Tax sale property can be an awesome investment.
You can often get them free and clear, and in the current economy there's a lot of property being repossessed for back taxes.
It's a great idea to start investing in tax sale property, but if you approach it in the wrong way, you could end up with more headaches than returns on your investment.
Most people start out by bidding on property at the tax foreclosure auction.
This is a mistake for a number of reasons, the main being competition.
The more people you have bidding against you, the more you will pay for your tax sale property.
Bidding can easily get out of hand, and you will likely find you can't buy a property at auction for low enough to ensure a profit.
Also, you can't inspect the property beforehand.
Even if you're willing to take on the risks that presents, keep in mind you'll have to wait at least a year before you'll own the property.
That means in the meantime, anything can happen to it.
Plus, you'll have to pay all cash at the foreclosure auction; that cash will be tied up during that year while you're waiting to foreclose on the property.
This is all unnecessary.
You can easily buy tax sale property outside the sale, even after it's occurred.
Once tax sale property has been sold at auction, during that year period the buyer has to wait to foreclose, you can approach the owner and offer to buy the deed directly from them.
Most people that are left at that point can't pay their taxes and will lose the property at the end of that year - so they're glad to sell to you and get some money in their pocket.
You can often buy tax sale property for as little as a few hundred dollars during this time, and it gets around all the problems above.
You won't have much, if any, competition; you'll be able to inspect the property beforehand; you won't have to tie up a lot of cash; and best of all, you won't have to wait!