Return in Tax Lien Certificates

[Luc M.]

So, let's say you have an amount of money sufficient that you can buy a nice diversified portfolio of tax liens in a handful of states (live and online bidding Counties). What do you think the return potential would be over a 5 to 10 year horizon?

I would think the majority of the certificates get redeemed but you would have 2-4% that you would need to foreclose on. Several of those that you foreclose on turn out to be a PITA due to someone filing bankruptcy, a mortgage holder challenging you and forcing you to spend money in court to protect your claim, etc. I would think that you would be able to get a gross return of 10-12% but then your net reurn could be 7-8% due to the costs associated with the problem childs.

Does anyone have any real world experience in what is possible with a large portfolio of tax liens over a longer time horizon?

Thanks,
Luc

[Ned Carey]

I know a lot of people do it but I do not recommend investing out of state. The laws vary considerably. Not knowing the specific laws can cost you a good amount of money. On the other hand knowing MD tax sale law very well has served me extremely well on a lot of deals. Early this year I was able to make a $58K wholesale fee and save $15k on taxes because I knew MD tax lien law better than any of the other players.

Also if you do not know a specific market very well you may not have a good idea of how assessments relate to the properties true value. This can make wise bids tough to do. There is also the risk of a building being dilapidated and you don't have the ability to inspect it if it is out of state.

My off the cuff guess would be 7-10% should be attainable.

I did MUCH better than that 5-7 years ago because I mad a killing on some properties I was able to foreclose on. Lately I have walked away from liens because the property wasn't worth the cost to acquire in a dropping market.

Today, especially in some areas with high vacancy and foreclosure rates you may be able to pick up nice homes because the owner has walked and the bank is asleep.

I am starting to inspect properties now for the May Baltimore City sale.

Good Luck,

Ned