Funding a purchase at a Tax Sale or Tax Auction is one of the biggest OBSTACLES for most purchasers! You already know that purchasing at these sales can be a money making bargain, but if you do not have the cash, should you walk away? Not necessarily!
Although locating the cash for a purchase is difficult in the present economy, it is not impossible. As discussed in the Fundamentals all properties purchased at a tax sale must be paid for – IN CASH (or equivalent) – in full – on the day of the purchase, and usually at the actual moment of the purchase. I have found one exception to this in a small county in Texas where they are now accepting credit cards and are charging the buyer the credit card fee in addition to the purchase price, but this is exceptionally rare. For convenience, I have noted which counties currently list their payment policies on the County Website pages. To view your specific county’s policies, click on the link below.
Specific County Pages are found at the bottom of this page
Funding Options for Tax Lien/Deed Purchases in Texas
If you do not have the cash to fund a purchase yourself, there are options you can explore. The first, and easiest, is a personal loan.
- Personal Loans – Personal loans are pretty self explanatory. If you have a friend or a family member that is willing to loan you seed money, this is the simplest choice. You can offer to pay them a reasonable interest rate on the loan amount or you can offer to share in the proceeds once you sell the property. Either way, I would recommend that you put your agreement in writing. This step, although it may seem very formal, can go a long ways to help avoid misunderstandings and hurt feelings! Also, when utilizing a personal loan, it is often best to consider properties with a six month redemption period instead of a 2 year redemption period so that you can sell the property more quickly, resolve the loan and go forward with your business without anyone else’s involvement! If you need a refresher on Redemption Periods, refer to the link .
- Credit Card Debt – Another option used by some is to get a cash advance on a credit card. Realize that this option, like Hard Money Lenders, involves a very high interest rate. However, if you are able to make a very high profit on the property you anticipate purchasing and can limit the amount of time before you repay the debt, credit card advances offer very fast cash with no “credit checks” and no “personal involvement” from family and friends.
- Texas Hard Money Lenders – Hard Money Lenders are one more option, but again, they involve high interest rates. The appeal of Hard Money Lenders is that they often will lend on investments like Sheriff Sale Properties when traditional banks will not due to lack of documentation, lack of assets or lack of personal credit. Hard Money Lenders are NOT Loan Sharks (infamous for using physical force to insure repayment and for charging ridiculously high interest rates) but they are similar in that they are the most liberal in their lending policies and are compensated for this by higher than normal interest rates.
Obviously, if you can avoid using any of these resources for funding and can save some seed money yourself, that is your best option. But, if the economy or your personal situation does not allow for this, there are OPTIONS! Explore them carefully and put everything in writing!
