Tax Liens - who can help me get started?

Question

Ned Carey · Answer

Most books are very general in their information. Once you get the general idea, more books might not be that helpful.

Yes a lot of books and internet information and courses are based on best case scenarios. The situation mentioned by @David Dey is probably as common as not. I see lots of companies bidding at numbers that are very risky.  They obviously don't understand  the risk they are taking.

Tax sale investing is vert competitive. Big money is working on slimmer margins than makes sense for the average investor.

The two things you really need to know are:

• The true value of what you are bidding on
• The rules of the game for your particular jurisdiction.

No book or course is going to tell you the value of a specific property you want to bid on. You will often get better information on the rules of the game at your county website than you will from a book that talks about tax investing around the country.

David Dey · Answer

Craig, you are getting great advice already and I think you'll probably get all the info you need.

However, I had to respond to this part of the post.

The best advice I can give you is, have a back up plan.

This year has been one of my best years in terms of volume of deals.  This is in no small part, thanks to a multi million dollar hedge fund specializing in FL tax certificates, but had no back up plan for when they actually got the property.

You see, this fund spent millions of dollars buying these certificates with the intention of making a great return on their investment.  They expected that the owner would eventually pay the taxes or some investor would buy the property at tax deed sale.

This happened 80-90% of the time, however they never made any contingency plan on the chance that they would end up with the property.

As a result they ended up with almost 200 homes in very rough condition.  (Keep in mind that a lot can happen in the 4 years it takes before one can apply for the tax deed and these properties had to be real dogs in order to not be bid on by investors)  They had no exit strategy and almost all of the homes ended up with code enforcement lie and some of the homes ended up being demolished before we got to them.

We ended up taking a contract on 185 properties around FL and have succeeded in getting these homes off of their books but for pennies on the dollar and are now their exclusive liquidation arm, but had we not come around, they would have ended up losing everything on those homes.

Yes, it's true that 80-90% of their deals ended up being profitable but those liens and judgements could become problematic for future transactions and you're definitely not doing yourself any favors in making enemies with the municipality for not taking care of your properties.

The best advice I can give you is this, especially as an individual doing this where every deal counts.  Do your due diligence and build an exit on each property as if you are going to buy it, because in the end you just might.

Jay Hinrichs · Answer

@Craig Garrow  this information is readily avaliable on the internet with a few clicks.

just google a state and ask how the tax sale works.. many counties have it clearly spelled out.. no big mystery here

Josh Carr · Answer

We can help - we have lists from every state and instructions. Bigger pockets won't let me place a link though :-)

Jeff James · Answer

I will reply but I doubt I will be of much help.

Every state has different statutes regarding how certificates are created, acquired, effective periods, minimum certificate age required to apply for a tax deed, certificate expiration age, etc.

I recommend that you post what states you are interested in purchasing certificates and hopefully individuals who have acquired certificates in these states will respond.

Your strategies will dictate your operating costs.  Are you just looking to hold the certificates for the ultimate interest income or do you want to use the certificate as a means to acquire the property?  If you want interest income there are usually very little, if any costs involved after acquiring the certificate.  The pitfall with this strategy is that the money is tied up until the property owner redeems.  In the states with which I am familiar there are no payments to the certificate holder until it is redeemed.  If you want to acquire the property associated with the certificate there will likely be administrative costs associated with the tax deed application and in at least one state with which I am familiar (Florida) it is possible that significant other costs could be incurred but that process is only important if you elect to invest there.

Another pitfall in tax lien investing is that in most, if not all states the certificate expires after a specified duration.  If no tax deed application is submitted prior to expiration of the certificate the holder loses his/her/its entire investment.

I will wait to see in which states you are interested in investing and if I know about the process in them I will try to answer any question you may have.

Rick H. · Answer

Budget $250, go to Amazon, and search the appropriate terms. You will find a number of books on the topic.

Most will be intro books or gateway books leading to offers by its author.

Buy what can, study with a highlighter and take action.

Emmett R. McCarthy · Answer

If you are interested in IL tax liens, I'm happy to help. IL annual tax sale bidding starts at 18% penalty rate per 6 months and can go as low as 0%. The tax buyer has the right to pay and post subsequent years' taxes at 12% per year or part thereof (meaning the full 12% accrues on day 1, 24% on day 1 of year two, 36% on day 1 of year 2). IL tax deeds convey "new and merchantable title" without having to file a quiet title action. This is my primary practice area. Thanks and good luck.

Jeff James · Answer

@Craig Garrow, I primarily invest in certificates for the interest income.  I am a new investor and none of the liens that I have purchased have been redeemed to date.  Therefore, I have not received any checks yet.  The liens that I have bought are over the counter certificates in Florida so they are earning 18%.  If you go through other threads on BP you will find that some people advise against buying OTCs while others at least say they buy them.  I recognize that they are higher risk/less desirable than the certificates acquired at auction but I believe I took steps to mitigate the risks somewhat.  We shall see.  My crystal ball is in the shop.  Anyway I cannot make a tax deed application until a certificate is two years old and they don't expire until seven years from the date they were prepared so for the time being it is wait and see what happens.

Tax Liens - who can help me get started?

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