Tax Liens are not always as they appear.

[Ned Carey]

Just got a tax lien redemption check from Baltimore City Today. City records show that this was redeemed back in April. It took 3 months to get us our money back from the city!

So what does that do to the interest rate? Instead of the stated rate of 18% We actually received only about 13.5%.

Hey that is a lot better than 2% in a bank CD. However if you are borrowing money to invest this can have a dramatic affect on your business model. This is just one example of the hidden costs and hassles of Tax lien investing.

[Ned Carey]

Originally posted by Christina R.:

Ned Carey - do you build in a "buffer" of sorts to account for things like this with the tax lien when you are borrowing the capital?

Specifically with the tax liens the lender gets paid the redemption amount when we get the check, if the city is slow that is a cost to the investor. 13% is still a great number for the investor.

In general today for just about any type of investing I have learned most of the hidden costs, so I figure them in when evaluating an investment. As an example in a rental I figure about $1,000 a year for future large capital expenses like roof, Furnace water heaters etc. These are things that don't have to be replaced this year but are actually wearing out and will need to be replaced someday.

When I was newer and didn't know as much I just made sure that any deal I did was a slam dunk and if I misjudged I still made money. - Ned