I recently read a blog post on a popular real estate blog about the advantages of investing in Texas. The title of the post was “Why Investors Love Texas.”
This article pointed out the advantages of investing in Texas but they missed a couple of important points. They claimed that Texas has tax lien sales every month. But in fact Texas is a redeemable deed state, not a tax lien state, so you are actually purchasing the deed to the property at the tax sale.
They do point out 2 other advantages to investing in Texas. The fact that you receive a 25% penalty instead of interest. So that no matter when the lien redeems you receive 25% on your investment – it’s not an annualized interest rate as it is with tax lien states. The second advantage is the short redemption period in Texas – 6 months for non-homesteaded and non-agricultural properties.
But there are 2 more advantages to investing in redeemable deeds in Taxes that they failed to mention:
1)unlike in other redeemable deed states you are considered the owner of the property when you record the deed, even though the previous owner has the right of redemption
2) If the lien doesn?t redeem, you don?t need to foreclose as you are automatically the owner of the property, you already have a recorded deed that is valid, all you have to do is clear the title to the property. This is an advantage over other redeemable deed states where you have to foreclose and then clear the title to the property.
They failed to distinquish between investing in tax liens and redeemable deeds. But this is a very important distinction. It’s important to the investor because you are actually purchasing the property, not just a lien on the property, so more due diligence is warranted when purchasing redeemable deeds. Texas is a great state for investing, but don’t just jump in without knowing the facts. My mission is keep you informed about these differences and give you the information that you need to invest successfully in tax liens or deeds.
What is your favorite state for investing and why? Let us know.
By paul kim February 21, 2011 - 10:17 pm
First of all, Thank you very much your valuable information.
I would like to know how can you get the certificate from tax assessor’s office that proves you do not owe any taxes from state.You have to walk in to the assessor’s office or by mail? And secondly,
Which entity is preferable to take part in the auction as an individual or LLC which I own a commercial property in Dallas.
I would keenly expect your answer. Thank you so much again,
Paul
By Joanne February 23, 2011 - 8:47 am
Hi Paul,
First of all I have to let you know that I am not a legal professional so in answering your question about whether it’s better to purchase tax deeds as an individual or in the name of an LLC, that’s a question that I am not qualified to answer. That’s a question for a Texas attorney who specializes in real estate. However I will give you my opinion which is that you should have a separate entity for purchasing tax deeds. I wouldn’t even use the LLC you have for your commercial property for the simple fact that if someone where to have a law suite against you for something connected with the commercial property you own, all of the other properties that you own in that LLC would be at jeopardy also.
In regards to the certificate of no taxes due that is required in Texas, this form must be signed by the county tax collector. I am not sure whether this can be mailed or whether you have to be present to have it signed. I believe that it can be mailed. It is good for 90 days after you have it signed. To make sure about this just call the county tax collector for the county that you plan on bidding in, as it may be different for each county.