I need some expert advice. I have found some properties in a good area (quiet street, safe, 5mins from shopping, etc). After digging around I found out that the owners actually had 8 properties in that area. I have visited 4 of these properties, they are fantastic prospects.
These properties are on my cities delinquent taxes master list, it shows they owe approximately $50k in taxes for the the 8 properties. I want to send them a yellow letter and try to negotiate the purchase of a few of their properties. They have a 6-plex and 2 quads that I am very interested in. The other properties would be easy to wholesale to other investors, or even flip if I had the cash.
What I am asking is what is the best route when trying to purchase properties with unpaid taxes. I have thought about numerous scenarios, if they agreed I could purchase 1 property and have them use the money to pay the taxes on other properties and I retain a option to purchase the other properties. I want to keep atleast 1-2 of the multi-units and figured once I rehabbed and rolled the property into a conventional loan I could cash out, purchase the next property, etc.
I don’t have tons of cash. I have a partner with $20k in the bank, great credit, and a good job so we have access to traditional financing. I am just wondering if there is another route I could take to acquire and move some of the properties faster.
I have considered wholesaling some of the properties to other investors but am not sure how to navigate the delinquent taxes. I am pretty new to wholesaling, subject 2, etc as I have only had experience with cash purchases to flip or remodel and refinance.
Sry for the long post and lack of clarity and good order.
Does nobody have any insight on this? Should I post the topic in a different forum?
Hi,
You posted this at roughly 10:00 PM Thursday night and believe it or not most of us are working or investing so you have to have a little patience and let someone get to your question.
Now after I finish dinner tonight I will come back and answer your question!!!
GR
Hi,
Buying properties with delinquent taxes is simple as taxes are paid by current owner and paid up to date in escrow, so a property being bought for lets say $100k whose owner owes $5k in tax arrears will pay the $5k in taxes and net $95k minus closing cost's in escrow!
Better than sending yellow letters, research the FMV’s and actually phone and talk to the owner, introduce yourself and tell him you would be interested in purchasing all or part of his properties and negotiating the terms and conditions. Tell him you see he’s behind on the property taxes and you can help him resolve his problems before he loses the properties!
If he is open to this, ask if you can get together and negotiate out a deal!
Now if you have not already you need to start building a retail and investor buyers list and qualify these people as to there ability to purchase, financing type, down payment available and do they currently have a mortgage approval or do they need to get with a mortgage lender to get one done!
Now you will really need to buy these at 25 to 35% off fair market value minus rehab cost’s so you want to convey to the seller that you can quickly allieviate his problems, except the property in current condition, have inspections for you and your buyers knowledge but convey your willing to take them without any renegotiation provided there are no major issues. (IE Structural, Electrical, Mechanical, Plumbing or Fire / Life / Safety issues?)
Tell the seller you can close all the properties in 45 to 60 days net all cash to him! Then determine whether you want to sell these wholesale by way of an assignment or a double closing with transactional financing!
Then depending on what you work out for a deal you could choose to keep a property or two for your self using your profits from the sale transactions as your down payment and financing the balance!
Good luck,
GR
The easiest solution to this is to (a) give the person an offer on the property and have him accept it … put everything in writing and (b) close the transaction at a title company. More than likely there are other encumbrances on the property title(s) if you have severe back taxes like that, so you need to be an experienced title abstracter or you’ll need to pay someone to do the work. I prefer to let the title company do all the work, and when you close you’ll have title insurance and everything will work out in your favor.
Thanks for the answers. To clarify, and not sound like a complete jack A, I meant post on a different forum within REIClub.com.
What are FMV’s? I have their mailing address and was going to write them a yellow letter that reads:
Dear x,
Hello. My name is BushyMule, I am an investor living and working in the x area. I noticed you have a few vacant properties in my area and I would like to buy them.
If you are interested in selling your properties, whether it be all of them or just one, please call me at 555-555-5555. I look forward to speaking with you!
thanks,
BushyMule
Properties I am interested in purchasing:
x
x
etc
Does this letter sound ok? Should I say something about helping them with the tax situation?
Lastly, when qualifying buyers for my buyers list, exactly what should one say? Do I tell the buyer how much I have paid for x property or simply let them view the property and make me an offer?
thanks for the help, you guys are awesome.
FMV=Fair Market Value, I was thinking you were stating FMV was a form of research tool where I could find someone’s phone number. Oops
Just a quick note. I invested in tax delinquent properties for a few years and one thing you should check is what is the penalty for not paying your taxes in your area.
In my area at the time I spent a lot of time and money chasing properties that weren’t for sale. Because the penalties were so small many money wise owners used the nonpayment of their taxes as a cheap loan source. Your property owner may be one of these owners.
Contact the owners and communicate that you want to help them. Be sincere about this and build rapport or they will never trust you and you will look like a slime ball just trying to manipulate them. Ask them what they are planning to do with their homes and communicate that you can help. They may be in denial, many are until it is too late. If they are motivated then you can jump into negotiations.
If you plan to attend an auction, you have your financing lined up in advance, if you really buy a property, you know how you will pay for it, and a course must make a cash deposit or certified check from the date of the auction.
Be patient and wait until that redemption period has almost expired. Then directly buy the property from the delinquent owners.