I put my post here since it seems like most tax lien/deed info is in this sub-forum, even though I also have some legal questions.
I’ve been researching tax liens/deeds pretty hard now for the past few months and I think I’ve pretty much got it down. I want to invest in Texas Tax Deeds to the high 25% tax rate and Texas has tons of sales each year. On to my questions.
Question 1: In Texas when you buy the Tax Deed you now own the property and you can charge the person rent, evict them, make improvements (can lose this part of the investment if they redeem), change the locks, etc. So what is the best option?
If you evict the previous owner who owes the taxes they are probably going to be pretty pissed and may mess up the place. On top of this you probably want to pay a lawyer to handle the eviction. So this may make sense if you think they aren’t going to redeem but if they redeem you have probably wasted a bunch of money on the eviction. Then again if you file for eviction it could prompt them to redeem earlier so you can collect your 25% and get out. I understand in most states you have to be very careful about contacting the person who owes taxes because they are supposed to work with the county/state exclusively and you could actually be breaking the law by asking them to pay up. So should you evict them, charge them rent, or just leave them be in hopes they won’t mess up the place if they don’t redeem?
Question 2: I’m in the process of switching my IRA over from American Century to a self directed IRA and setting up an LLC for to handle the transaction. Any personal advice/hints/tips to making this process easy and keeping yourself organized so you don’t do anything illegal?
Question 3: This kind of ties in with question 1. When you buy the deed you need to get insurance and secure the property by at least changing the locks. Any advice on how to go secure the home without ending up in a fistfight with the residents? Don’t want to just show up and be like “hey this is my house I’m changing the locks.”
That’s all for now, thanks in advance for all the help.
Hi,
Investor Paul this question is as loaded as a cowboys 44 40 at a gun fight!
Until this question I had thought little of the Texas State Tax Deed Sales!
My worry would be “What is the Liability between my Tax Deed Sale Purchase and the end of the Redemption Period 6 to 24 months later?”
If you buy a tax deed and get your sherriff’s / constables deed 4 to 6 weeks later and move to collect rents, re-establish rents, raise rents or evict a property tenant and suddenly a day or two later the property is redeemed, is there potential damages or liabilities for your actions between your purchase and a redemption?
What happens if you evicted and suddenly owner redeemed and said "You owe my friends money to move out and now move back in to my property because I wanted them to live there? Or if tenants move out and do major damage and owner redeems and say’s “I have pictures and Video of my property 2.5 months ago and this party buys my deed, I redeem it only to find my property unlivable, who is potentially liable for damages and expenses?”
What if you evict the owner and force them out only to be redeemed and there’s a claim of damages or expenses which were incurred? If the property is empty and you put a renter in a month to month or a lease and owner redeems, how do you get that renter out of a property owner is entitled to empty but is in possession of your renter?
What if tenants are actually squatters and never lived there but you allow them to stay, they pay one month and force you to evict them, do damages and owner redeems while squatters are still there and owner is immediately entitled to property what are damages or liabilities???
Texas is a Hybrid state, half tax certificate (By Redemption) and half deed state (By issueing Sherriff’s / Constable Deed)
Title insurance is not available until after redemption period expires which basically means the property can’t be sold until after this redemption period ends! (6 month redemption period for normal owners, but if a “Homestead” was filed owner has 2 years to redeem)
I am not sure I like the ramifications of this kind of set up???
GR
Those are pretty much the questions I have. My belief is that most people probably just buy home owners insurance and let the person stay in the home until they either redeem or the redemption period is over. This is probably much easier than messing with rent, evictions, etc. I wonder if by letting them stay in the home without a lease agreement if that would open you up to a ton of potential legal problems. Also, since it is technically your property when you purchase the deed you are supposed to secure the property. Legally, I’m not sure what all that entails. If the home is vacant I’m sure just installing locks and boarding any broken windows would suffice. But, if somebody is in it and the building has locks/windows would it be secure or would you have to change them?
I am/was hoping that somebody that has done Texas Tax Deeds could chime in otherwise I’ll probably just need to pony up the money to pay for a lawyer to answer my questions. Worst comes to worst I may just have to take a small vacation and do a practice run down in Texas. I would do research and go to the auction like I would if I was going to buy but just end up watching the action and see if I can find a big shot whose ear I could bend for a few minutes.
Some use the cash for keys system where they give cash to the property owner for them to leave the house in better conditions than they would have been in case of an eviction. This is a possible win win situation.
Carla how does that work? I’ve read in some states that investors approach owners that are coming up for sale with loans but this can be illegal depending on the state. Are you suggesting that you buy the deed then approach the owner with some cash to leave the property in good shape? My concern with that action would be what if they take your money and turn around and redeem in the 6 month redemption period? Now you are out the money you gave them to leave. I take it you would have to have them legally give up all rights of redemption in exchange for the cash but again I’m not sure if this is legal in all/any states when you are involved with liens/deeds. It seems most states are very strict about lien/deed holders approaching the owner and asking for redemption. This makes sense because all of that money needs to go through the municipality but I’m not sure if that ban you from doing a cash for keys transaction after you have bought the lien/deed.