Risks Involved In Investing In Tax-Defaulted Properties
The biggest risk in investing in tax-defaulted properties is not knowing the area that you are investing in. If you don’t know your diligence just like any other type of real estate you are going to encounter massive trouble.
If you are interested to know more about investing in tax-defaulted properties, watch this short video now.
Over 10 years ago, Jay Drexel discovered Tax Default Property Investing. Today he owns over 700 Tax Default Investments and buys a couple every single week from his home office.
These investments are in multiple states, they are making anywhere from 10% to 25% ROI. He’s a full-time investor and educator teaching students all over the country about how with the right education, technology, and coaching, you can invest safely and successfully in tax liens from the comfort of home.
For more valuable information click on this link and watch the complete episode: – https://youtu.be/rbrwXPwusDU “Tax-Defaulted Properties with Jay Drexel & Jay Conner”
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Jay Conner:
Of course there’s risk in anything that any of us do in the single family house business. If you’re rehabbing a house there’s always the risk of the unexpected that may come up. You don’t know exactly how long your carrying costs are going to go. Of course we use a formula that accounts for the unexpected, but there’s always the unexpected and this world of tax liens, tax deeds, tax certificates, what are the risks that are involved? I heard you say, if you’re looking for a rate of return, you could get a rate of return of up to 36% annual rate of return. I heard you said that a second ago, but what are the risks that go with this type of business?
Jay Drexel:
The biggest risk is not knowing the area that you’re investing. So I put it this way. A lot of people have heard historically through bad infomercials, YouTube, we always get that bad information from new investors that they heard from an uncle or somebody that is a guaranteed investment. In counties actually will guarantee on the documentation, the rate of return. But it’s always caveat emptor, which is by everywhere. What that means is basically if you don’t do your due diligence, just like any other type of real estate, you’re going to get yourself in trouble massively. So where I’ve seen people go wrong many times is they just, in their mind, they’re hearing that they get this great rate of return, 36%, 24%. And they think you can buy any lien and get that money. Well, the reality is if the county’s not able to collect that money, they can’t pay.
So you may have just thrown money away. And after a certain period of time, there’s a statute of limitations on there where they drop off and lose your money. So you could buy a lien many times, you’ll see a tax lien on a property, residential commercial property that the lien is actually higher than the property’s worth. And people will invest in it because they don’t do their proper due diligence or homework, just like anything else, many times in areas like you’ll see in Arizona, they’ll sell tax liens at three-year redemption periods, 16%, but it’s in the middle of the desert. They’re trying to create. So just like we all know in real estate, a property is only worth what somebody else is willing to pay. If you end up investing in a lien against a piece of land, that’s worthless, you’re never going to get money.
And if you decided to acquire the property, if nobody sold land in that area for 50 years, odds are, you’re not going to sell it either. So that’s where people tend to go wrong. He’s not doing proper due diligence and it’s difficult because each area has different laws, different rules, different regulations. So you may learn incredibly well how to do it in one area and then jump to the next county and it’s turned upside down. So it’s just doing that proper due diligence. If you don’t do that, you’re just like any other type of real estate you’re going to bury yourself really quick.
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