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What Is A Tax Deed And How Do I Invest With One?

If you are looking for alternative ways to invest in real estate, you have probably heard more than one person talk about tax deeds. What are tax deeds and how can they mean big returns on your investments? Let me explain.

A deed to a piece of property gives the holder of the deed exclusive rights to that property. They can build a structure, tear one down, rent out the house on the property or live in it themselves. Deeds are normally bought and sold by individuals, although in some cases they may be bought from banks as well.

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A Tax Deed is a special type of deed. When a property owner has decided to stop paying their property taxes for whatever reason, about half of the 50 states have a special arrangement to collect the taxes: the tax-collecting county or municipality where the property is located will give the owner a certain window of time to catch up on the late payments. But after that window has closed, if the delinquent property taxes have not been paid then the county will actually seize the deed to the property!

Then, the county will make out a special type of deed to itself: a Tax Deed. This Tax Deed will then be available for sale to the general public, either at public auction or at a later private sale.

So how can you make some money with tax deeds?

Well, like any other deed, you can purchase a Tax Deed and then either flip it to another owner or rent out the house on the property. But what makes Tax Deeds so special is the very low price for which they are usually offered. By law, the county or municipality selling the tax deed is only allowed to keep as much money as they are owed and not a penny more! So if the property owner owed $1,500 in delinquent property taxes, then that amount (plus some fees and interest) is the price set by the local government for the tax deed.

Can you imagine getting a property, and in many cases an entire house, for only $1,500? It’s incredible!

And that low price can mean big profits for you. If you turn around and just flip the property to another purchaser, without even making any changes to it, you can sell the real estate at a half its value and still make a profit! Or, if you are willing to work with a contractor to make some repairs and improvements to the property and the house, then the return on your investment can be many times more whether you flip it or decide to keep it as a rental property.

Tax Deeds are great opportunities, because for a low price you can get your hands on a piece of real estate that can then make you thousands of dollars for very little effort!

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