WHAT’S YOUR TAX SALE MOTIVATION?

by Gilbert Bennett, Proprietor
GBENNETT 3 INVESTMENTS LLC
www.gbennett3.com

My Tax Lien Sale Background

I’ve been investing in Tax Lien Sales in New Orleans for 3 years now. I’ve purchased different types of Tax Liens; Tax Liens on occupied residential property, Tax Liens on office condos, Tax Liens on vacant commercial property, and Tax Liens on blighted abandoned residential property. I’ve studied the Louisiana Tax Lien Statutes; I’ve spoken and networked with many other Tax Lien investors and multiple lawyers who handle the title work necessary to quiet a Tax Lien Title. And I’ve conveyed all of this to let you know the following: before deciding on investing in a Tax Lien Sale you must decide on a tax lien strategy.

Tax Lien Sale Strategy

Over the past 2 months, The City of New Orleans has held 2 online tax sales; leading up to these sales, my website started getting more hits, and I started getting more calls and emails from people with questions about how they should go about investing in the tax liens; questions like…what would you do? My answers were really quite consistent regardless of who I was speaking; You need to have a strategy in place to help you accomplish your goal, and to develop that strategy, you need to have a Goal or a Motivation for investing in mind. I’ve dealt with investors in the past who want to sell liens that are matured, but they aren?’ interested in actually taking title; they just want the interest and penalties they were entitled to through the sale; they were looking for a return. And I’ve dealt with lots of frustrated investors who are unhappy because all of their beautiful properties they thought they’d acquire through the liens have been redeemed before the redemption period expires. Once I find out more from these investors, I understand why they weren’t investing thoughtfully; they weren’t strategizing to accomplish their goals.

What’s Your Louisiana Tax Lien Auction Goal?

In 2007 the Louisiana State Statues related to Louisiana Tax Lien Sales changed significantly, the state’s congress, in an effort to stem land grabbing of peoples hurricane damaged real property which sat in limbo due to slow insurance and government processes, changed the rules relating to how Tax Lien Sales were conducted and how the Tax Lien Investor could deal with the acquired Tax Lien Title. Auctions Turned to % ownership bids, instead of the first to pay taxes gets title style of auction, and the rights of the investor to immediately renovate/remediate or make other changes likely to put the property beyond reach of the potential redeemer were cut short, a municipal or court order became necessary to get a writ of possession. It fundamentally changed the strategy by which a property could be fully exploited for gain, and required more careful consideration of the goal for each Tax Lien Investment.

Tax Lien Motivation

Some potential goals for Tax Lien Investing could be:

1. Solid cash return on a semi-safe investment
2. Low cost property acquisition
3. Bargaining power

For each motivation, there needs to be a strategy.

Solid Cash Return on Investment

If you’re motivation is getting a solid cash return on your investment, what strategies can you employ to increase the likelihood that you acquire Tax Lien Titles on properties that will be redeemed?

• Purchase Tax Liens on occupied properties
• Purchase Tax Liens on high value properties
• Notify the property owner in as many ways as you can that: you now hold a Tax Lien and that they have a limited redemption period before you quiet the title
• Notify the property owner you will enforce your right to quiet title and take possession if the lien is not paid off within the time frame.
• Pay taxes immediately; as soon as they are published: you have a right to pay subsequent years taxes after you’ve purchased a Tax Lien and each year paid immediately accrues a 5% penalty on the new balance
• Ensure the property owner is alive and a current contact information can be obtained

Low Cost Property Acquisition

For those interested in acquiring property swiftly through Tax Lien Auctions, you must also decide on the type of property you want to acquire, I use the basic evaluation method; that the higher the value of the property in its condition at time of sale, the less likely the Lien Title will reach maturity unredeemed.

In Louisiana, the redemption period is shortened from 36 to 18 months on property that has been declared blighted[1].

• Purchase Tax Liens on blighted property : they should look blighted; talk to neighbors about last time owner has been by if possible
• Purchase Tax Liens on properties with deceased or very difficult to find owners
• Send notifications only as required by law
• File to quiet title immediately upon expiration of the redemption period

Bargaining Power

I don’t know about some of the other investors out there, but when I want a piece of property; I go after it with everything I can. One great bargaining tool is an irrefutable right to the property. I haven’t found many things more motivating to a seller than enforceable/foreclosable property liens. If I see a piece of blighted property I want and a lien is available I’ll take it! Utilizing a Tax Lien as bargaining tool can you a better price, It’s cheaper for me to just pay the lawyer and quiet the title than to pay THAT PRICE: a faster sale, I’ll be filing to quiet the title as soon as the redemption period expires, so this sale needs to happen before then if you want to get something out of this property: or a blighted property cleanup, If you don’t clear this property up, I’m going to take the title from you and clean it up myself.

In Conclusion

Your Tax Lien motivation must be identified before your strategy can be developed so that you can ensure your strategy helps you to accomplish your goals. This information is intended to be a brief guide and not intended as legal advice. For legal advice consult an experienced real estate attorney.

If you are interested in learning more about Tax Lien Titles, Tax Lien Auctions, or Tax Lien Investing please visit my associate Joann Musa The Tax Lien lady, on her website http://taxlienlady.com/ . She has provided lots of training articles for the starting Tax Lien Investor for free, and has advanced courses at a very low cost.

About the Author:

Gilbert Bennett III is a real estate investor with experience in Louisiana Tax Liens, residential property management, vacant owner locating and blighted property redevelopment. To contact Gilbert Bennett please email: gilbert@gbennet3.com.

This material is copywrited 10/14/11 and may not be copied or reposted without direct written permission of the author.

[1] Blighted properties can be identified by cross-referencing the property tax bill number with outstanding code enforcement liens

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