More Questions About Tax Liens and Tax Deeds
Even though I bought an over-priced training program over 2 years ago I've had positive experiences with my tax lien investing. In fact, every single tax lien has paid me back with at least a 17.5% interest. I received my investment back several times.
My tax lien investing centered in Florida - mainly because the Florida counties were selling their tax certificates right when I learned about this strategy. Plus Florida has a significant on-line presence for obtaining tax certificates.
I had money in 2008 and played in the tax certificate auctions. Yes I was nervous. I was really nervous when I discovered one of the certificates were taxes due on a boat slip. Dang, a boat slip? Luckily this certificate was redeemed within a month. Whew!
There were 2 other tax certificates I bought, with the intention of bringing them to foreclosure should they not be redeemed. One was a little house in Sebring Fl, and the other a property ONE THE WATER in Key Largo. Talk about salivating!
If you're not familiar with tax certificates from Florida, I'll give you a quick rundown. If you own a certificate for 22 months, you have the ability to bring the property to a foreclosure auction buy paying off all the other years liens and a fee to the county. If nobody else bids on that tax deed, then by default the property is yours.
What are the risks?
There are risks and don't let any guru say there aren't. I'm fortunate that all my tax certificate investments have paid off at high interest rates. Here are some of the issues to avoid:
- Contaminated soil - You can buy the certificate but nobody wants the property. The certificate expires after 7 years and you will have lost your investment
- Condominiums - A still unresolved issue in Florida, yet still on the side of the County's and the County's investors - the COA may make you pay for the previous owners arrears. Luckily most judges know they're paycheck comes from the County, and they know the County needs to depend on tax certificate funds to operate. It won't take long to resolve this issue but you may have a legal dispute on your hands in the mean time.
- What is land today may be underwater tomorrow - make sure you're not buying swampland
- If you really want a property...I mean really want to secure the property at the end of the 22 months and are willing to forgo the 18% interest rate - bid .05%. That is the lowest bid and you will most likely win (unless there is a tie). The up-side from this is that there is always a 5% penalty. In the end, regardless of your low bid, you will get at least a 5% annualized return on your money.
WARNING - there are more risks when purchasing Tax Deeds, which will be another post.
I welcome your feedback and your experiences!
Comments (2)
Good point on that .05% strategy - I'd rather earn 17-18% anyway. I've looked into Texas but haven't bought any. My area in Austin has pretty slim pickin's.
Jean Norton, over 13 years ago
Great summary of Florida tax certificates! There really are alot of risks in buying tax liens. I would point out that if you bid down to .05% on Florida properties, you're 99.9% likely never to get the property. Those certificates are bid down to that rate because they are so well secured and will most likely redeem in a few months. I saw you're from Texas. Any experience buying tax deeds there?
Jon Fadil, over 13 years ago