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Buying Homes For Back Taxes Vs. Investing in Mortgage Foreclosures

If youre looking for a new way to invest in real estate- or if youre a tax sale investor and want to learn how to get tax properties without attending auctions and bidding against other bidders- Rick Dawson, a Chicago area real estate expert, offers a free mini course on buying tax properties before the auctions at his site, Go Ahead, Be A Deedgrabber! Definitely worth exploring if you havent already.

Buying Homes For Back Taxes Vs. Investing in Mortgage Foreclosures

By Maggie Dawson

If youve decided to get into the foreclosure investing business, good for you. Foreclosures are at an all-time high due to the recent economic downturn, and the opportunity for investing has never before been quite what it is right now. The question is, what route will you take- buying homes for back taxes, or investing in mortgage foreclosures?

The smart answer is to invest in tax foreclosure property, and heres why.

While mortgage foreclosure investing used to be a lucrative venture, recent times are finding more and more homeowners upside-down in their mortgages. When home values dropped, so did the equity these people had in their homes. So today, finding a mortgage foreclosure with equity to go after is a rare thing- not to mention the field has become crowded with other investors as of late.

Homes with back taxes owed, on the other hand, almost never have a mortgage and almost always have a ton of equity. Why? Because at tax foreclosure sale, mortgages are wiped out- so mortgage companies make sure to pay the delinquent taxes on a property before it ever makes it to tax sale- leaving mostly properties that have no mortgage by the time the sale rolls around. Also, frequently the back taxes owed are the only encumbrance on these properties houses without mortgages are also often houses without any other liens.

So what now? How to get this property?

You will probably have little success investing at the actual tax deed/lien sale. Other full-time tax property investment companies will have researched the best properties and will be willing to make a smaller return on their investment that you are, so youll be outbid almost every time. This doesnt mean you cant invest in tax property you just have to be a little smarter about it.

Why not attempt to buy the properties directly from the distressed owner, instead? These owners are often ready to get out from under the tax burden and would rather sell to you than see their home lost to the government. Many times you will find that these owners have already resigned themselves to losing the property and getting nothing from it, or just no longer care what happens to the property (we offten see this in the case of an absentee owner or failed landlord). These owners are motivated to sell, and to sell for cheap.

Click here for more info on this investing method- including how to obtain or compile your own list of properties about to be lost to tax sale in your area or anywhere in the country.

Also, learn what to say to an owner when you talk to them on the phone, to grab their deed for as little as $10! (Yes, really!)