This is one of the best ways of acquiring property below its market value for those looking for ways to diversify portfolios. The three methods through which states handle delinquent property taxes are either as tax lien states, tax deed states, or hybrid states. Tax deed states stand out because it is only in this kind of state that the investor purchases the property outright if the owner fails to pay his taxes.
So, which is the best? There are countless opportunities in most states. How about breaking that down a little more and then finding out just what is tax deed investing, as well as the best state options? (Read some of our other real estate agents blogs for more insightful reads)
So, what’s a Tax Deed?
Once the taxes are unpaid and an owner can’t or won’t pay his property taxes, the government can seize the property. It is the governmental process of a tax deed. If this owner goes into default on this loan, a tax deed is released and the local government becomes the rightful owner of the property as the-owner has no rights anymore.
It sells the property at public auction if the taxes aren’t paid because the property is considered to be sold. It begins by selling the property at public auction when the taxes are not paid, as a means to recoup the taxes. Proceeding to pay off the tax obligation also provides investors a onetime chance to purchase real estate at a greatly reduced cost relative to its actual value.And while the rules and timelines are different state by state, knowing the law is essential.
Top States for Tax Deed Investing
Some of the best states for tax deed investing include:
1. Florida
Florida is one of the most sought-after tax deed auctioning hotspots since its real estate market is relatively healthy with either maintained or undeveloped properties. Its state has made it easy to participate in an auction by establishing an online system for its auctions and provides a sufficient number of opportunities to acquire a property.
2. California
Known for the large real estate market, California is another wonderful state to get into tax deed investing. California offers an 18% interest rate and two-to-three-year redemption periods, creating very attractive returns and the ability to obtain prized properties.
3. Texas
Texas has a solid real estate market and a simple tax deed process. As the state is so big and has such a huge population and continuous economic growth, it attracts the greatest number of investors looking for long term returns.
4. Alabama
Based on Alabama, the interest rate is 12 percent and the redemption period is three years. Its tax deed sales process is straightforward and well explained which make it attractive to even veteran as well as new investors.
5. Arizona
Arizona is a profitable location for tax deed investing, boasting a growing population with a highly active real estate market. The competitive nature of the state affords investors with many discounted acquisitions.
6. Colorado
Colorado has an 11% interest rate, but its real estate market more than compensates for it. In Colorado, redemption takes three years from an investor’s notice to create an effective timeline for strategy development.
7. New Jersey
New Jersey is pretty strict with its tax lien laws. It might not be attractive to many, but one would find it promising for those looking for long-term prospects.
Why Tax Deed investment Is Beneficial
Increasing your real estate holdings using tax deed investment is a good way to make money. Real estate can be bought at a discount and become an opportunity for profit through ‘redevelopment, rental revenue or sales’. But due diligence is essential; a smooth investment experience is ensured by knowing state-specific legislation, property conditions, and potential risks.
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