Wednesday, 24 February 2010




Secretly Buying Cheap as Developers Go Bust
By Dr. Steve Sjuggerud

I'm investing in properties at cheaper prices than I ever thought possible... 

I'm buying "secretly." These properties aren't listed on MLS, and your realtor won't show them to you. But they can be some
 of the best 
deals you'll ever see.

Most people will never see them, because they don't know where to look. They're properties sold by the government to collect
 back taxes.
I've already done this in Florida. Earlier this week, I went to a few county courthouses in Georgia to figure it out there, too...

"Are you the Tax Commissioner?" I asked one lady as I walked into the county courthouse.

"Yes, I am," she replied. She was holding a stack of papers about two inches high and looked to be in a hurry.

"Do you have a minute to chat?" I asked.

She looked at her pile of papers... she sized me up... and then said, "Sure."

(You might not like the South. But I sure do... Here's the busy Tax Commissioner of a county in the State of Georgia. 
I didn't have an appointment. She had no idea who I was. But she figured I wasn't crazy and wasn't there to waste her time. 
So we had a meeting in her office.)

"How do tax deeds sales work in this county?" I asked.

"We try to give people every chance possible to pay when they're behind on their property taxes," she said. "We send tons of 
notices, and we let them stretch things out. If they don't pay, then we let them know that we will be selling their property 
on the courthouse steps to recoup the back taxes due."

You can't fault the Tax Commissioner... She's doing her job, following Georgia state law. Ultimately, her county needs that 
property tax revenue. It has to pay for firemen, policemen, and city services. If she doesn't collect that money, the county 
will have to raise taxes on everyone who does pay what they owe.

Even if the property is sold on the courthouse steps, the previous owner can still get it back. But now the terms get tough... 
The previous owner has to pay a 20% penalty over what the new owner paid.

That 20% penalty attracts investors... like me. Let me show you how it works...

Let's say there's an empty lot worth $100,000 and the owner hasn't paid taxes. If the county sells that property, you could
 probably buy it for $50,000 on the courthouse steps... mostly because it was poorly advertised and it has a couple strings 
attached.

There are three ways the investment can work out for you. 1) The original owner buys the property back from you, including
 the 20% penalty. So you collect $60,000. 2) After a year, you sell it at a profit. 3) If the owner doesn't buy it back and you
 don't want to sell it, you just keep it. All three sound like pretty good outcomes to me.

I asked the Tax Commissioner what it looks like for upcoming auctions in her county. She said she has a large number of 
delinquent properties... and she has no idea how many will actually pay off their taxes in this bad economy. She also pointed 
out Georgia's high penalty (20%) attracts a lot of competitive bidding on the courthouse steps.

 

 
I expect the supply of delinquent properties to be huge in the next few years... and Georgia property developers went just as crazy as Florida developers did. Now those hotshot developers are upside-down, owing more than the property is worth. Somehow, somewhere, choice properties from upside-down developers will end up at fire-sale prices soon.

One of the cheapest places to look is in the sales done by your local county for back taxes due. Every county has a different 
system. Look for their website online or visit your county courthouse.

I highly recommend you get familiar with the tax liens/tax deeds process in your local county. If you stay on it and watch closely, 
you have a legitimate chance of ending up with a property you want to own for a truly unbelievable price.

I know... I've done it... I urge you to check it out.

Good investing,