For many people, investing in real estate remains a tricky landscape to traverse.
One area in particular that often goes overlooked is the world of back taxes on property and how these lingering debts can be turned into profitable investments. This blog post aims to pull back the curtain and guide you through how to buy back tax delinquent properties.
What are Back Taxes on Properties?
Before we delve into how to buy tax delinquent properties, it's important to understand what back taxes on property are. Back taxes are unpaid property taxes that a homeowner has failed to pay over time. When these taxes go unpaid for too long, the property becomes tax delinquent. This status allows the local government to step in and recover the money owed.
Each state has different rules, but most will eventually allow the county to sell the property to recover the unpaid taxes. These are called properties with delinquent taxes, and they’re often listed in public records or local government websites. Buying these properties gives investors a chance to get real estate at a discount, but it also comes with some risk. That’s why it’s important to fully understand how these back tax property situations work before jumping in.
How Buying Back Tax Delinquent Properties Works
Purchasing properties with delinquent taxes can be a smart investment strategy when done the right way. First, the investor needs to do their research. This means identifying which properties have unpaid taxes, how much is owed, and what each property is worth.
Most states offer tax sales or auctions where these properties are sold to the highest bidder. These events may be held in person or online. The money collected from the sale is used to cover the back taxes on the property.
It’s important to look into the property’s condition, any legal claims against it, and the rules in your state. Some states offer a “redemption period,” where the original owner can still pay off the taxes and reclaim the property. Knowing these details ahead of time helps you avoid surprises and make a smart investment decision.
Risks and Benefits of Buying Tax Delinquent Properties
The biggest benefit of investing in tax delinquent properties is the chance to buy real estate for much less than market value. Many of these homes are sold at a fraction of their worth, which can lead to strong profits when reselling or renting them out. It’s a great way to start building wealth through real estate.
However, there are also real risks. Some properties may have serious damage, which means you’ll need to spend money on repairs. Others might have hidden property liens, legal claims that still need to be paid, even after you buy the home. You may also face delays if the previous owner exercises their right to reclaim the property, depending on state laws.
That’s why it’s critical to understand how back taxes on property work and do thorough research before buying. Not every deal is a good one, but with the right knowledge, you can avoid common mistakes and make smarter investment choices.
Check out the video below to see how one investor made $22k from investing in tax delinquent properties.
A Step-by-Step Guide to Purchasing Back Tax Property
Here is a step-by-step guide:
- Identify Potential Investment Opportunities: Start by searching county websites, real estate software, or public records for properties with delinquent taxes.
- Perform Due Diligence: Research the property’s condition, neighborhood, and any legal claims or property liens. Understand the rules in your state about how long you have to wait before getting the deed.
- Attend Auctions: Local governments often hold tax lien or tax deed auctions. Some are in person, others are online. Make sure you’re registered ahead of time.
- Win the Bid: Be strategic about how much you offer. Don’t let emotions push you to overbid.
- Pay for the Property: Once you win, you must pay within a set time, usually 24 to 72 hours.
- Acquire Deed to the Property: After payment, you’ll receive paperwork or a deed depending on the state process. This gives you legal ownership of the property.
Understanding this process helps reduce risk and ensures your back taxes investment starts off on the right foot.
Tips for First-Time Investors
Now that you know the basics of how to buy back taxes property, here are a few tips to help you succeed:
- Always do your research.
- Understand the risks and potential rewards.
- Be patient—this process can take time.
- Check for hidden costs like repairs or liens.
- Start small and build experience before bidding on larger properties.
- Consider working with a real estate attorney or tax sale expert, especially for your first deal.
These simple tips can help you avoid costly mistakes and make smarter choices when investing in properties with delinquent taxes.
Frequently Asked Questions About Buying Properties with Back Taxes
1. Can anyone buy a tax delinquent property?
Yes, most auctions are open to the public, but some require registration ahead of time.
2. Do I get the property right after winning?
Not always. Some states have a waiting period called a redemption period.
3. Are there extra costs after buying?
Yes—like repairs, unpaid bills, or legal fees.
4. Where can I find these properties?
County tax offices or local government websites list them regularly. You can also use a real estate software like DealMachine to find them and do your due diligence for properties if you are already investing.
Conclusion
Investing in properties with back taxes can be a smart way to enter real estate. This is especially true if you want low-cost opportunities with high potential. While there are risks involved, doing your homework and following the right steps can lead to great results.
Whether you're new to investing or just exploring new options, understanding how these tax sales work puts you ahead of the game. With patience and preparation, you can turn a delinquent property into a valuable asset.
