For months and months, I’ve been seeing John Beck’s late-night infomercial on tax sale properties. Having been in the tax sale industry for almost 10 years, I can tell you that I’ve occasionally seen deals as good, or better, than the deals you see on TV for John Beck’s Free and Clear system. But let’s look at some of the realities that come along with investing according to John Beck’s system.
To get properties from tax sale, you will have to invest in a tax lien or a tax deed. Your state will offer one or the other, or sometimes both.
If you buy a tax lien, you will generally wait a period of time from 6 months to 5 years while the owner is given a chance to pay the lien off. Only after that time expires will you be able to apply for a deed to the property. I think most of the examples in John Beck’s Free and Clear System are of properties that were purchased through a tax lien. What the commercial doesn’t tell you is that the student probably had to wait a long time, and purchase over a dozen liens, to get the property featured on TV. This is because most liens on good properties pay off during the waiting period.
You also have to investigate dozens, or hundreds of properties to settle on a property to purchase a lien against. This is because many properties offered at tax lien sales are not even worth the amount owed in taxes, especially considering the time you have to leave your money tied up and possibly pay subsequent taxes.
I highly doubt that any of the properties purchased for under $1000 on the commercial for John Beck’s Free and Clear system were purchased at a tax deed sale. Tax deed sales offer immediate ownership of the property at the time of the sale. Therefore, these sales are well attended by investors, and the bidding process drives the final purchase prices well above the minimum amount, and often near retail. Therefore you will not see many $20,000+ properties going for under $1000.
But John Beck’s Free and Clear System has its merits. If you have IRA or other money that you want to invest at above-market rates, tax liens may be a good investment for you. Just don’t plan on getting many properties.
Also, it does at least identify tax sale properties as one of the most profitable niches in real estate investing. So how do you make money by acquiring cheap properties through tax sale, if most liens pay off and tax deed bargains are rare?
Simple! Identify the owners of tax sale property who are about to lose their property to a tax deed sale, or running out of time to pay off their tax lien. Then contact them by mail or phone, and offer them a token amount for their property, or work another arrangement with them so they won’t lose it. Avoid waiting for tax liens to mature, and circumvent the bidding process at tax deed sales. The profits can be enormous. When someone decides to walk away from their property and quit paying the taxes, you’ll be on top of it!