As a professional real estate investor for several years, I’m often asked by friends and family to weigh in on this opportunity or that opportunity to supposedly strike it rich in real estate. Most of the time my advice is of the “if it’s too good to be true, it probably is” variety. No, that distressed property isn’t going to make you a 60% return on your money. Yes, you could lose your entire investment in that short sale.
But, when my nephew, Ryan, recently called inquiring about purchasing one of the tax lien properties in Fort Wayne, Indiana, it gave me pause. Sure, you can earn a return on this type of investment. But, it’s also fraught with risk. A lot of it.
For Ryan to achieve his goals, he’d have to do his homework and then some for a number of reasons.
Are Fort Wayne, Indiana Tax Sale Properties a Good Investment Bet?
If you’re looking for a way to get your hands on Indiana investment property, one option is to buy a tax lien certificate. This lien, which is offered at auction when the homeowner doesn’t pay their taxes for consecutive months, gives you the opportunity to collect interest and potentially walk away with the property.
Ryan, for instance, would bid on the tax lien certificate directly from the municipality at the Fort Wayne, Indiana auction. Minimum bids start at only the cost of the unpaid taxes and assessments plus $500 to cover the cost of the sale. If he wins the bid, he would then be able to collect interest—if and when—the homeowner redeems the property, which they have 12 months to do. If the property owner fails to pay him back, he would get the title then rehab and sell the property for potentially good returns.
This sounds great on paper, but it doesn’t always work out that way. There are a lot of variables that have to come together in your favor to make it worthwhile. Some of the risks include:
It’s not always cut and dry.
Property tax lien certificate holders usually get paid out over other creditors, including mortgage holders, but there’s one exception. If there is a state or federal government lien on the property, that takes precedence. That’s not to say you would necessarily be on the hook, though. If Allen County follows certain procedures when dealing with the IRS, those federal liens are discharged. That’s why if you are hoping to buy the tax lien certificates, it’s important to thoroughly research the properties.
You may be stuck with a hard-to-sell house.
If the property isn’t in good shape after all is said and done, you’ll be stuck with something you can’t rent out or sell. And, let’s face it, if the homeowners didn’t have the money to pay their taxes, it’s unlikely that they afforded much home maintenance. Will there be a market for selling the house at a price that makes sense after absorbing the rehab costs?
That’s where that research I keep talking about comes in again. You have to be sure you know everything about the neighborhood, local real estate market, and property values before jumping in. So much for it being an easy, passive way to get real estate exposure.
There’s no access to cash flow.
If you want some cash flow out of your investment to fund other projects, a Fort Wayne, Indiana property tax sale may not be the best option. It’s only after the lien is redeemed that you get your original investment plus the interest. So, if an opportunity comes up to purchase another distressed property, you may miss out.
Purchasing a tax sale property in Fort Wayne, Indiana has a lot of risks associated with it. Not to mention, it can be time-consuming to do your due diligence and frustrating if the property isn’t available come auction time. Sure, if everything works out you’ll earn interest on your investment for a few months. But, it takes time and your return on these tax sale properties may not be worth the risk.
A Less Risky Way to Find Distressed Properties to Buy, Rehab, and Sell
While real estate investing is inherently risky, buying tax sale properties in Fort Wayne, Indiana is not one you need to take. A better option for getting leads on distressed houses, one I’ve successfully relied on for years, is HomeVestors’ nationally-known and trusted “We Buy Ugly Houses®” advertising campaign. As a HomeVestors® franchisee, I don’t have to chase down risky opportunities at tax sales because homeowners come to me looking for “solutions to ugly situations®” before the county takes an interest.
That’s something that sounds too good to be true but really isn’t. Call HomeVestors today to see how you can take advantage of some of the best Fort Wayne, Indiana leads available.
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