Housing affordability and stability is over, according to a June 17, 2021 article by Bloomberg writer Karl W. Smith, and consumers should start to embrace renting over buying. Home ownership peaked in 2004 at 69% but has since declined.
According to a 2014 New York Times report, the math on the rent versus buy argument is shifting in favor of renting. The math fluctuates like a yo-yo, but in 2014 the rent was more advantageous due to the rising cost of housing. (You can check for yourself using The New York Times calculator.)
What should prospective owners do now and what does this mean for TAX DEED AND TAX LIEN investors?
future owners
TAX DEEDS and TAX LIENS are two options available to prospective homeowners who are dealing with rising home prices and high demand, including demand from PRIVATE EQUITY investors as well as regular homebuyers.
A property that was foreclosed on by a state or local government because the previous owner failed to pay property taxes has a TAX DEED as proof of ownership. DEEDS are auctioned to raise money for county back taxes. These homes often sell for much less than market value, but the DEED buyer may need to make some minor modifications to the home. DEEDS-based homeowners will also need to be flexible about the area and possibly even the city they want to move to.
Although TAX DEED auctions are not held in all states, TAX LIENS sales are the norm. A state or local government can place a LIEN on a property to collect unpaid taxes. To pay financial obligations, governments sell these LIENS to investors. In addition to getting back the original investment, the investor also receives a specific amount of interest, usually between 10% and 12%, when the guarantee is paid.
In the case of a FORECLOSURE, the lienholder may purchase the home, provided it is free and clear of all other LIENS and claims, including a mortgage. Compared to a DEED, this route is significantly less likely to result in a house, but it does.
A prospective homeowner can save for a down payment much faster with a 10% to 12% yield.
Can these properties be rented out?
DEEDS and LIENS investors often debate whether to sell or rent the home after buying it. Of course, there are those who just don’t want to deal with rent and who can’t be persuaded otherwise. This is totally acceptable. However, there seem to be more and more reasons to become a landlord for individuals considering renting. Private investment firms like BlackRock have been acquiring residential properties lately to use as rental units. Renting now seems to be more popular because consumers are finding it more financially advantageous.
Let’s look at some scenarios. In the United States, the average cost of rent has increased by more than 30% over the last ten years. That’s just 3% a year. The average rent for a two-bedroom property increased by 1.8% in 2020, while a one-bedroom home saw a 4% increase. Compared to the previous ten years, rents seem to be growing faster. So the answer is yes! It Can be rented.
Selling them is also a great deal and I have a tip for you beginners!
First, before the tip, I would like to introduce you to the types of properties that you will find in this business.
- Residential: It is the most common and most recommended. Used for single-family or multi-family housing, located in urban, suburban or rural areas.
- Commercial: Everything commercial. Shops, malls, hotels, inns, among others! Not recommended for beginner HUNTERS.
- Mixed Use: Mixed use properties combine work and well-being in one place. Properties that present constructions with commercial and residential purposes.
- Industrial: Warehouse, factories, power plants, warehouses, among others.
- Agricultural: All property, of continuous area, whatever its location, which is intended or may be intended for agricultural, livestock, plant extractive, forestry or agro-industrial exploitation.
- Used for some special purpose: These are usually buildings that are in municipal service and parks.
Great, isn’t it? However, it may be that you are still not sure or that you are still learning and studying about the methods and do not want to take too many risks, it is normal…
So, for you who want to start slowly, a great idea is to start investing in lots.
Typically, the following occurs: the builder creates a new subdivision and then, for some reason, goes into financial difficulty.
When this happens, several adjacent lots are owed the same amount of tax. Soon, you will have the possibility to acquire more than one lot in the same area.
Plots that already have water, electricity and sewage installed, but without any construction because this will avoid possible expenses with the structure before you can sell it, which means extra expenses, it is the most recommended.
