Iowa is a unique state when it comes to unpaid property taxes. In a short sense, investors pay a property owner’s taxes, and a lien is placed on the property. Interest accrues at 24% year, or 2% each month. This is a wildly fantastic investment opportunity if you are lucky. However, not everyone is so lucky. Here are a few hints for investing in Iowa tax sales.
Hint #1 Avoid low value options.
Don’t bid on properties that owe only a small amount of taxes. If you are buying a debt of only $100, and you have to pay a $100 entry fee, the fee outweighs the potential benefit.
Hint #2 Know the Registration Dates
Iowa offers a very limited window for registering. Tax sales are held the third Monday in June. Tax sale registrations typically open in late May or the beginning of June. Registration can close a week before the sale date. Don’t miss your registration window.
Hint #3: Look at rates of participation.
When you register online, you can see how many bidders are bidding on the same parcels as you.
Hint #4: Try to get as many entities bidding as you can.
You can up your investments by bidding as yourself, your business entity, your spouse, etc.
Hint #5: Have cash ready to go.
Immediately after the auctions are done, you will get an invoice. The money will be withdrawn from your bank account within 24 hours. You may do a simple calculation of taking how many bidding numbers are available and dividing it by the number of tax sale properties. You can use that percentage to determine your likely invoice. Make sure you have adequate funds.
Hint #6: Invest in small counties.
Large investors are less likely to waste their time and money on small counties. You have better odds of winning, and you may have better luck getting the delinquent taxpayers to pay their taxes.
Hint #7: Only buy from counties within driving distance.
It is possible that you can take title to the property after 1 year and nine months in addition to following the legal notification process. Because of this, it is best to purchase tax lien properties within a driving distance that you can manage.
Hint #8: Know the difference between public and regular tax sales.
Public tax sales are properties no buyer bought last year. They take only 9 months to start the redemption process, but there is usually a reason no one wanted to buy the tax lien last year.
Hint #9: Know how different properties are labeled.
For example, AB may mean a mobile home. You can call your county treasurer if you do not know what types of property are listed.
Hint #10: Communicate.
After a tax lien purchase, you may send simple, non-threatening letters to the property owners. This can help to shake the money tree and get your investment paid back.
Hint #11: Sell tax sale properties to neighbors.
If you do not think the property owner will pay the taxes and you do not want the property yourself, you may sell the tax lien to the neighbors. Sometimes they place a higher value on the abandoned property.
Hint #12: Check in with your county treasurer’s office.
The county treasurer should notify you when a tax lien is paid back. However, they sometimes don’t… Don’t be afraid to contact the Treasurer’s Office to see if a payment has arrived.
Hint #13: Set aside money to pay taxes.
After you receive your payment and interest back from the property owner, you will receive an interest payment notice. Be prepared to pay taxes on the accrued interest.
Hint #14: Be prepared to lose some money.
There are times when a property is abandoned, has significant expenses, and no neighbor wants it. You will lose your investment in these instances.
Hint #15: Always consult your legal counsel for reliable advice, and have fun! For more information on Iowa Tax Lien Sales, see our video at: https://www.youtube.com/watch?v=LiYKPWeOMw0
