Wholesaling Tax Liens & Tax Deeds
Member since 2018 · 5 posts · 0 votes
Wholesaling Tax Liens & Tax Deeds
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Specialist · Phoenix, AZ · Member since 2011 · 698 posts · 629 votes
7y@London Elliott If you are new, doing what Jay suggests is a good educational start. I did that step - bought somebody elses old tax lien course back in the early 1990's. That way I learned the basic terms and process, but the biggest benefit was I didn't get on the guru's marketing list to get hounded by them for expensive coaching and investment pressure.
I do tax lien investing in Arizona, but not in Maricopa county. I do know most of the details of a tax lien foreclosure having started them in other Arizona counties.
Maricopa is different from all the other counties in Arizona. In Maricopa more than one tax lien investor can hold a lien on a parcel. Like you describe, you can hold the 2016 lien but somebody else can hold the 2015 lien. (In the other counties, if you bought a tax lien last year and did not pay this year's taxes, then your old lien is combined with the new lien amount and sold to a new investor. You get paid for your lien and interest by the new investor and you are out)
If somebody holds an older lien, then they will reach the 3 year redemption period before you, they can foreclose. You still get paid if they foreclose successfully, but they beat you to the foreclosure and get the property.
If they do not foreclose after the 3rd year of holding their lien, and yours reaches the end of the 3rd year, then you can foreclose. If you are successful, part of your foreclosure is to pay off the other lien holders. You have 10 years to hold your lien. If it is not paid off, or if you don't foreclose, then your lien expires worthless and you lose your money.
You can always offer to buy somebody's older lien on a parcel. All will want their principal back. Some will take a discount from the interest owed them, some will ask just for the amount of interest owed, and a few will ask for a premium (more than what is earned so far) on the interest. I would not pay a premium because the odds of ever getting a property in foreclosure are very slim.
A little over a year ago I had a couple offer to buy two liens I owned. I had liens on two adjoining vacant parcels. The couple owned a house next to both lots. They had called the county to find the owners to buy the property and the county told them I owned the liens and the owners of the lots may have been deceased (they were).
The couple offered to buy the liens so they could foreclose. I asked for the principal plus interest I was owed. The lots were worth only about $2,500 more than the taxes plus interest I was owed. I figured let them spend the $2,000 to foreclose because I was going to make almost nothing on the lots if I foreclosed and then sold them. This way I made my 16% interest for 5 years I held them and it didn't cost me a dime to get paid. I had not foreclosed yet because I was waiting for the market in that area to rebound.
Each state is different in how liens are handled and how long of a redemption period the owner has to repay the lien before it will be foreclosed. Arizona is one of the longer redemption period states at 3 years.
6 Replies
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
I would go on e bay and buy any of the tax lien gurus written materials and tapes.. usually pick them up for 25 to 50 bucks.. from someone who paid thousands for the programs.. and it never amounted to anything for them.
that's were I would start.. read and learn
- Specialist · Phoenix, AZ · Member since 2011 · 698 posts · 629 votes7y
@London Elliott If you are new, doing what Jay suggests is a good educational start. I did that step - bought somebody elses old tax lien course back in the early 1990's. That way I learned the basic terms and process, but the biggest benefit was I didn't get on the guru's marketing list to get hounded by them for expensive coaching and investment pressure.
I do tax lien investing in Arizona, but not in Maricopa county. I do know most of the details of a tax lien foreclosure having started them in other Arizona counties.
Maricopa is different from all the other counties in Arizona. In Maricopa more than one tax lien investor can hold a lien on a parcel. Like you describe, you can hold the 2016 lien but somebody else can hold the 2015 lien. (In the other counties, if you bought a tax lien last year and did not pay this year's taxes, then your old lien is combined with the new lien amount and sold to a new investor. You get paid for your lien and interest by the new investor and you are out)
If somebody holds an older lien, then they will reach the 3 year redemption period before you, they can foreclose. You still get paid if they foreclose successfully, but they beat you to the foreclosure and get the property.
If they do not foreclose after the 3rd year of holding their lien, and yours reaches the end of the 3rd year, then you can foreclose. If you are successful, part of your foreclosure is to pay off the other lien holders. You have 10 years to hold your lien. If it is not paid off, or if you don't foreclose, then your lien expires worthless and you lose your money.
You can always offer to buy somebody's older lien on a parcel. All will want their principal back. Some will take a discount from the interest owed them, some will ask just for the amount of interest owed, and a few will ask for a premium (more than what is earned so far) on the interest. I would not pay a premium because the odds of ever getting a property in foreclosure are very slim.
A little over a year ago I had a couple offer to buy two liens I owned. I had liens on two adjoining vacant parcels. The couple owned a house next to both lots. They had called the county to find the owners to buy the property and the county told them I owned the liens and the owners of the lots may have been deceased (they were).The couple offered to buy the liens so they could foreclose. I asked for the principal plus interest I was owed. The lots were worth only about $2,500 more than the taxes plus interest I was owed. I figured let them spend the $2,000 to foreclose because I was going to make almost nothing on the lots if I foreclosed and then sold them. This way I made my 16% interest for 5 years I held them and it didn't cost me a dime to get paid. I had not foreclosed yet because I was waiting for the market in that area to rebound.
Each state is different in how liens are handled and how long of a redemption period the owner has to repay the lien before it will be foreclosed. Arizona is one of the longer redemption period states at 3 years.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Jerry K. very informative post.. I can see if you have millions tied up in these it would be a job to track them all.
especially if your buying a lien say 1000 dollar lien..
what always stumped me is how do you buy the next years tax's when it goes so fast at auction.. at least the ones I was at. I sat through one in Mississippi and well I knew right then this was a pretty difficult business and like I said it went so fast I am sure very few knew what they were bidding on.. I did not.. this was not like a tax deed auction were you could narrow it down to one item and bid on it.. ?? Just curious how you handle that or how its done in AZ..
- Specialist · Phoenix, AZ · Member since 2011 · 698 posts · 629 votes7y
@Jay Hinrichs - I can't imagine having millions in tax liens! I have about 20-30 at any time and it's a handful for me to keep in spreadsheets. This is just a small allocation of my retirement funds. I use them more as high paying Certificates of Deposit.
The Arizona counties I invest in use online auctions. There are still a few counties in AZ that have the open outcry auctions. Most counties found they sell a much higher percentage of liens by going online. I live in Illinois but I visit AZ every 18 months or so, so I know the areas I invest in. I can bid from home in the online auctions.
I narrow my list by converting the list of liens from a PDF to a spreadsheet (if not already given in a spreadsheet). I then have some website screen scraping macros that grab the real estate type for each lien (vacant residential, home, multi-family, commercial, etc.). I know the parcel numbers for the areas I'm interested in and I filter the list down to just those areas. I usually filter the list from there by size so I get most of the "slivers" of land off the list.
From there I have other macros that grab the GIS satellite image of the parcels with the property line drawn in so I can see what each parcel is. I can scroll through the images pretty quickly to see if I want to view it closer.
Many times I look at Google street view if available, but those pictures can be dated, so I take them with a grain of salt. I usually go for vacant residential parcels because they get the highest rates of interest. A street view is just to see if the land is buildable - but many vacant lots do not have street views.
If I decide to go for a property with a home, it's usually an area I have driven through on my visits. I'll research to see if there have been any fires or news stories about the address (once a house that came up had a story from a couple of years before about meth being made there - it was a nearly million dollar house - I passed on bidding on the lien). I want there to be a mortgage so that I know the bank will pay the lien if the owner does not.
I really never expect to get a property through foreclosure. I have taken "flyers" on occasion on homes when I see the owners are deceased and there is no mortgage. That increases the chance of foreclosure, but since I don't look at many homes or commercial properties, I don't find too many of those.
I do like to bid on parcels with liens that have billboards or cell towers. If those fell into my hands through foreclosure, then I can get monthly income from the billboard company and my only expense is real estate taxes which tend to to be low if the billboard is the only structure on the parcel. Again, haven't been able to land one of those, but the interest rate is usually 16% until the parcel owner pays the lien. I'm looking at doing tax deeds to see if I can land billboard or cell tower parcels in the future. I have to automate this process even more to sift through all the tax deed states for that!
- Tyler, TX · Member since 2014 · 6 posts · 15 votes7y
When I lived in Arizona it was a three-year process and different people could buy the lien of any of the three years, and then one of them could pay the other(s) money with the 16% interest to buy the lien of the years the other(s) owned. Long process. Definitely study up on it more.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Jerry K. Thanks Jerry... the ones I attended in MS were 3 days long and the sales were cried.. it was a zoo.
there was a few big players with teams and lap tops and from what I could see spending a few million
I think I spent 20k and never did get a pay off.. I just forgot about it and chalked it up to a learning curve.
I spent Decades with my dad buying tax sales in N CA.. but we were the dominate bidder at the sales by far.
so we had it pretty dialed in.. and like you we knew property by APN number then would do drive bys to narrow it down.
In CA its EXTREMELY rare to have an actual home go to auction.. its 99.5% land.. But we were in the land business.
Just like those guys you see selling how to flip land training.. same thing.
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