Every week I get questions from subscribers. Here are the answers to a couple of questions that I’ve gotten this past week. Both of these questions were about investing in Texas Redeemable Tax Deeds.
Help with over the counter deeds in Texas
Question from Nmamdi: I really want to invest in over the counter deeds in Texas. ?I have some money that I want to put down but I’m having problems doing research on the properties. First of all, since I live in Washington State, I can’t physically go to the property. Secondly, I can’t make sense of the information I get from the county websites. ? Please help!
Answer: First of all?most of the tax sales in Texas are handled by a couple of law firms and?you can get information on these tax sales from their web sites. One of the law firms that handles tax sales in Texas is Linegarger Goggan Blair and Sampson, LLP.?You can find out more on their website at: http://www.publicans.com/.
Secondly since you live in Washington state and can not physically look at the property you are buying, you have 2 options. Invest in a state that is closer to you, or even your own state, where you can go and physically look at the property or find someone who lives in the area that you are investing in that can look at the property for you.
Insuring a Redeemable Deed
Question from Greg: The one item that has had me reluctant to invest in tax deeds in Texas (I live in Texas), is that from my understanding, from the moment I win the bid, I’m the owner of the property from a liability perspective, but it’s still redeemable. So, I have to have insurance on the property, which substantially increases the costs during the redemption period, driving the effective rate of return down dramatically. Do you address this in your approach? If so, I’d be more interested in taking the next step.
Answer: This is a really good question. Yes you do need to insure the property as you are considered the owner. And yes this will increase your cost, however if the property is not redeemed it really shouldn’t matter at all as you would have to get insurance anyway. For any deed property you purchase, redeemable or not, insurance must be figured into your cost for the property.
I think what you are worried about is what if you purchase a redeemable and you get insurance on the property and then it is redeemed? What then? First of all in Texas, unlike other redeemable deed states you are considered the owner of the property and you can move into the property or rent it out. (You may have to evict anyone that is currently living there, which will also add to your expenses).
I would get insurance that you do not have to pay for a whole year, but can go month by month or at least only pay for the first 6 months. Regardless if the previous owner redeems you should be able to get a refund from the insurance company for any insurance that you prepaid and did not use because the property was redeemed.
The bottom line is that if you know about all of these hidden expenses and you plan for them when you purchase the property and you never pay more than a fraction of what the property is worth, so you still make a nice profit in the long run.
If you are really interested in purchasing Texas redeemable deeds, the best program to get is Darius Barazandeh’s Texas Houses For Pennies. Darius is a Texas attorney and real estate investor who has a lot of experience with Texas redeemable deeds. You can find out more about his program at http://taxlienlady.com/texastaxdeed.htm.
Disclaimer: I am not an attorney, accounting, or real estate professional and any advice that I give you is purely for educational purposes. It should not be taken as legal advice. I suggest that you seek out a legal professional in the state that you are investing in for legal advice.
By Tony April 4, 2012 - 11:55 pm
Great information regarding Texas Tax Deeds.
By Jesus September 10, 2011 - 9:43 pm
Just one to add something for Greg, Section 34.21 of the Texas Tax Code (Right of Redemption)(G)(2) says that the amount reasonably spend by the purchaser for maintaining, preserving and safekeeping the property including the cost of:
1. property insurance
2. repair or improvement required by local ordinance or building code
3. discharging a lien imposed by a municipality to secure expenses incurred by the municipality in remedying a health of safety hazard on the property.
4. dues or assessments for maintenance paid to a property owners association.
Don’t worry about the insurance you will make that money back on your sale for sure and like the law says you will get all you money back plus a 25% on your money. The more money you invest bigger the return.
Good Luck and Joanne thanks for these great blogs I love it.
By Joanne September 13, 2011 - 12:16 pm
Hi Jesus,
Thanks for the information on the Texas Code and what it says about redemption of tax deeds and what types of expenses are paid to the investor – with a 25% penalty.