10 Investment Strategies for Delinquent Real Estate

Investing in real estate is typically done through several fairly standard transactions. These transactions include buying homes and converting them into rentals, buying real estate with lenders, or investing in real estate investment funds or similar third-party real estate assets. Tax sale homes, or tax delinquent real estate, are significant opportunities for investors from all backgrounds to develop their portfolios.

Here are some delinquent real estate strategies you can use to start acquiring property and making money from it.

Have Definitive Plans

Take the time to develop a definitive budget and plan for any real estate you intend to buy. Have a plan, whether it's a rural property, inner-city housing, a parcel of undeveloped land, commercial property, or another form of tax-delinquent property.

If you don't have a clear idea of the next steps, purchasing a tax-delinquent house could leave you without a clue about how to make a profit.

Get as Much Information as You Can

You're buying delinquent real estate as-is. No home inspection tells the full story of a house. That said, you can inspect a house from the road, look at the paperwork, and look for other public details about a property.

You may even want to contact a neighbour to see what they know about the house. The more information you have about tax delinquent properties, the more accurately you can estimate its value.

Make Your Best Bid First

You know where the budget tops out. Don't be roundabout based on preliminary research and what you believe the property is worth. Put forth your most competitive bid to start.

You have to do so if it's a public tender because you only get one bid. Lay down your best bid, knowing that anyone who outbids you will do so because they believe the property is more valuable than what you determined it to be.

Consider Assessed Value

You may be able to buy delinquent real estate, sit on it for a few months, make some repairs or not, and resell it. Always note the assessed value, however. Be sure that if you utilize this strategy to resell, you're ready to put the funds into the property to maximize its value. This may involve significant renovations, updates, and repairs.

If You Don't Sell, Turn It Into a Rental

Many investors will take delinquent real estate, fix it up, and create rentals. Be sure to analyze whether a property is in a popular rental market. If you opt not to go with a month-to-month rental, an Airbnb may be worth setting up. After ownership is secured, there are dozens of ways to take land and make money from it.

Don't Touch It and Re-Sell It

Some investors see tax sale homes as assets and invest in them as such. Consider purchasing real estate in strategic areas without investing in repairs. If the lot is valuable enough and the homeowner comes through in the grace period, you could easily make a profit in both scenarios.

Beware of Complex Situations

Some properties may have Crown interests, liens, and encumbrances attached to them that will become your problem as a homeowner. This doesn't mean not bidding on these properties but simply being aware that they may require extra work.

A title search can tell you if other claims against the property could prevent you from taking possession. This may increase your expenses.

Don't Over-Invest

A key delinquent real estate strategy is to always make it profitable. The more upfront investment you have to make, the more difficult that will be. This is why you want to set a budget when bidding on delinquent real estate. When you overbid and overinvest, you put yourself at financial risk in case unexpected costs associated with repairs and renovations arise.

Wait to Do Any Repairs and Renovations

Wait until you assume full ownership of a tax delinquent home before making repairs or renovations. Until the grace period is passed, the prior owner can still pay their taxes and prevent you from taking ownership.

If you start repairs and renovations early, you will lose that money when you give the home back. Always ensure the title is signed over and ownership is fully transferred before proceeding.

Connect with a Lawyer

If you hope to build a real estate portfolio based on tax-delinquent properties, a lawyer experienced in tax sales can be tremendously helpful. They can also be a major asset in evicting current occupants.

They can also ensure you aren't breaking any laws in assuming possession of a property after you're declared the winning bidder.