A tax sale is not always considered one of the better real estate investments. However, tax sales can be incredibly lucrative for someone willing to take the risk of purchasing and researching what they’re bidding on long before they bid.
High returns are possible in tax sales, so they make for a good investment for a beginner. They are also ideal for someone looking to maximize real estate ownership opportunities in their area.
Let’s learn more about why tax sales are a good investment.
1. Real Estate Prices Are on the Increase
Across the board, whether it’s a simple house or land, the price of real estate values is more or less on the increase Canada-wide. While not every tax sale is a guaranteed pathway to profit, if you’re fortunate enough to lock in on the right property and the redemption period passes, you could sell the property you’ve acquired for a significant profit.
2. It’s A Low-Stress Way to Bid on Properties
Trying to acquire real estate in Ontario is hard. No matter what, a potential buyer will normally encounter a bidding war that inevitably leads to a property going for a spiked price. You will still run into multiple bidders with tax sales, but most people find it much less stressful, especially with public tender tax sales done online or by mail.
3. You Set a Budget and You Make Your Move
Tax sales are perfectly within your control to calculate how much risk you want to take and what you’re putting in. It is up to you to decide what your budget is, and there is, to some degree, the opportunity to control your investment strategy better with a tax-sale investment portfolio compared to stocks and other forms of investing.
4. You Pay A Fraction Of Its Market Value
You may get a property at a fraction of its market value at the end of the process. A municipality just wants to recoup the taxes and interest owed. They aren’t looking to profit. Municipalities often price tax sale homes extremely low because they know it is a high-risk undertaking for a buyer. A tax sale home can be as little as a quarter of a property’s value.
5. You Do Not Have To Get A Mortgage
You do not need to buy a tax-sale home with a mortgage. Prices are often so low that many investors may not require a mortgage or additional lending. This means you can generally conclude the tax sale process fairly quickly so long as you have the money at the close time to complete the sale.
6. Save Yourself Big On Real Estate Fees
As there is no mortgage and tax sale, properties are designed for a quick sale, and there is no credit check, no attorney fees, no realtor fees, and several other fees that you avoid having to pay. Investing in tax sales is quick and easy, affordable in the right circumstances. If your goal with tax sales is some form of homeownership, it may be the most cost-effective way to get there.
7. You Earn During The Redemption Period
When your bid gets you a tax sale property, you collect interest during the redemption period. The property owner can redeem the taxes before the property reverts to you. This means that, even if the tax sale home never lands, you can still get a return on your investment simply by holding the title.
8. Tax Sale Returns May Be Better Than Stocks
A smart tax sale investor can sometimes generate a return of up to 75%. It’s all based on researching and purchasing the right tax-sale properties. The returns can be far higher than the stock market, and other investment opportunities offer, though this won’t necessarily be the case for everyone.
9. If You Love Property Management, Try Tax Sales
Tax sales can be used for a wide range of purposes, including turning them into rentals and managing them like you would any other property. They can also be renovated and resold for profit once the ownership has been fully transferred to you. If you get to that point, big rewards can be nabbed, and your real estate portfolio can open up in a big way.
10. You Can Quickly Acquire Multiple Properties
A smart investor with tax sales can feel like they are winning the lottery by purchasing properties at a significantly discounted rate. If you have the financial backing to do so, you can acquire multiple tax-sale homes fairly quickly and, at such a steal, it may prove to be a smart strategy if you desire to use real estate as your primary investment strategy.