Looking for tax lien opportunities "on the cheap"

Tax Liens & Mortgage Notes
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Looking for tax lien opportunities "on the cheap"

Damon R.
Herndon, VA · Member since 2016 · 11 posts · 3 votes

Hello. BP community, I'm new to this and RE investing in general and looking to start out with tax liens. While I understand the basic principles, processes, and benefits and have done some research, I'm really interested in your stories, strategies, and advice on choosing the right places to look, what to zero in on etc, beyond the "pick a county... dive in... the state with the best % ROI.... it depends...." etc

I know that "on the cheap" sounds like  a loaded term, (just like "best bang for your buck") and is relative to the amount of resources, risk willing to take, and effort...(i.e I'm willing to do the work and troll lists if necessary.....) and  I'm aware that personal preferences and goals are ultimate determinants, but I'm just curious to hear perspectives on the "where" &  "why"  from a practical sense in choosing a state (tax lien), area, location, type of asset, etc and what constitutes the best (ideal) win-win situation in terms of time, money and effort spent in those cases. THX

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y

@Deborah Hardin  those are the numbers my Dad did in the 60's and 70s.. we bought lots for 50 to 200 bucks and sold them for 2000 to 10000.. mostly on contract... in those days though we could buy 250 or so at one sale.  100k went a long way LOL...  Oh the land game brings back fond memories

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    highly competitive  endevour in the popular tax lien venues... its a mad house many times.

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  • Damon R.
    OP
    Herndon, VA · Member since 2016 · 11 posts · 3 votes
    10y

    @Jay Hinrichs Iv'e read that in areas with the best, deals, assets and % ROI, the "little guy" othen gets crowded out by big REI banks, firms, savvy and the like. Many suggest avoiding auctions alltogether and look for OTC deals after the storm blows over and the sharks have left.... my question is ...where can a newbie dip into the pond without getting pushed out and left picking through the scraps?

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  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    10y

    I started in Baltimore City and still invest there. I bought two "leftover" liens that no one bid on at the auction. Both were boarded up properties. I was able to foreclose on both and both turned into home runs.  - Beginners luck.  I was also fortunate that was when the market was heating up and I was buying on the fringe of good areas.

    Since you are willing to do the work, look for the sketchiest and riskiest areas. Then do the hard work of driving those areas and picking out the best of the liens available. This doesn't mean Google Street view, it means getting out of your car and looking at the back as well as the front of the house. It means looking in the windows of vacant houses or talking to neighbors.

    This doesn't work in the nice areas because everyone bids high in the nice areas. But in the areas that sometimes get overlooked, you can reduce your risk by knowing the properties better than any one else..

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  • Damon R.
    OP
    Herndon, VA · Member since 2016 · 11 posts · 3 votes
    10y

    Thanks @Ned Carey As I mentioned I'm not afraid of the work.. that being said I've read many wacky stories about picking up "sight unseen properties" and OTC deals  for pennies on the dollar...  or throw away, unwanted vacation plots for $25. do these magical unicorns REALLY exist or are they just guru lies.... ( PS: I probably already know the answer... If its too good to be true..... LOL 

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  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    10y

    @Damon R. I can tell you lots of stories of deals that are "to good to be true" as I am sure @Jay Hinrichs can. We can also tell you about some serious money losers too. The Gurus always talk about the exceptional deal but rarely about the losers. 

    I don;t like the ideal of sight unseen properties but I invest in Baltimore where "sight unseen" might mean no rear wall or an empty lot assessed as if it still has a house on it. 

    Land can be a great way to make money -with or without tax sale.  Land is harder to value because you have to know what you can do with it. Zoning  and environmental concerns greatly affect value. But if you are buying cheaply enough in tax sale you don't need to know everything about the land. You only need to know you are buying so cheaply that someone else will pay more at auction.

    PS: the story I told about the first two leftover liens was a "too good to be true  story." I  bought two left over liens for less than $5000 total.  I eventually sold those two about 2 years later for over $50,000 profit.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Damon R.@Ned Carey   we go to that same old adage in most of this stuff   ( It depends) what this depends on is the states your working in.

    I cut my teeth in CA tax sales and as such it was ALL land and lots.. I am not sure we ever bought one house and the counties we worked ( North SF BAY Counties) its was extremely rare that a improved parcel with a SFR or any other improvements ever made it to tax sale.. Now again this is tax sale not liens..

    So in your Lien states you can get lucky ( but of course the harder you work the luckier you seem to get) and pull off those deals on houses that fell through the crack... It can certainly happen

    Its a job though in my mind I was going to get into liens in MS  I took a few hundred grand to a sale to try it out.. and left after spending 5k .. the velocity of the sale in that state and the good ole boys and the experts with their lap tops and really new the game ... It did not take me long to realize I was totally out of my depth and this was a waste of time.. I don't even recall if I got the 5k back or I just lost it.. probably lost it.   The other thing I realized was the bidders were bidding down the rate of return paying premium.

    So I suppose over the counter would work or get set up in a city and really understand it like Ned does either way its a job.. to be successful in my mind and from my perspective personally I look at anything real estate related as something to scale and go big with.. others may be fine investing in a few liens and see what they get to me waste of time for too little money.

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  • Damon R.
    OP
    Herndon, VA · Member since 2016 · 11 posts · 3 votes
    10y

    @Ned Carey and @Jay Hinrichs  thanks for your inputs and congrats on your successes.  If I might ask, I'd be interested in hearing  exactly how you came about your discoveries -  Was it a targeted needle in the hay search; throwing darts at the map/county; a blind swing with the piñata or dumpster diving at the auction ?  what was  your  methodology, line of thinking  or strategy in staking out the ground so to speak when you started….. if you don't mind sharing…….(without divulging too many trade secrets ….LOL )  

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    that was my one swing at tax Lien investing..  I have no further interest in it.. personally.

    Tax Deed and sales I am still quite active but this is just like following vanilla courthouse steps foreclosures.. they happen once or twice a year its cash and carry.. so you can be more organized etc.  

    to compete with the big boys in the Lien business is not something as stated that I care to do..

    and on a individual level I guess what I would do is if these liens are in your state or city.. I would get to know my area like the back of my hand so you could just look at address's and weed out the ones that are bad right away and concentrate on one's you want.. and then you can be aggressive on those.

    what happened in MS was that is was moving SO fast that there was really no time to really focus on a single property.. they have to sell thousands of these so they just blast through them

    Tax deed and now with Bid for assets taking on many counties auction process its a true auction that gives you some time to see if you want to bid up.

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  • Damon R.
    OP
    Herndon, VA · Member since 2016 · 11 posts · 3 votes
    10y

    @Ned Carey  BTW FWIW- in reference to pursuing out of state. sight unseen, I've heard of a least one instance where an investor used a company called WeGoLook, where you pay local people to run errands for you in places not immediately accessible  or convenient.  In this case the runner went to the property with detailed & specific instructions ( i.e  take pictures, ask questions, accompany the inspector, etc) and reported back.  I'm not sure if such an approach is the most prudent in terms of proper due diligence …but I guess there are always those who will come up with creative ways to streamline their efforts...and wallet    lol

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  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    10y

    @Damon R.

    I first learned about then in a CD program and then the first REI course I took included a segment on tax liens. I had heard about over the counter, or leftover tax liens so I went Baltimore city and bought a list. I looked through Many many hundreds of liens to find the two I thought worth buying. After that I started participating in the auctions and learned over time. I learn something new every year. And every year the best auction strategy is a little different.

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  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    10y

    @Damon R. at least tow of my main competitors in Baltimore use other people to go out and look at the properties and take pictures.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Damon R.  @Ned Carey  Ned can correct me.. but I don't think the go look is feasible at all.

    you get a massive list and you never know exactly which ones are going to be avalaible on auction days.

    Unless this list Ned is talking about is avalaible inventory... that they are holding until someone buys them.. that would be different. but I suspect that you need to look at 100's of properties to pluck out a few that you would actually like.. so not feasible to pay someone to go do this unless this is your business

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  • Deborah Hardin
    Attorney · Cabot, AR · Member since 2016 · 130 posts · 39 votes
    10y

    I have seen quite a few tax deed properties purchased in Arkansas, for crazy low prices and immediately sold for a nice profit.  I've also seen tax deed properties purchased sight un-seen, only to later discover that there is no longer a house there.  

    You just have to be absolutely sure that you know what you are getting.  

    One of my clients recently purchased a lot for $50, and turned around and sold it for $8,000, before he even received his deed from the Commissioner. I doubt he spent more than two hours on that deal.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Deborah Hardin  those are the numbers my Dad did in the 60's and 70s.. we bought lots for 50 to 200 bucks and sold them for 2000 to 10000.. mostly on contract... in those days though we could buy 250 or so at one sale.  100k went a long way LOL...  Oh the land game brings back fond memories

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  • Damon R.
    OP
    Herndon, VA · Member since 2016 · 11 posts · 3 votes
    10y

    I see your point. @Jay Hinrichs however I was referring to after you've zeroed in on a target as part of the DD process, the problem I see is if you've missed something for your spotter to ask/do, reliablity /knowledge / trust worthiness of job, etc I'm not sure if would be worth the extra fee(s) ( multiple visits, etc) to not have your own   eyes on ... execpt in thoses rare instances where it would be near impossible, time and/or cost prohibitive to do a sight visit  ( re:  out- of-state or sight unseen) I guess for me  It would have to be one of those "too good to be true" type of deals we've talked about: 1: 1 million lol

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  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    10y

    @Jay Hinrichs @Damon R. 

    It is not in many areas, it is both feasible and important in others. Keep in  mind I work in Baltimore City. I look at 6-8,000 properties before the sale each year. Probably 2/3 of them don't even make it to the sale.  Baltimore's list starts at about 25,000 and about 10,000 wind up actually going to auction. 

    I think my competitors pay $1-2 per property to look and evaluate. I saw someone from my area post an ad here offering to do it for $50.00 per property.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Ned Carey  that's awesome..it must take some serious logistics to operate there.. out of all that what is your target number per sale. how many Liens would bought would you consider a successful sale?

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  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    10y

    @Jay Hinrichs Out of the 6-8,000 we look at  we bid on about 2,000 and win about 4-500 liens. We have been foreclosing on about 15% of them and that is where our profit comes from - foreclosures. Since we borrow to buy the liens we really don't make any money on the interest.

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