Are tax liens something to get into?

Question

I am very inexperienced in tax liens. However I have gone down this rabbit hole of tax liens. I have a decent understanding of what it is. I’d like to figure out the best or most common way that investors use and leverage tax liens? Is it a strategy to cross your fingers for getting a property at a discounted rate? Is it a strategy to put your money in something with intent of getting a high return on the case of the owner redeeming the lien?
Again I’m in the rabbit hole. So please advise if you wish.

Denise Evans · Answer

In Alabama, at least, it is a strategy of actually getting the property, whether the sellers are motivated or not, and whether they are in the wind or not.  Immediate possession rights under older system (still applicable to over the counter sales) and immediate possession with the right strategy still possible with newer system.  Of course, Account Closed is right about motivated sellers. Don't overlook that aspect of the possibilities. Many people who cannot afford to fix up their properties wonder why they keep paying the taxes year after year, but they feel trapped  into doing it. Inertia prevents them from contacting a real estate agent to sell the property, or perhaps an agent will not take the listing because the property is in such bad shape. Keep your eyes open at all times to whatever possibilities might appear, and you will find yourself finding more opportunities than if you stick to a pre-programmed, off-the-shelf, strategy.  Of course, you need to be prepared before leaping in. But, don't put yourself in an investing straight jacket.

Bruce Lynn · Answer

As @Ned Carey says, tax liens and deeds are just one strategy of 100.

So this depends on you and what you are interested in.  Not sure if you are in AL or FL or both.  If you want to invest in FL I would look up Sandra Edmonds out of Palm Beach.  I don't know her personally and have never been to one of her classes, but if I was going to invest in tax liens/deeds in FL I would attend one of her classes.

Not sure if she teaches classes, but Denise Evans is your expert on BP for AL.  Look up and read all her posts here on AL tax deeds/liens.  Then you might contact her to see if she does any seminars or classes.

Next up get a list of the tax lien/deed sales in your area.  Go to the auction.  See how it works.  Then see if you want to spend more time and money learning about it and doing it.

Remember you probably need CASH.  Typically no leverage on tax liens/deeds.

Read the book the 16% solution for the basics.  Read even about the states you'll never invest in to get a better understanding of even how your state works.

Remember it is a get wealthy SLOW investmest strategy like most investing.  Not a quick way to riches.  Sounds good sometimes when people tell you the possibility of making 25% returns government guaranteed.  So if you buy a $1000 tax lien and hold it for 2 years and make $250, you're not quitting your job any time soon.

KNOW 100% what you buy, especially in FL.  I'm sure there are lots of underwater flood zone swampy parcels there.   Know why the previous owner did not pay their taxes and willing to loose the property, BEFORE you buy.

Denise Evans · Answer

@Bruce Lynn, thanks for the shout-out. I do have classes, videos and the authoritative reference book on the subject.  Plus, hello out in Coppell! I went to undergraduate school at University of Dallas, in Irving. I sure miss Dallas, and also Houston, where I practiced law. Been living in Alabama for many years now.

Ned Carey · Answer

@Zac Rogers there is no more reason to get into tax liens than any other real estate strategy. My guess is the risk adjusted rewards for tax liens is about like other real estate investments.

Tax liens, like pretty much all RE investment strategies, are very competitive right now. That drive up prices and risk, and drives down returns.

Eliott Elias · Answer

All it is, is a form of distress. Use it as a reason to give you leverage and purchase the property cheap. Homeowners who don’t pay their taxes are in financial distress.

Account Closed · Answer

It's really just a strategy to try and find motivated sellers. From there, you have to get in touch with them and feel them out. Are they motivated? Do they want a quick sale at a potentially discounted price? Does the lien and their financial situation push them to sell? It's more complicated than just a lien automatically meaning they need to sell, but it could be a good strategy to try and find motivated sellers.

John Underwood · Answer

You need to learn how to do it, understand the risks and and a good bit of cash that can be tied up for a year or more.

As Ned mentioned it is very competitive and prices can get bid up pretty high which makes it less profitable.

Bianca Caruso · Answer

Also, curious about this! I was just browsing my county website about tax liens and there were so many tax liens.

Andrew Bosco · Answer

it's just another strategy as everyone else has said. However, in my experience, this strategy ties up money and time more than other methods of real estate.

Are tax liens something to get into?

Most Popular Reply