK.

Here's what they each mean…

THE POINT…

outlines just what we're trying to accomplish through tax sale investment and preferable ways for you to approach making truly gigantic profits!

THE PROCEDURE…

is the nuts-and-bolts section that, in straightforward, no-nonsense language, really gets at the heart of how to improve your chances to make HUGE PROFITS for a TINY INVESTMENT at LITTLE OR NO RISK!

THE PAYOFF…

wraps-up with exactly what you may stand to gain if you do your homework and due diligence and apply these strategies – profit, profit, profit!

CHAPTER 2

THE POINT - PROPERTY

I have one word for you: Property . That is our goal. That is our mission. Many other real estate investors at tax certificate sales are interested in the interest rate return on the certificate, which is certainly attractive – up to 24% in some states. A long-term investment strategy of buying certificates, selling them back to property owners who redeem them at the price plus interest, and then buying more certificates and repeating the process, can create a nice little nest egg for your retirement.

However, if you're interested in making HUGE PROFITS for a TINY INVESTMENT at LITTLE OR NO RISK in few years or even a few months, that particular strategy is not the way to go.

EXAMPLE

You are at a tax certificate sale in the city of Baltimore, Maryland, where the interest rate on tax certificates is a titanic 24% per annum. You're excited about that, but you're more excited about a house you've located that is part of the tax sale. You bid on the certificate for the house, and purchase it at for $5,000. But the property is assessed at around $100,000, so you stand to make a HUGE PROFIT is the property is not redeemed!

Here's a bonus – the redemption period is a relatively short six months. However, six months later, just as you are preparing to foreclose, a relative with a legal claim on the house shows up and pays you your bid, $5,000, plus that magnificent 24% per annum interest on your $5,000, or about $100 per month, times six months. About $600!

Now, $600 profit is nothing to sneeze at, but it's not the $95,000 EQUITY in the house you stood to gain if the certificate was not redeemed!

It's time for me to ask you a question: which would you prefer?

A. Six Hundred Dollars

B. NINETY-FIVE THOUSAND DOLLARS

When I put it that way, it's rather simple, isn't it? Our goal, buying tax deeds and tax certificates, is NOT the excellent rate of interest return that may accompany these documents. That's a distraction, and a nice consolation prize.

Our goal is locating and acquiring the PROPERTIES that will make us HUGE PROFITS for a TINY INVESTMENT at LITTLE OR NO RISK!

CHAPTER 3:

THE PROCEDURE

GETTING THE LIST, CHECKING IT TWICE

So, now we've established that you're truly interested in property and only property, many questions start to rear their heads. Which properties? How do you identify them? Where should you go?

DUE DILIGENCE

First of all, let me say that it is INDISPENSIBLE for you to do your due diligence. Think back (for some of us, it's a long ways) to middle school or junior high. It was very tempting to skimp on the homework the night before the test, wasn't it? It was so much easier and more fun to go spend time with friends or grab a Coke and flip on the TV. But the next morning at the test, you regret the fact that you didn't spend a little more time reading about the Teapot Dome scandal.

It's the same way with real estate investing, except the potential ramifications are not the difference between a B and a B minus on a test. Not doing your due diligence can result in mistakes that could cost you THOUSANDS of dollars of potential and actual profits!

Below are three excellent stepping stones to getting your due diligence started up:

Step Number 1: RESEARCH

Before you go to Spain for a vacation, you buy a phrasebook, right? You take some language classes or at least get that pocket-sized dictionary so you can order the good stuff in restaurants and ask the taxi driver to take you back to your hotel. And the thing is, that sort of limited preparation is mostly what you need, because in Europe there's probably a good chance somebody in the immediate area will speak at least a little English.

But at tax sales, English doesn't count. You need to speak, and furthermore, be fluent in, tax sale-ese. You need to speak the language of the tax sale. Buying this guide is a number of steps in the right direction! But there's no substitute for specific local knowledge. If I went into every tiny bidding detail for every county in every state, this guide would cost more than it does and would be so heavy it would break through your dining room table!

Never fear. Mastery of tax sale-ese just requires some research!

Stay Local .

Focus your attention at the beginning of your tax sale/certificate investing career on counties a close drive from you, or on one or two adjacent states with systems that interest you.

Our Tool Kit.

The Tool Kit segment of this guide provides a wealth of Internet links and tips that will help you connect with state and county tax officials and sites, easing the road into huge profits!

Halls of Knowledge .

Spend a little time in the local law library. Look for state statutes on conducting tax sales. Takes some notes, or even photocopy them to refer to at the drop of a hat! Due diligence is like an apple a day. It can keep the losses and lawyers away!

Drop In .

Visit the county and municipal tax authorities in the off-season, months before any tax sales they might be holding. Ask questions! Get familiar with their local customs and practices.

If you know the local rules and the folks who will ACTUALLY BE CONDUCTING THE SALE, you can acquire some obvious advantages, and some potential allies!

If you master these four areas, you are radically increasing your chances to be speaking tax sale-ese as well as a the tax lawyers and real estate wonks, and you may radically increase your chances to make HUGE PROFITS for a TINY INVESTMENT at LITTLE OR NO RISK!

Step Number 2: TIME AND DATE OF THE SALE

You've done your statutory due diligence. You've got the local customs and tax rules down, and you're ready to go! But, where do you go? Locating the local county, state or municipal tax sale is usually pretty simple.

Statutory Requirements .

There is almost always a statutory requirement (i.e. the law says the tax officials must announce it) for states and county tax offices to publicly announce tax sales, as well as announce the sales to property owners. In practice, lists of properties or certificates can be posted in public places around the county as well, or just pinned to the tax officials' office door.

Newspaper Announcements.

Generally, tax officials are required to take out newspaper advertisements announcing properties defaulting on property taxes, along with the actual date and time of the sale.

Early Bird has More Time to Locate Property .

Ok, you've done your due diligence, located the tax office, and already gone in to talk to the officials and get the lowdown on local rules and customs. Chances are, you can acquire some information regarding the properties or certificates up for sale BEFORE most of the investors, who just look for the newspaper ads.

This head start can translate into valuable property research time, especially in large or more populated counties with big numbers of properties on the block. Remember, more knowledge = potentially more profit!

Early identification of the sale and the sale properties can give you a leg up on the competition in terms of identifying prospective profit-making properties, and having the most knowledge about any given property at the tax sale!

Step Number 3: READING THE LISTING

Ok, the tax sale is in a couple months, but hasn't been announced in the papers yet. How do you know this?

Well the information was provided to you by the friendly tax officials at the local office; you introduced yourself to them a couple of months ago while doing your local tax law research. Since then, you drop in occasionally, just to catch up on a personal level. You even picked some coffee up for them when they was very busy and couldn't take a break.

All this personal attention pays off one day when you stop by to say hello, and you see they've posted the list of properties for the next tax sale. The newspaper ads go out next week, so you've got a jump on the competition!

The staff makes you a photocopy of the list, and you're on your way! You go out to the car, and see a list of numbers something like this:

345-106-1997-50-23544

345-365-1995-150-43386

346-222-2000-50-56677

These numbers continue all down the page! What do they mean? Is it some sort of secret real estate guru code? How could they do this to you? You bought them coffee and everything! Remain calm. Everything's going to be ok. Every state, county, and municipal jurisdiction has their own particular way of identifying various pieces of property. Part of your due diligence is just being able to read the list! This is another reason why it's good to get to know the local tax officials, as they can translate the mumbo-jumbo into specific information for you!

To get you started, here are three common systems that tax officials use to identify property. Generally, a local tax office will use one or a couple of systems similar to these:

Street Address .

The basics. Many jurisdictions list a parcel by the address of the property and the name of the property owner. A particular listing might read as follows: “9299 Briarcliff Road, currently owned by David and Kathy Crawford.” This type of listing is straightforward and easy to read, but not as specific as the other listing systems we're about to explore.

Tax Property ID Number .

The extended numbering method from the example at the beginning of Step 3. For tax registration purposes, each parcel of land, whether improved or not, receives a unique identification number. Each part of the number (separated in the example by hyphens) contains specific and unique information about that particular piece of property. Those numbers are linked to specific tax maps covering various parts of the city, and usually on file with the tax officials. Let's look at a specific example on your list:

345-365-1995-150-43386

Now, let's break down what each number might mean:

345 – General area of town

365 – Subdivision or neighborhood

1995 – Year the number was assigned

150 – Type of property (like an apartment complex or single family home)

43386 – Unique identification number for that piece of real property

This system makes your job much simpler if you're looking for a specific type of property.

For example, if you were looking for unimproved land (let's say that's code 150), you could just scan the listings for all the “150” properties, and ignore the rest. Similarly, if you're interested only in a certain area, just look at the “345” tax book map.

Legal Description .

Another method used by tax officials to list properties is the use of a legal description. Deed registrars often catalogue legal description listings in an index, called the grantor/grantee index, of their local office. Here's a typical listing: “the property owned by Chad and Margaret Hennings as conveyed to them by Deed recorded on September 10, 1945 in Volume 177, Page 313 of the official deed records of Johnson County, Kansas.” Lots of lingo, huh? Let's break it down:

Chad and Margaret Hennings are the property owners of record. They'll be the ones who are delinquent on their property taxes, and among the possible redeemers of the property.

September 10, 1945 is the date they took possession of the deed to the property. This happened a while ago, in 1945. Chances are better that the property is free and clear of all other liens than if the date is more recent. If the property was purchased more recently, it's possible there are other interested parties (mortgage companies, relatives, etc.) who may be interested in redeeming the property, making your acquisition less likely.

Volume 177, Page 313 of the official deed records of Johnson County, Kansas . These numbers locate the property in the county tax map books, where you'll probably be able to locate the street address of the property.

Now that you know where you're going, it's time to evaluate those properties, to further increase your chances to make HUGE PROFITS for a TINY INVESTMENT at LITTLE OR NO RISK!

CHAPTER 4:

THE PROCEDURE

SOME NO-NOS…

Congratulations! You are now the proud owner of a list of properties! So how can you convert that piece of paper into what might be HUGE PROFITS for a PENNIES ON THE DOLLAR? Eat your vegetables. Get out there and do your homework. Visit those addresses and check out the properties for yourself.

Remember the Point? You're trying to acquire property. Even more importantly, you're trying to acquire the BEST PROPERTY. You can only discover the BEST PROPERTY by evaluating the parcels yourself. Bidding at a tax sale, or even buying certificates over-the-counter, for property you have never seen before, is a recipe for disaster.

Environmental problems, neighborhood considerations (a beautiful single-family home plopped down next to a slaughterhouse, for example), occupied properties, all of these conditions and many more can lessen your ability to acquire a piece of property at a FANTASTIC PROFIT for a TINY INVESTMENT at LITTLE OR NO RISK.

A great first step in weeding out properties from the list as having the least potential for you is to ask the advice of your friend, the tax official. He or she can turn you on to some great neighborhoods or areas that are likely to be more profitable than others. After that, jump in the car and get moving!

There's a problem here: you can't bring in a group of experts to check out the property from top to bottom. First, it would be prohibitively expensive to go through property after property after property on your list. Second, and more importantly, YOU DON'T OWN THE PROPERTY. Walking around on a property owned by someone else is called trespassing, and it's illegal. You'd be surprised, however, by how much you can find out about a property from the side of the road or the sidewalk.

Below, I've listed my group of No-Nos, property characteristics that should throw up a giant red flag for you. Avoid these properties like the plague!

A FEW NO-NOs :

Environmental Issues .

You'll be surprised how many properties out there have serious environmental issues attached to them. You might also be surprised to know that every owner in the chain of title of a property is responsible for the clean-up costs required to deal with the waste or pollution associated with the site!

Let's say a company called BigGasCorp ran a gas station on the parcel of land you just acquired during World War II. What you don't know is that they has underground storage tanks for gas and oil on site that have been seeping into the surrounding soil. BigGasCorp then went out of business. Now that you own the property, YOU ARE STILL LIABLE TO CLEAN UP THEIR MESS, even sixty years after the fact.

Even if you had no idea PollutionCorp even existed, YOU ARE STILL LIABLE TO CLEAN UP THE LAND. Much money will be lost in the clean-up, and you're fantastic profit may turn into a painful loss.

The problem here is that you can't know this without a professional inspection, but you can't get a professional inspection until you own the land! All you can do is be on the look-out for tip-offs that may indicate environmental issues with the property.

Avoid the following:

Underground Storage .

Any property that contains or once used underground storage.

Industrial Past .

Any type of property which used to be used for industrial purposes, including farmland.

Demolition Land .

Any property that once had any sort of structure on it, even if the busted-up building has been removed.

The Dump .

Any property used as an illegal dump (i.e., cars, washing machines, etc dropped off by local residents who have nowhere else to dispose of them).

Wasteland .

Dwarf trees and blasted areas even in the summer may indicate an environmental problem.

Smelly Neighbors .

If the property is next door or near obvious environmental hazards (gas station, dry cleaning firm, etc.).

Not In My Back Yarders .

Everybody knows that there are facilities very important to the functioning of a town or city. Everybody also knows that they don't want to live next door to them! Avoid properties nestled near the following:

- Industrial Plants

- Factories

- Sewer Treatment Plants

- Mines and Mining Operations

- Rendering/Meat Processing Plants

- Mental Hospitals

- Alcoholism/Drug Rehab Centers

- Prisons and Jails

- Recycling Centers

- Chemical Plants

- Homeless Shelters

- Airports

- Shipyards

- Nuclear Power Plants

- Warehouse Districts

- Railroad Yards

- Homeless Shelters

Again, the idea here is not to acquire just any property you can get your hands on! I guarantee you there will be many opportunities to acquire property next door to, or across the street from any and all the red areas listed above. But you won't be acquiring profitable property. All you'll be acquiring is a headache!

I Already Live/Work Here .

Remember Stupid Jimmy in Iowa? He acquired a property already occupied by a little old lady who didn't want to move. Most people don't, and if redeeming a tax certificate or a deed is possible, it's much more likely to be redeemed if somebody is living at/working on the property.

If a residential unit is in good repair, with a motorcycle parked in front of it, or if a commercial property has an Espresso Hut stationed there, chances are much greater that somebody is interested in retaining and/or redeeming the property. That means chances are greater that you won't end up owning the property.

Phony Improvements .

Just because a tax certificate says a parcel of property is improved by a residence or other improvement doesn't mean the certificate is still telling the truth! Maybe you buy a tax certificate sight-unseen, foreclose on the property, and then travel out to see your new property, only to find out that the owner MOVED THE HOUSE. Stranger things have happened.

Underwater Investing .

Acquiring properties near wetlands or on flood plains is risky business. Unless you're prepared for and have the resources to perform major drainage and reclamation projects, give these areas a pass, unless you like having the lake as a permanent resident in your living room during the rainy season! It's also very difficult to get insurance on land the federal government recognizes as flood plain. Take a pass.

Ok, so that's a lot of things to look out for. It seems like bad things can happen at every turn. That's true, FOR THE INVESTOR THAT DOESN'T DO HIS OR HER HOMEWORK! However, for you, it's simply a way to separate the good for the bad! You can't concentrate on every property on the list from a tax officials' office, anyway. There's not enough time. You've got to get over to the next county and work some profit magic there, as well!

If you let the bad seeds weed themselves out, you are more likely to gain HUGE PROFITS for a TINY INVESTMENT at LITTLE OR NO RISK.

After you weed out the lemons, use the method below to increase your chances of gaining HUGE PROFITS even further! I call it the Rule of the Pan.

CHAPTER 5:

THE PROCEDURE

THE “RULE OF THE PAN”

Movies dealing with the gold rush are filled with old codgers standing hip-dip in a stream in the high Sierras. There's one of them, dipping his prospector's pan in the silt at the bottom of the stream over and over again, swirling the goop around and around, face fixed in concentration. Then suddenly, as the silt and muck drains out the holes in the bottom of the pan, there it is, he's found gold!

Think of the following checklist as your own personal prospector's pan. You need some way to narrow your prospects down to a manageable number of properties, on which you can really focus your attention, and that increase your chances of making FANTASTIC PROFITS for PENNIES ON THE DOLLAR!

So, using the No-Nos , you've disqualified all of the really risky properties from your quest. But, there's still a sizeable list of properties left. How do you distinguish between them? I designed this checklist to give you big chunks of information, all of which will give you a leg up as you pursue profit through property!

YOUR GOLD RUSH CHECKLIST

Your equipment to go through this checklist should require no more than a phone book, a computer with Internet access, and a couple of friendly conversations with the neighbors and friends of the property owner.

OWNERS

The essential information you need to discover is the location of the owner. How likely are they to redeem the property? If the owner is dead, on the lam from the Feds, or has given up all material issues and is living in a monastery on a mountain in Tibet, the likelihood of redemption is slim. If the owner is taking an extended vacation in the Bahamas, the likelihood of redemption increases quite a bit.

SALE DATE

There are some good hints here. You may have a better chance of acquiring a house last sold in 1930 than one sold last year. Although, why would the owner with huge cash reserves not pay his/her taxes? Is there some information there that you need?

SALE PRICE

You can get this information from any real estate agent. The house that sold in 1930 for $4,500 may have an owner that doesn't exist anymore. A sale price comparable to the market from a couple of years ago may indicate that the owner is scrapped for cash temporarily, but will attempt to save the property when push comes to shove.

IMPROVED PROPERTY

Improved properties are easier to check out/inspect than raw land. Improved property comes de facto with sewage disposal, zoning, probably won't flood in the middle of your first night in it, etc. Raw land carries a bit more risk.

BUILDING PERMITS

Similarly, if work has already been done to ready raw land for subdivision or construction, it has quite a bit more value than land without that work. Difficult to discover, but good to know if you can find out about them.

APPRAISED VALUE MATCH-UP

Does the appraised value of the property match up with other properties in the area? If it doesn't, you should discover the reason. If you do your due diligence with regard to appraised values in the area, you can locate the properties that just don't smell right. A low appraised value in a high-rent area can be very dangerous.

In the Business Journal of Milwaukee, Richard Gardner, the assistant tax collector for Dade County, Florida, said that in his area, “$10,000 in assessed tax-lien value probably would by a 15-acre lake full of rocks or a small plot on which you could put a billboard, if you're lucky.” Know your area, and go after those properties that compare well with others in the area.

ZONING

What a lovely meadow across from your new property! Too bad you didn't now it's zoned to become a new water reclamation plant for the city! Check out zoning around the property you're examining, not only for the property itself.

NEW DEVELOPMENT

New construction projects in “run-down” areas may be a signal that appraised values and commercial traffic through may be getting ready to jump through the roof! A savvy investment might be the tax deed on that run-down video store directly across from that abandoned widget factory THAT WILL BE TURNED INTO LUXURY CONDOS NEXT YEAR!

Again, do your homework, get the low-down of new zoning from the local zoning board, read the papers for stories about rezoning or redevelopment, and you could find some amazing opportunities for yourself to produce HUGE PROFITS for PENNIES ON THE DOLLAR at LITTLE OR NO RISK!

TRANSPORTATION ACCESS

The original real estate joke: What are the three most important facets of a property? Location, location, and location. How close is the property to interstates, bus routes, “hard” roads in rural areas? Is it close enough to be convenient, so whoever lives in the house can jump on the highway to get to work downtown? Conversely, is the house directly underneath an underpass or next door to the elevated train stop? Prospective buyers want convenience to transportation, but they don't want the subway in their living room!

Any or all of these checklist items can help you get an excellent sense for which properties might best provide you with HUGE PROFITS for PENNIES ON THE DOLLAR!

CHAPTER 6:

THE PAYOFF

We've identified your goal, to PROFIT through acquiring properties.

We've identified the straightforward PROCEDURE , which will help you separate the wheat from the chaff and locate a decent string of properties.

Now it's time to set yourself for a possibly huge PAYOFF …

I've put together a list of real-world secrets and tried-and-true tips to bring you that extra mile, and help you locate those special properties that may bring you HUGE PROFITS for PENNIES ON THE DOLLAR at little or no risk!

STRATEGY SECRETS

This expert's chapter will show you more than the basics! Doing your due diligence and your homework, learning local tax customs, meeting the tax officials, checking out your properties, that's all basic training. Now that you've mastered them, you're ready for the big time!

In the following pages I've outlined the secret techniques I use to increase my chances of acquiring HUGE PROFITS for TINY INVESTMENTS through tax deed and tax certificate purchasing! Here we go!

SECRET 1:

RURAL SALES

Smaller counties can be the gateway to larger profits, especially if you're buying tax certificates direct, but also if you are participating in a public oral bid tax sale.

Public Oral Bid Tax Sale .

It's that simple math again. Big Cities equals more people. Smaller Towns equals fewer people. This equation probably holds true for tax sales, as well. Far from the population centers, you tend to find not as many people interested in tax liens and the profits that can be made from them. All the more reason for you to get on the road, and take advantage of the lack of competition!

Buying Direct .

The logic follows here. If there are fewer people at local tax sales in smaller counties, it stands to reason that more tax certificates will not be sold. As you know from previous parts of this eBook, if a tax certificate isn't sold at the annual tax sale, the county or state usually buys it, and it sits in the tax office. And if there are more deals on good property waiting for you out in the smaller counties, my advice is get in your car and get on the road right away!

SECRET 2:

TAX CERTIFICATES IN LOW INTEREST STATES

If you could choose two scoops of ice cream or three, which would you choose? That's a no-brainer, of course. You'd choose three. But it's a trick question. The real question is, “would you choose three scoops of ice cream, or two scoops that would turn into two ice cream TRUCKS full of ice cream?” I would choose the trucks over those paltry three scoops. Wouldn't you? Here's how this story translates:

Many states give tremendous rates of return on their tax certificates. The city of Baltimore, Maryland gives 24%. Illinois gives over 18%. Those are excellent returns you will receive if the tax certificate is redeemed.

But wait a minute, the goal here is not for the certificate to be redeemed. It's for you to use the tax certificate to acquire PROPERTY! Especially if you are buying direct, you may be facing slim pickings when trying to purchase a tax certificate in a high interest state.

As I mentioned before, some tax investors are mainly in the certificate market for the interest rate, and the big interest states will draw a lot of competitive interest. Competitive interest, as we've explored before, limits your ability to acquire HUGE PROFITS for a TINY INVESTMENT at LITTLE OR NO COST!

However, look at a state like South Carolina. It's tax certificates carry an 8% rate of return, just slightly more than some savings accounts! How many people do you think are going to flock to tax sales in that fair state?

Not nearly as many. This lack of competition gives you a correspondingly better chance to get certificates that you can use to acquire property, and also gives you a reasonably better chance to acquire certificates to valuable properties over-the-counter!

SECRET 3:

LOCATING TAX CERTFICATES LEAST LIKELY TO BE REDEEMED

In Chapter 4 we dealt with how to locate valuable tax certificates or property deeds, but there's likely to be quite a few of those scattered about the tax wilderness. And remember, we're looking not only for tax certificates on valuable properties, but also ones that are NOT LIKELY TO BE REDEEMED!

Wait! What if you're not satisfied with tax certificates on properties that are simply valuable? What if you want to tip the betting table towards you even further? As a savvy and ambitious real estate investor, you want not only to find those properties that are valuable, but are likely to fall into your hands and not likely to be redeemed by their previous owners!

It's an extraordinary situation when a valuable property isn't redeemed by someone! As the owner of a valuable property, you wouldn't just give it up for back taxes. Neither would anyone else. But there are properties out there that will not be redeemed.

How do you identify such a property? ESP? Random luck? Nope. I've got another checklist for you…

I believe locating properties with these characteristics will enable you to drastically increase your chances to locate certificates that are not likely to be redeemed! And if that occurs, you could be well positioned to be acquiring HUGE PROFITS for PENNIES ON THE DOLLAR at LITTLE OR NO RISK.

Be on the lookout for these flags, and you're on your way!

FLAG 1 – ABANDONMENT

This is the premiere signal flag to look for. There are as many reasons for abandoning a property as there are people in the world. A change of heart, an untimely death, inheriting a property on the other side of the country and then forgetting about it, the list goes on. Here's one possible example:

EXAMPLE:

After having identified a list of likely properties, you are doing your due diligence. One of the properties on the list has a beautiful old clapboard house on it, straight out of the Wizard of Oz. But it's dilapidated – broken windows, lawn all grown over, no mail in the mailbox. It looks abandoned!

Upon further investigation (a quick friendly chat with the neighbors), you discover that the owner went on a trip to the Inca Trail in Peru and never came back! The neighbors say the bachelor hasn't been around for two years or more!

The house certainly seems abandoned. Flag 1 identified.

FLAG 2 – ABANDONMENT BY LENDER OR NO LENDER

This flag is equally important to research! Typically, when a potential property owner purchases a property, they don't have enough cash to pay the entire purchase price. They may be able to hand a down-payment of $15,000 on a $100,000, which leaves them short $85,000.

That's where a lender and a mortgage comes in. A bank or lending institution will commonly agree to pay the remainder of the purchase price in exchange for a mortgage, a loan taken out by the property owner. In the case above, the property owner will repay the $85,000 over a period of time, plus a rate of interest that is agreeable to both parties.

The lender now has a very strong interest in the property, as $85,000 of the purchase price came from the lender! And, as security for the lender, if the property owner doesn't pay the monthly mortgage, the lender eventually has the right to foreclose on the property, placing a lien on the property just like local tax officials might. If they foreclose on the property, the investor is free to recoup its investment by reselling the property.

Here's the important thing. We've established before that in many states property tax liens are a PRIORITY TAX LIEN. In other words they come before all other liens. If a tax certificate or tax deed is purchased by a savvy investor like yourself, it is often the case that all other liens are WIPED OUT, including a lender's lien.

DOES THE PROPERTY HAVE A LENDER LIEN?

You can research whether a property has a mortgage or deed of trust against it by checking into the property's title. Usually a county office called the County Clerk's office or the Recorder's office is the place to research a title.

If in your research you discover the property has a mortgage against it, you should probably give this property a pass. Since they stand to lose, in this case, $85,000, it is very unlikely a lender will not redeem a property tax lien!

Since the lender redeeming the property is not an outcome you desire (you want the property for yourself!), the best strategy to deal with this flag is bypass it, and move on to Flag 3.

FLAG 3 – FREE & CLEAR

The best way to deal with a property encumbered by a lender's lien (i.e., a mortgage or a deed of trust) is to move on to another property! Chances are that a lender will redeem a property from an investor who has purchased its tax certificate.

So avoid properties encumbered by lender's liens, and focus on the free and clear properties! A property without a mortgage or deed of trust is often called free and clear, meaning that there are no other outstanding liens on the property.

By doing your homework at Flag 2, and determining whether or not a property is encumbered with a lender's lien, leads you directly to Flag 3. If a lender's lien exists, walk away. If it doesn't, then that property is very likely free and clear!

FLAG 4 – INHERITANCE

Bill is in the middle of a move from Philadelphia to Cherry Hill, New Jersey, his wife is having a second baby in about two months, he's changing jobs, and grandma broke her hip, so she's coming to stay to recuperate. A typical family day. In the middle of all this chaos, a notice comes in the mail that his great uncle Harry passed away, and he left Bill his fishing cabin in Whitefish, Montana. Bill thinks, “hmm, that's nice,” and promptly forgets all about it.

The family moves, Bill continues to not remember about the cabin across the country, and eventually the property tax notices start to come in, after wending their way through forwarding notices and the U.S. Postal Service. Bill has just received a promotion and more responsibility, and he's also just received news that a third baby is on the way.

He looks at the tax lien notice and makes an executive decision: eighty-six the cabin. Montana can have it. It's probably a rickety old shack, anyway. And what's in Whitefish, Montana? Whatever.

Well, Whitefish is a resort town, and Uncle Harry's “fishing cabin” is actually a three-bedroom summer home on a beautiful piece of lakefront property. And now it's free for you to acquire at a HUGE PROFIT for a TINY INVESTMENT at LITTLE OR NO RISK!

Inheriting a property can be a wonderful windfall. Depending on the property owner's personality and relative financial position, it can also be an annoyance that they just want to go away! Or it can be something the property owner is not equipped to deal with right now. In any case, there are interesting possibilities here for a savvy investor.

If you determine, while searching at the Recorder's/County Clerk's office that a property has been inherited or received as a gift, it's possible that the current owners have ABSOLUTELY NO INTEREST IN REDEEMING THE PROPERTY, no matter how fantastic it may be!

FLAG 5 – UNDELIVERABLE

Certificate states will notify current property owners that a tax certificate for their property will be sold at the upcoming tax sale. Usually, this notification comes through the mail. If the notification letters are returned to the treasurer's office as undeliverable, that means the property owner is no longer at that address. Furthermore, they may not even know a certificate for their property is going to be sold at the local tax sale.

If you can find out from the local tax officials which notices have been returned as undeliverable, the properties they are attached to may be excellent candidates for non-redemption!

Other factors that may increase the probability of the owner NOT REDEEMING THE PROPERTY ARE:

- if the address of the undeliverable letter is out-of-state or, even better, out of the country

- if the address of the property owner is “in care of” another party

SECRET 4:

FRIENDLY LOCAL CONTACTS

This secret is extremely important! You can use my system or any other system with great skill and daring. You can bulldoze your way through identifying hundreds of properties. You can spend days on due diligence. You'd be surprised, however, how much you could be helped by a few kind words at the local county treasurer or collector's office.

It's obvious that the people who tend to know most about tax certificates and the properties they encumber are local tax officials, the people who sit behind the desks in the county tax offices.

Why? Well…

They may know where the best values are.

They may know where the worst values are.

They may know that the late Fred MacAtee's daughter is getting ready to redeem that property you're thinking about.

They may know that a local property you're looking at floods every six years, and this is year five of the cycle. They may know who moved to Outer Mongolia and isn't coming back.

They may know which property owner's tax notices are being returned marked, “VACANT.”

It's amazing to discover the doors a few minutes of sincere chat about Melva's son at college or Harry's latest computer purchase might open in the long run. So be courteous, be friendly, and be straightforward.

If you're able to develop a pleasant working relationship with local tax workers, you will probably be increasing your chances to make HUGE PROFITS for a TINY INVESTMENT at LITTLE OR NO RISK! And you may make some new friends, to boot!