Buying Land at Back Tax Auctions

A lot of the land on this website started at back tax auctions. It’s one of the best ways I know to get your feet wet in real estate without much money. Here’s how I did it.

It started in Detroit

Before land, I was buying houses in Detroit with my sister and her husband. When the bank-owned houses dried up, the neighbors sold to us, and back tax auctions helped too. We bought those houses as well, and built the portfolio up to over 160 houses.

Why there’s back tax land at all

In the U.S., we tax the land, not just the people. That pushes people who own land and aren’t using it to let it go. When the taxes don’t get paid, maybe someone died, moved, had the wrong address, or just decided the land wasn’t worth it, the county eventually takes it and sells it to the highest bidder.

Arkansas does it at the state level

Arkansas is the only state I know that runs it at the state level. A lot of its counties are tiny, with a couple thousand people, and don’t have the system to take land for taxes and sell it the right way. They got backlogged, so the state stepped in and set up the Commissioner of State Lands to do it for them.

In Arkansas, if you don’t pay the taxes for two years, the land goes to the state. That’s the shortest I know of. Most states are three years or more, a lot are five, and some are ten. The state sends notice after notice by registered mail, then auctions the land. Even after the auction, the old owner gets about 40 more days to pay the taxes and keep it.

How I bought it

When I started, there were no maps. Everything was paperwork in the mail. I’d fill out a form and write a check for each property, put a couple hundred in a big box, and send it off. A couple months later they’d write back: “Luke, we’ll sell you these ones.”

The auctions were held in person at a local hotel or conference center, posted in the newspaper. Best bid wins, cashier’s check, paid on the spot, as is. You’re not supposed to walk the land first, and they don’t give you much information about it. It’s really built for investors, not someone looking for a place to live. Investors would travel from auction to auction, buy everything up, and resell it over time.

Anything that didn’t sell at the auction went into post-auction sales. The bid starts at the back taxes. If you’re the only one willing to pay them, you get it. If two or three people want it, you compete and the price goes up.

I bought so many Arkansas properties this way that I get lost in my own database. You’ll see hundreds of them all over Izard, Baxter, Chicot, Pulaski and other Arkansas counties on the Land History map.

What to watch out for

• You buy it as is. No inspections and very little information, so do your homework from the county records and maps.
• Know the extra fees. Some subdivisions charge yearly improvement-district fees on top of taxes, even where the improvements were never built. Look before you bid.
• Title can take work. A tax deed isn’t the same as a clean title. On bigger properties, plan for the title work.
• The old owner can still redeem. Until that window closes, the deal isn’t done.

A good way to start

People ask me how to get started in real estate without much money. This is one way. These are smaller deals, and I like bigger-dollar ones now, but tax land is a great way to get your feet wet and learn a lot, fast.

Browse Land for SaleSee It on the Map