Who Should Buy at Tax Sales?

Not everyone! Those who should buy at tax sales are not typical real estate investors. Tax sales appear appealing at first glance because they offer the opportunity to purchase property at a fraction of the value. That being true, why shouldn’t everyone want to take advantage of this great opportunity?

Answer: Tax Sale properties come with an array of issues that the purchaser must be willing and able to handle. For those who cannot handle these issues, purchasing homes at a Texas Tax Lien Sale is a poor choice.

Repairs – this is one of the biggest obstacles a purchaser faces.

Properties sold at a tax sale have usually been abused. When a person faces eviction due to non-payment of taxes, they often do not leave willingly. Destruction by the hands of the previous owner is common. Even if the owner did not purposely cause damage, they often did not have the money to make the most basic repairs. Some homes have been left vacant for years before going on the auction block. Vandalism often plays a part in these properties. Recently, I bought a home where the AC unit had been stolen and vagrants had been living inside the home. The cost of these repairs can be extensive, and there is no way to know how much will need to be spent on repairs until the property is purchased. Being able to make small repairs yourself is critical. If you must pay an outside contractor to complete all your repairs, you will likely be pursuing an uphill battle.

Sufficent Capital

Having enough capital to finish the project and being able to cover holding costs is imperative. This seems obvious, but because of the redemption period, those wanting to flip a house must wait until the redemption period is complete before a purchaser can get a title policy. This means that the house must sit there for between 6 months and two years before you can regain your money. The house can be rented for income during this period, but you run the risk of more damage to your property during the rental period. So, a person is looking at a fairly extensive period of time when your money is tied up and you are paying insurance and taxes and upkeep on the property. If a person cannot afford to have their money tied up for this period of time, this is not the best method of purchase for them. If a person falls into this financial category, but still is determined to invest, Hard Money Lenders, Credit Card Loans or Family Loans may be an option.

Evictions

Often, when you purchase a property, owners will still be living in a property. You must evict them to protect your property and to be able to move on with your project. Evictions are not pleasant. They frequently involve pleading from the previous owners, screaming with anger, or sobbing with sadness and desperation. A Sheriff will help you serve the eviction notice, but those not strong enough to handle this type of situation should consider other means of purchasing.

In summary, examples of those who SHOULD NOT buy at Texas Tax Lien Sale would include

  • Anyone that is cutting it very close on funding
  • Those that cannot afford to have their capital tied up for at least 6 months
  • Those that would require complete assistance by a contractor

Those who SHOULD buy at a Texas Tax Lien Sale would include

  • Those that can afford to have their capital tied up for at least six months
  • Those with a background in construction or are extremely handy around the house and can complete some projects without assistance
  • Those with ample capital so that if there are unexpected expenses (and there will be), you can make all the repairs needed for the sale of the home
  • Those that are “thick-skinned” and emotionally can cope with evictions

Texas Tax Sales are a great way to purchase real estate cheap, but one must consider all the baggage that comes along with a tax sale property before taking the plunge!