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Individual Investors Earn Competitive Returns By Dramatically Improving Neglected American Neighborhoods

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Tax Sale Resources
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Pittsburgh, PA, USA (Sept. 5, 2022) — As reported earlier this year by Bloomberg, the cost to rent a home rose faster in 2022 than it has in more than 30 years. The median price to rent a home – at a time when buying is unaffordable to millions of Americans – has skyrocketed above $2,000 a month, for the first time in history. But a small investment fund in Pennsylvania, which specializes in investing at public tax deed auctions, is creating more affordable rentals – by improving neighborhoods plagued by neglected properties.

John Pack, a member of the National Tax Lien Association (NTLA), runs the small fund in Pennsylvania devoted to buying tax liens and deeds at municipal auctions and then transforming the underlying properties into value-added assets. “We buy properties almost all over the state,” Pack explains, “either to fix them up and resell them or sell them to others who fix them up themselves.” Those are often construction contractors who can do renovation work quickly and then market the finished projects as affordable single-family homes or rental properties.

Pack cites the example of one home that was uninhabitable, in a state of severe deterioration, and had mold growing inside it. “The neighbors contacted us,” he recalls, “and reported rat infestation. We came in and evaluated the property, acquired it, and then a contractor purchased it from us. They put about $150,000 into the property, doing custom work throughout to transform it into a home they could then sell for above-market value. You would have never known that the before-and-after houses were the same one. Now it is the nicest house on the block, by far, and the neighbors are extremely happy.” The city had reason to celebrate too. It went from having a property on the tax rolls that represented a deficit of $25,000 to a home that is an asset to the neighborhood and generates approximately $9,000 a year in property taxes. Those taxes now support vital community services such as schools, fire departments, and inspectors to enforce safe building codes.

The U.S. Department of Housing and Urban Development points out that neglected, abandoned properties ─ like that one used to be ─ pose health and safety hazards and drag down the value of other homes in the neighborhood. They also reduce local tax revenue which is, ironically, urgently needed to remedy those conditions. That can soon lead to economic disinvestment, which triggers higher rates of unemployment and causes members of the skilled workforce to move away. The domino effect means fewer residents, more vacant homes, and boarded-up businesses.  

Another project Pack was involved with was for a trash-filled eyesore where the taxpayer owed the county more than $70,000. The remodel cost approximately $60,000, but turned it into a safe, comfortable, beautiful property. Since then, it has been providing a great home to a family while generating more than $5,500 a year in tax revenue year after year. Meanwhile, Pack’s goal is to complete as many as 75 of these projects per year. That translates into an infusion of approximately a quarter of a million dollars a year in tax revenue – where before there was only debt, blight, and a shortage of quality residences available to lower-income families. Over 250,000 properties are sold annually at tax deed auctions nationwide, generating more than $4.3 billion in revenue, according to Tax Sale Resources – an organization that collects tax sales data.

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