Tax Lien Investing in RI

[Alexis Mashaw-Williams]

Curious about tax lien investing. An online auction is being held late August and I have a few questions about it. I know it’s probably different by state so looking for people that have done it in Rhode Island only that I can ask some questions

[Anthony Thompson]

@Alexis Mashaw-Williams this has come up before too, if you want to search the forums for prior threads. Basically, there is some possibility for success but it's fairly complicated and there are risks. You need absolutely need to research and ask about fractional bidding/ownership before you bid, so I'd suggest asking your attorney to explain it.

For example, if you bid at less than 100%, which my understanding is very common in online auctions of this nature, you would be unable to get full ownership of the property after a year, but you would still have full co-liability with the owner, and either live with that liability or take out an insurance policy to protect yourself (which could be costly, as you won't be able to give the insurance company access to do an inspection).

There are also issues/difficulties with title insurance, prior and subsequent liens, etc. And you should really drive by anything you're thinking about bidding on, because the pictures on the assessor pages (and/or Google street view) are often several years out of date. It's quite possible that you bid on something that looks fine online, only to find out the building has been torn down or burned out - both have happened to me and I've lost money in the process.

If you're willing to put in the time, you can make a small return on a few thousand dollars, but you should understand the risks and it is one of the more advanced/legal intensive areas so again I'd recommend consulting an attorney on the risks because you can also lose money, possibly a lot if there is some kind of environmental problem on a property you bid on.

If you don't absolutely understand what you're bidding on and potentially getting, if you bid less than 100%, then IMO you should not bid at all.

I'll also say that RI Housing typically takes the cream off the top, in that they get first right of refusal to take owner occupied liens at 100% and they go after houses with equity. So the chances of ending up with a house after they're done taking the good ones are very small. This is absolutely intentional and 100% by design, to protect homeowners from investors like us; you can research the Madeline Walker bill to understand the history of it, if you want.