Wealth Building: Part Two

What is a Deed?

A Deed is defined as-

1.) a legal document that is signed and delivered, especially one regarding the ownership of property or legal rights.

What is Property Tax?

Property Tax is defined as-

1.) A property tax or millage rate is an ad valorem tax on the value of a property, usually levied on real estate. The tax is levied by the governing authority of the jurisdiction in which the property is located. This can be a national government, a federated state, a county or geographical region or a municipality. (Wikipedia)

How does a Tax Deed Sale Work?

A tax deed sale is the sale of property by the governing jurisdiction for taxes owed on a property. When a property owner fails to pay their property taxes, the county has the authority to foreclose on the property and auction the property on the auction block, well online now for the taxes owed. This is what is called a “Tax Deed Sale”. So to answer the question, yes tax deed sales are in fact true. Let’s go through the questions that everyone asks about tax deed sales.

• Can anyone purchase these properties?
• How much money do I need?
• Can I get a mortgage on these properties?
• What are the Pros and Cons?
• Can a Corporation purchase these properties?

Can anyone purchase the properties?

So the good news is that the properties are available to the general public. To access these properties for purchase you can go to the local county website and search tax deed sales or google, name of county tax deed sales. Once you get to the correct website, you will be required to register prior to bidding. Most sites will also require a deposit, but we will get into that in the next section. Once registered you will get access to the auction calendar and can see the list of properties available.

How much money do I need?

As I stated above, before you can start bidding you would need to post a deposit in escrow. The deposit amount is usually 5-10% of the amount you plan on bidding. This amount must be paid by ACH or Wire Transfer. Now the properties have a wide range of purchase amount and property types, such as land, condominiums, townhomes, and single family homes. Amounts of properties can vary, but on an average opening bids start at around $5000.00., but you can actually acquire a property for as little as $3000.00.

Can I get a mortgage on these properties?

Well since these properties are being auctioned because of delinquent taxes, and must be paid at the close of business on the auction day, it is very difficult to mortgage these properties. The way it works is that you place your bids online, and if you are the winning bidder, you must pay all monies due before the end of the business day via wire transfer. In some cases the county website will request that you put cash in escrow, and they will draw the proceeds for the purchase from that.

What are the Pros and Cons?

I will let you know that this form of wealth building has the advantage of the Pros outweighing the Cons. First, this is a rapid way to build Net Worth, since the purchase is cash then there is no mortgage that takes away from your equity. Second, you have multiple options in which you can build passive income. You can buy, repair, and then sell, this is called Flipping. You can also buy, repair and then rent, either way you start to develop a passive income. Third, you have the ability to acquire property at a real low price. Forth, you can bid on more than one property in a day. The Cons on purchasing the properties are first, you must do your due diligence, and have a title search done. If you purchase a property that does not have clear title or violation this purchase can cause you to lose instead of gain. Second, you will need to have a good real estate attorney in case you need to remove occupants after your purchase.

Can a corporation purchase these properties?

The answer to this question is yes, it is possible for a corporation to purchase one or more of the properties in a tax deed sale. The easiest way to make a purchase in the name of a corporation is when you set up your registration it ask if it is a personal or corporate registration. After you successfully set up the corporate registration, any properties purchased will be titled in the name of the corporation.

In Closing, here is the Disclaimer

Building wealth is different for every person, for some it may happen overnight and for some it may take a little bit of time. The vehicle you use to build your wealth may be different from someone else’s. Don’t get discouraged or listen to naysayers, this will only delay your goal. Continue building one dollar at a time and continue to climb hills and eventually you will conquer Mountains.

Thank You for reading this story, please be on the lookout for future readings, and Happy Wealth Building.