Los Angeleas County Property Tax Default Sales
The Los Angeles County Tax Collector reserves the right to sell your property at a tax default auction if property taxes have not been paid for five years. The starting bid at the auction is the amount owed in property taxes. Buying properties at a tax default sale is very different than buying properties through a conventional method, such as through a real estate agent and a willing and cooperative seller. A deposit of 10% of the successful final bid must be made at the time of the auction, and the remaining balance is due within thirty days. There is no due diligence period, and there is no contingency. All sales are final.

Property Tax Default sales are held once or maybe twice annually, e.g., in 2007, there were two tax sale events and in 2008, there was only one tax sale.  As such, opportunities with regards to tax sales are limited accordingly. 

The next scheduled tax sale should be in or around February 2009.  We shall begin accepting Subscription Agreements for this investment in or around December 2008. 

Equity/Debt Structure
Tax sale acquisitions are 100% equity, and there is no debt service involved.  See Profit/Equity Distribution Flowchart.

Investment Goals
Our objective is to turn quick, modest profits through resell, or as some may refer to as “flipping.”  “Modest” is defined as a return of between 115-120% of the investor’s original investment, i.e., $50,000 invested should yield a return ranging from $57,500 to $60,000.  The investment period necessary for this return is approximately one year. 

Should resell of the property not yield the aforementioned profits, the property can be rented to generate income relief.  We consider this an alternative profit strategy, and our objective with rental income is to generate between a 15% to 30% project cap rate return.         

Downloads
Sample Subscription Agreement (PDF)
Sample Partnership Agreement (PDF)
Tax Sale Profit/Equity Distribution Flowchart (PDF)