10) Reading County Lists

The process for investing in tax liens and deeds can be broken into four general steps:

1) Find the tax sale list

2) Research the tax sale list

3) Make an investment

4) Perform an exit strategy

We just discussed finding the tax sale list in our previous training video, now let’s talk about reading a list once you have acquired it and how to sift through the data to find qualified investments.

Like we mentioned in the training video about determining your investment criteria, there can be quite a bit data on tax sale lists, and sometimes almost nothing, but there are a few items that we should identify every time:

  • Identification Number (Parcel Number)
  • Delinquent Tax Year
  • Amount Owed (Delinquent Tax Amount)
  • Property Address
  • Property Assessed or Market Value
  • Property Type

Of course, the more information that you can chase down, the better, but those six information pieces are the most important for us.

We care about the amount that we are investing, the value of the property that serves as collateral for our investment, and the property type.  We also are interested in the property address in order to view the property online or in person, if you live near the property.

In order to quickly sift through lists to find properties that meet the criteria that we’ve set up, we use what we call the Quick Glance Method.

Quick Glance Method

Using the Quick Glance Method, we quickly skim through a tax sale list narrowing the list based on our pre-set criteria. 

The Quick Glance Method is executed in different ways depending on the format of the tax sale list. The most preferable way to do this is by using filters in Excel, but some investors prefer a printed list and a highlighter, which is okay with us.

When you have the list in front of you, the first thing that we look at is the amount owed on each investment, or the amount that we will need to invest, for each individual investment. Doing this will quickly narrow the list.

In Excel, you’d highlight the header row, add filters, then filter the appropriate column with your criteria. If using a physical list, just quickly browse and highlight those that meet your criteria. 

The next thing that we will do is find the column or place on the list where the property type is located. If we know we are only interested in single-family residential homes or vacant residential, then we would apply a filter or quickly highlight those that meet that criteria.

And finally, find the assessed or estimated market value and perform the same filter. We say “estimated market value” because the county is not the market and cannot provide a fair market value accurately. Whether you consult with the county, Zillow or another automated value estimator, or even a broker or agent, it’s always an estimate until someone buys the property and the money hits your account.

With that said, an estimated market value from any of those places is valuable to give you a quick idea of what your exit strategy might look like.

That is the Quick Glance Method. It is used to quickly narrow a list down to possible investments. These are not sure deals, but we’ve at least narrowed to potential deals that may work. This process may take a bit of time in the beginning, but will become easier and faster the more you do it.

The next step is to take a closer look at each investment and to narrow further.

Due Diligence

Performing “due diligence” means researching potential investments to make sure they are good investments for the investor; meaning that they will perform well and return as estimated. No investment is 100% guaranteed or sure; however, during this step we take a closer look at each investment to try to resolve or kick out those investments that may be more questionable than others.

For instance, the surest investment in our experience, when considering simply earning interest on your investment, is a single-family residential home where the property owner lives in the property. If the property owner lives in the property, then they are more motivated to keep the property and will satisfy the delinquent taxes as quickly as possible.

When chasing a return through interest, that is the most important question to ask; who is the property owner and how motivated and capable will they be to keep the property?

If considering property acquisition, then you need to ask the same question but with the opposite perspective, meaning that you’re hoping the property owner will let the property go to foreclosure, while also considering the desirability of the property and possible exit strategies. Understand that if you acquire a property through foreclosure that it is unlikely that it’s in perfect condition and completely desirable. That doesn’t mean that you can’t wholesale for a quick exit without putting more money into it, but know that this isn’t something that you’re likely moving into to occupy yourself. It’s an investment property whose purpose is only to make you money. Don’t get romantic, just look at the numbers.

Some things that you might consider (we will go through this in more detail in a later due diligence training video) are whether the property owner’s address matches the properties physical address, plug the address into Google Maps and use Street View to get a quick look at the property (considering, of course, the date when the Street View images were taken), the neighborhood or area of the property, and past performance of tax lien certificates (how many previous year’s taxes were delinquent and how many of those were redeemed).

If you’re investing in a tax deed, or it’s a tax lien certificate where you think you’re likely to acquire the property (potential factors could be multiple previous years of unredeemed tax liens or the property owner does not live in the property), then you will want to perform more due diligence specifically related to possible exit strategies for the investment, which we will talk about later.