Real Estate Tax Deed Investing: How We Made Over One Million Dollars in Two Years

Property-tax liens can be auctioned off, picked up by investors
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My primary use for the profits would be to pay down and hopefully pay off my primary mortgage and eliminating a monthly payment. Also, I would look to increase the line of credit on my primary residence which I would use to then invest in some higher quality rental property. I like how you spread the profits around to different areas and are willing to hold some cash. Timely post. Hope to do some research on this over the next few weeks and then start making some moves…. When Mrs. I originally had no Vanguard REIT in my portfolio because I felt we had enough exposure to real estate through our home.

If prices went up, I wanted to be able to pull more money out of the REIT to buy a home and vice versa. Makes sense. Maybe something like Invitation Homes. It does makes sense — especially with the dual diversification of the Vanguard REIT and the relative liquidity if you need or want to utilize the capital elsewhere.

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I asked regarding the taxable account though because you mentioned in your second point about leveraging the capital invested in the REIT if you might buy a property in the future depending on market conditions. I am doing this this year since i screwed up these past few years and did not do anything. Your accountant is right. Consider becoming a lobbyist to raise money from other people e. Great timing! We just sold a 2nd home to offset some of our future college costs we have a 18, 15 and 13 year old. What would you do with cash if you do not need it for years Sam?

What is the cut off years to put money in the market? I would spend all your time telling your kids to work hard, apply to scholarships, and inform them that mom and dad are gonna live it up and to not count on you guys for financial support! You are so helpful!!!!! Cannot thank you enough!

Hi Sam, I listened to your podcast with Noah Kagen twice :p and one thing really stuck out was you saying all these kids who has only seen a bull market might be caught holding too little when the stump hits. I can see why you are holding cash — I would do the same too. If we are planning for a family in 5 years I would like to have more time enjoying the simple things. Therefore my investments would be mad simple and liquid.

Call you listen to the podcast. I will guarantee you that you will feel beyond tired after you have a little one! Maybe by then, prices will have increased even further, giving you an even larger windfall to consider selling. Could be good! The only one I can imagine will be inheritance, which is hopefully a long way off as my parents and in-laws are only around years old. One mistake many people make is to actually use their expected windfalls as part of their long-term financial plan.

This is a risky undertaking as you never truly know if that windfall is coming. I like to see these financial windfalls simply as a luxurious top up or security on my own pursuit of financial freedom. As for how I would spend it, well that depends on how much it is. Do people really bake in an inheritance as part of their financial planning?

In this particular episode you will learn:

Real Estate Tax Deed Investing: How We Made Over One Million Dollars in Two Years [Matt Merdian, Laurence Samuels] on *FREE* shipping on. Editorial Reviews. About the Author. Matt Merdian has a business background in music, stock Real Estate Tax Deed Investing: How We Made Over One Million Dollars in Two Years - Kindle edition by Matt Merdian, Laurence Samuels. Learn the real estate and Tax Deed investing techniques of two average guys who.

What are the booming industries there? Perhaps global warming is making cooler places more attractive? Or is there open borders that allow foreigners to buy up everything and price out the locals for an under the table fee? What if they live to and you hit 70 with no inheritance to speak of? Our real estate is pretty crazy. There is certainly no booming industry that is driving it.

There is a bit of a perfect storm right now or at least a year ago. Some reasons are:. So, using debt to take on more debt… — Self governed real estate board that window dresses all stats to make real estate appear to be an amazing investment — Obsessed media that is funded by the real estate boards to promote real estate investing.

Even during weak periods, the media portrays things with rose tinted glasses. This is intellectual property of the real estate boards, apparently. This lack of information keeps buyers blind from actual information, they can only believe what they are told by the real estate boards and media — Fear of missing out. People can buy houses, ask for a long closing date, never move in and sell them again for more before the initial purchase has even closed.

Many realtors use this to buy a lot of houses at once with no intention of living there, just to sell them again within the year for more there is a serious issue with fiduciary duty here. There are many more reasons adding to it. We have very few global companies here. Certainly nothing that is driving the house prices. Could have bought a nice rental property with that as the down payment. Another story was an inheritance that literally went to Vegas, and you guessed it.

Years of decay

On a longer term basis the story is different. Somebody older would hopefully have the nous to use the money wisely invest it. How does one even go about finding their first rental property? I feel like brokers do not really offer any investment advice or insight. If you reinvest the monthly distributions you end up with a nice cushion that protects you from downside risk. Where do you live so I can join you? How old are you now and what percentage of your net worth is real estate? I decided early on that the part I enjoy and am good at is finding the deals, structuring them often with creative financing , and managing the investment and relationships… neither my strength nor interest is in doing repairs, so I outsource ALL maintenance and repairs.

I have a great team of contractors and handymen that I can call on at any time to deal with issues. My next property will probably be a small apartment building commercial loan , and the goal is to keep scaling up. As you get into larger apartment buildings, management fees drop considerably.

How tax-lien buyers make money

Sounds interesting, care to chat more? But as always, make sure you do your own research! Exciting you guys are so close to retirement! What was your impetus for selling your debt free good cabin? Sounds like you have a solid plan for reinvesting your windfall. Any insights for new users of the platform? I just had dinner with three RS employees last night actually. A couple positive things on the horizon they will probably announce. Sam, Do you consider paying off debt the same as a return on investment?

I understand the tax benefits of mortgage deductions but for me, really simplified my approach by focusing on the mortgage interest amount and treated that like a return when I paid it down. I admit it was also emotional as I really enjoy addition by subtraction and being debt free.

For me, I own a home debt free, sold a fully paid off rental so now sitting on cash, still have a k and a couple pensions in the future by 47 years old. It may not have been the optimal use of my money but getting out of debt sure feels wonderful. Sam, so far I love your newsletter. I find the information very useful and valuable. However, the real estate crowdfunding strategies only seem to be available to high net worth investors.

Do you have any recommendations for average investors? Also, the CD strategies only seem to make sense if people are able to put the amount of money that you are investing, with the way current interest rates are for any fixed bank investements. Thank for this post! Your email address will not be published. Don't subscribe All Replies to my comments Notify me of followup comments via e-mail.

You can also subscribe without commenting. Sign up for the private Financial Samurai newsletter! Here were my initial thoughts after despositing the check. Tweet Share Pin 3. Comments Currently in process of reading all of your posts, and stalking you for advice. The idea of talking to a wealth manager weekly is NOT attractive to me. I want to be left alone. Hey Sam, Question about your crowdfunding investments. Best, Sun. Thank you! Thank you for the response!

Great post and site! So my interrogation mark is certainly raised against the bonds, even more with such low return unless they track inflation, of course… I would guess that for true diversification you could be looking at ETFs tracking other economies EU, Japan, etc , or certain commodities, etc Great article anyway. Hire staff and get to it ;. Thanks again for sharing. Thoughts on the RS domestic equity fund? Hi Sam!

What would you do? If we get another real estate crash you will be ready to jump back in. FS, Thanks for sharing your ideas. Awesome timing for this article for me, Sam. Thanks for sharing your experience. Buy munis only if your state or city is financially strong. Thanks for all your help! Another great article as always. Got to earn, got to convince, got to take some risks. Not everybody can walk either. But there are ways to move. Keep on going. Oh yeah, and I will do my friendly attend to lobby his grandparents to contribute as well Would be interested to get your perspective on this!

Do you live in a rental now, or another property you own? Could be a great buying opportunity in the future for those with cash ready to deploy! Bear Where are you banking that you are getting 2. What have you been buying in this market and I will have you allocated any windfalls? Thanks Sam for a great post! Fidelity has a great inventory of muni bonds from all states. If the tax bill is more, then so be it. Hope not though! Sam, I am surprise you are that conservative with your newly acquired liquid assets.

How To Become A Millionaire In Two Years Buying One House Per Month - Real Estate Investing

It should be noted that buyers often get into bidding wars over a given property, which will drive down the rate of return that is reaped by the winning buyer. Those who then own these properties may have to deal with unpleasant tasks, such as evicting the current occupants, which may require expensive assistance from a property manager or an attorney. Those who are interested in purchasing a tax lien can start by deciding on which type of property they would like to hold a lien, such as residential or commercial, or undeveloped land versus property with improvements.

They can then contact their city or county treasurer to find out when, where, and how the next auction will be held. These rules will outline any preregistration requirements, accepted methods of payment, and other pertinent details. Buyers also need to do due diligence on properties that are available, because in some cases the current value of the property can be less than the amount of the lien. Furthermore, there could also be other liens on the property that will prevent the bidder from taking ownership of it.

Every piece of real estate in a given county with a tax lien is assigned a number within its respective parcel. Buyers can look for these liens by number in order to obtain information about them from the county, which can often be done online. For each number, the county has the property address, the name of the owner, the assessed value of the property, the legal description, and a breakdown of the condition of the property and any structures located on the premises.

Investors who purchase property tax liens are typically required to immediately pay the amount of the lien in full back to the issuing municipality. If the investor paid a premium for the lien, this may be added to the amount that is repaid in some instances. The repayment schedule usually lasts anywhere from six months to three years.

Investing in Property Tax Liens

In most cases, the owner is able to pay the lien in full. If the owner cannot pay the lien by the deadline, the investor has the authority to foreclose on the property just as the municipality would have, although this is a fairly rare occurrence. Although property tax liens can yield substantial rates of interest, investors need to do their homework before wading into this arena.

Investors also need to be familiar with the actual property upon which the lien has been placed to ensure that they can collect the money from the owner. A dilapidated property located in the heart of a slum neighborhood is probably not a good buy, regardless of the interest rate that is promised, because the property owner may be completely unable or unwilling to pay the tax that is owed.

Properties that have suffered any kind of environmental damage, such as from chemicals or hazardous materials that were deposited there, are also generally undesirable. Lien owners need to know what their responsibilities are after they receive their certificates. They must usually notify the property owner in writing of their purchase within a stated amount of time, then they must send a second letter of notification to them near the end of the redemption period if payment has not been made in full by that time.

Tax liens are also not everlasting instruments. Many have an expiration date after a certain period of time has elapsed after the end of the redemption period. Once the lien expires, the lien holder becomes unable to collect any unpaid balance.

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IF you qualify for the partial then you apply a formula that basically prorates the time you were in residence, owned the house, or the time elapsed since you last used this exemption whichever is smallest. Saved myself a bundle when I pointed this out. So far as the 1,, dollar figure for profit? In your example half of that was for upkeep and improvements which, treating the house as an investment, is pretty much necessary. For a myriad number of reasons, Uncle Sam and society in general should not want to encourage people to rent over owning, which it would be doing if landlord-owners could claim these expenses while tenant-owners could not.

As for the exclusion? Used to be you had to use all the money from a sale within six months on a new home or the unused portion would get taxed. This came down unnecessarily hard on people moving from expensive areas to inexpensive areas, old people who were moving to an assisted care arrangement, couples looking to downsize especially after all the kids moved out , and created all kinds of special rules dealing with people moving overseas to work, et cetera. This is a material improvement. In the past, the rate was based on your tax bracket.

Taxpayers in the 10 percent and 15 percent brackets paid 0 percent, and those in the top tax bracket paid 20 percent. Now, the rate will be based on income thresholds. Sam, with the real estate market being so inefficient in terms of realtors and selling and fees. I think everyone would love to hear or know how you found the right person to sell your place or what can be done to limit costs since it can be so high in a HCOL area where values of properties are so much higher so more costs!

Good call on calling the title company to get the closing costs etc from when the home was purchased. What a great idea! Thanks Samurai for article….. In we sold rental property gifted by our parents that was fully depreciated prior to the gift date. Both parents are deceased so some records are on file but not all. Are you aware of how the estimate process works? I am missing the obvious here. The deduction is one of the reasons why homeowners spend money to improve their homes. The other reason is to improve the quality of their life while living in the home.

Get nosy, and 7 other ways to avoid that property tax creep

The main point of buying a home is to prove the quality of your life and find stability. The key here is to borrow the renovation costs and sell quickly within 2 years then you have really won. Because you wrote off the expenses which were incurred but borrowed and you got the K exemption. We did this on our last rental and paid no taxes on the sale no exemption, but the expenses were so high borrowed, on paper it negated the profits we made, and we walked away with actual profits.

How I’m Reinvesting The House Sale Proceeds

We originally did a exchange which we re-characterized in our taxes to a regular sale once we saw the expenses number match the profit numbers. Can you actually share some numbers on how you did this with your rental? Did you really make a profit if expenses were so high?

I conconverted a rental due to tax law changes. I will most certainly occupy it for 2 years if the tax law did not change to 5 of 8! Home arbitrage is very real here in Central Oregon with, dare I say, the infestation of Californians. Good for us money wise, very lousy due to changes in the new residents attitudes and lack of Oregon values. Thanks for the idea of buying in Oregon! What are some Oregon values that we need to adopt before moving up there? I do not blame any individual for changing values. It is that large cities make all. No ones fault and your money is welcome here too.

Recent article about large tech presence coming here and we see it. I win either way as I have raw land smack dab in the middle of all this in migration:. Thanks again for the clarification that the 2 of 5 still stands, boy am I happy! Edit: People walk by Without salutations. Like saying hello, just an odd but understandable behavior if one comes from bigger citities.

When something breaks it is a repair and that is not a deductible expense. If you fix a hole in your roof for example. If something is a home improvement such as an upgrade, perhaps a new 30 year roof, then that is deductible. Very thorough post! Keeping detailed records is one of those things that sounds easy but is harder than it seems with all the time that goes by owning a house.

When something breaks and needs repairs that tends to be quite stressful and that in itself makes it hard to remember to keep track of all the details of costs, who you hired, when, etc. Lots to think about as a homeowner but worth it in the long run! Here, government incentives home ownership by giving a tax break when an individual eventually sells their residence. Although, to be fair, the requirement that you had to have lived in the home for 2 out of the last 5 years smells like a lobbyist addition to me…. From the perspective of buying a home to live in it, then yes, I think the tax break is fair.

To me, buying a home is part of the American dream and the tax break certainly fosters that. But, from a purely investment perspective, I would disagree and say its not fair. Why incentivize one sort of investment over another? Understood that some time must be spent actually living in the residence but the requirement then should be living in the home full time. Thanks for sharing the detail. This is what we plan to do with our duplex. I really hope it sticks around for a while. Good job! How goes the home search in Hawaii?

Which country is this rule for John? I am very sorry if I was incorrect. I will admit I read the entire tax bill at least twice! I will look again and would be overjoyed if incorrect! Sam, What is the best way not to pay more property taxes than you have to once the renovations are done?

Is it all based on the assessments? Is there a way to keep this down legally? Property tax laws are very state and local dependent. Only way to save is not perform warranted improvements, but that is asking for trouble. In , I added a superfluous window to my attic dormer and was surprised when the assessment jumped dramatically. I put about k into my home with no reassessment. So conceivably you keep paying same tax the whole way. I think they nudged mine up once. This kind of tax code is insane and, as you just shown, it does not net much tax collected either.

No reason to keep receipts from 20 years ago when you bought a lamp metaphorically and improved the house. I really hope I need to refer back to this post one day. Nobody should pay more in taxes than they have to. When you think about it, that gain will likely need to be used to pay for a new residence or rental at an inflated price as well.

I thought the lived it in for 2 of 5 years has changed with the new tax law to lived it in for 5 of the last 8 years. Wow, 5 out of 8? I may be wrong. It seems that was in both the House and Senate bill, but looking on the Internet now to verify it may not have passed.