The Creative Investor - Tax Liens and Tax Deeds - Some Basics for Your Success (Part 2 of 3)

So in most cases either you purchase real property for pennies on the dollar or gain a high rate of return on the money you used to purchase the property!

Here is list of the returns paid out at redemption for various states. Remember redemption refers to the

statutory or legal right for the original owner to buy back the property.

SELECTED STATE REDEMPTION RATE

Alabama - 12% per annum
Arizona - 16% per annum
Florida - 18% per annum
Georgia - 20% first year
- 40% second year
Iowa - 24% per annum
Kentucky - 12% per annum
Mississippi - 18% per annum
Nebraska - 14% per annum
North Dakota - 12% per annum
West Virginia - 12% per annum
Texas - 25% first year
- 50% second year

Let’s look at an example so you can clearly understand how the redemption return works:

George attends a tax foreclosure sale and he is the successful bidder. He files the deed with the County Clerk or Recorder’s Office. Four months after the deed is recorded the delinquent property owner “redeems” the property. George receives his initial investment back plus 25%!

Here you can see that George was the successful bidder on the tax sale property and he received a tax deed at the auction (more on the difference between deed states and certificate states in a later article). Also note that since the original owner redeemed the property she must pay George the original amount invested plus the state mandated penalty return.

What Happens If the Owner Does Not Redeem?

If the property owner does not redeem you will typically get title to the property. That’s right title! Remember what I said above: If the delinquent owner does not redeem the property during the specified time period then as the successful bidder, you would be entitled to the property regardless of the purchase price. Let me say that again: you would be the owner of the property even if you bought the property for $5,500 and it has a market value of $50,000!

The author, Darius M. Barazandeh, JD, holds both a Doctorate of Law and a Masters Degree in Finance. He is the President and founder of DMB Real Estate Enterprises, Inc. that invests in tax sales, lease-options, mobile homes and residential mid-rise construction projects. He has also author of Texas Houses for Pennies, one of the most detailed courses on Tax Liens. Information contained within this article was not intended to be, nor should it be taken by the reader as legal, financial or tax advice. The above article was written for educational purposes only.