Has anyone bought orange county tax certificate?

Question

Hi everyone!

I have just started out in orange county tax certificate sale, gotten them at a good interest rate :) just wondering did anyone of you get involved in this orange county tax certificate sale?

Jerry K. · Answer

@Karen Margrave

Actually I don't have experience in Orange county.  I've bought a lien in Palm Beach county OTC on a home that was in bank foreclosure.  Nobody bought the lien in the auction, I assume because of the foreclosure.  So it went to the OTC list.

The lien was over $10,000 and when purchased OTC would earn 18% interest.  Which in reality is calculated 1.5% per month.  I wasn't interested because living in Illinois I couldn't go see the home to check on condition.  I did see it was in an area of $500k - $800k homes via Trulia and Zillow.

Somehow I stumbled onto Zillow a few months later and saw the property was for sale and under contract.  I saw the pictures of the inside and outside and it was in "move-in" condition.  The lien was still avaialble.

I called the listing agent who told me it was going to close in 10 days.  I bought the lien.  If Florida the statues provide for a minimum payout on liens of 5%.  So I earned 5% for holding a lien for 10 days.  If the sale didn't close, I was going to earn 18% on the lien for a very good property.

Rare case where the bank did not pay the taxes on a very good property.

Jerry K. · Answer

Arh Elaine A lot of criteria can come into play.  Here is a general overview that I use.  Note - This is my opinion and what I 'm comfortable doing.  Each investor will learn their own likes/dislikes and gauge risk levels.

When I look for high rates only, I look at vacant residential land. I stay away from large cities.  I've found that most lists of liens in auctions are vacant residential land. Yet most investors stay away because there is not much return if they end up owning the land. Because of less competition for vacant residential liens, winning rates can be higher.

If the area is a higher end development and is not near a big city, that is a pretty good combination.  I held one lien for three years and I was a few weeks from starting foreclosure when the owner paid it off.  It was in a city of just under 5,000 people.  The lot was in a development of higher end homes and had nice amenities.

I won the lien at 9% - not bad. The lot was bought originally for $125,000 by the owner.  However, 2008 hit and the lots dropped to about $50,000 (some even less if the bank foreclosed and sold them).  So I was looking at something for which I paid a small amount (I paid the first year taxes via the lien and then paid the taxes each year for the next 3 years waiting until I could foreclose), and then if I foreclosed, I could sell at a discount of $25,000 and still make a huge multiple on my costs.

Instead it paid off, and I made about $1,000 in interest over 3 years, where I would have made about $40 if that same money stayed in the bank or in a CD.

I do look at homes or other buildings at times, but the rates go so low by the competition, that I tend to shy away from improved property.

Florida is an exception since they have the minimum 5% rate that you get even if the person pays off the day after the lien auction. 5% is a nice return in the current economy.  So, I'll bid on single family residential in Florida and bid the minimum knowing that most people pay off within a year and I'll get my 5%.  I like to bid on luxury properties with big tax bills because the competition is low.

However, you have to really be sure there are no bankruptcies, legal entanglements, foreclosures, etc.

Just a couple of strategies...

Jerry K. · Answer

Arh Elaine Congratulations!  I did not buy in Orange County FL this year.  Tell us about your experience. Why you decided on Orange County FL, what you bought, your feelings now, etc.

Arh Elaine · Answer

hi jerry, just a quick check with you,, what are e criteria for u to select which tax lien to invest in? Eg, low income or high income area? Single family properties? Amenities? Owners?

Arh Elaine · Answer

Thanks jerry! Appreciate it!

Jerry K. · Answer

@ARH ELAINE   I buy liens almost exclusively online.  You can read about some of my strategies on my Biggerpockets blog at the link at the bottom of this post.

Arh Elaine · Answer

hi matt, the reason why I gotten e 2 liens is bcos the price of the liens is suitable for me. And the land value and assess value seems reasonable. Thus I took this 2. I did some research in zillow and it the location of e properties seems ok as it is near amenities.

Frankly speaking, I didnt know that 2 areas belongs to low income family. I guess that was mistake no 1 for not doing a thorough research on e demographics of the area.

On the flip side, I guess with low income area, the chances of foreclosing would be pretty high. Then it might not be a bad thing after all.

Does anyone of you did any online auction before?

If not, what is your strategy ?

Ceasar Blackman · Answer

very interesting subject, just read about it on their website and I'm also intrigued. Congrats on the wins at auction

Karen Margrave · Answer

@Jerry K  You seem to have some experience in O.C. Florida, maybe you could share it?

Matt Devincenzo · Answer

Congrats ARH, I've recently been looking at getting some tax liens for my IRA to hold. Can I ask why did you decide on Jefferson St and Prato Ave?

Being from the area I know prato is in a fairly low income area and depending on which Jefferson St it is it is also in a low income area. Was that a calculated reason for purchasing those or was that more a choice because of the lower risk of capital since the certs were cheaper? Or less competition since other weren't bidding on those certs? Were these homesteaded properties(homestead is a tax reduction for owner occupied homes in FL)?

Just wondering about these things since I'd like to see how these work out for you as I'd like to begin to purchase some for my IRA to hold. But I also want to see how things work for someone before I get something in my IRA that can be difficult to deal with since it is my retirement return that would be affected.

Has anyone bought orange county tax certificate?

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