Howdy @Bastian P.
These are all great questions and you are thinking in the right mindset. Please see my responses below in italics:
1) Lets assume I have a tax certificate and now want to get a tax deed for that property. If I understand this right, I first would have to buy any other outstanding tax certificates for that property, plus interest, before the process can start?
Yes, exactly. You will never want to go through this process as it's ridiculously time consuming (6-9 months before the auction actually takes place from when the deed application was filed) and will cost you more than your investment is worth. For example, in Pinellas County, when the clerk approves your application, you have less than 2 days to respond and pay any remaining recording fees which have to be done at the courthouse. If not done promptly, you risk your application being denied and the county keeps all your money.
2) From your experience, how much are the fees that come along with a tax deed sale? A rough ballpark would help me.
A good estimate is roughly $1,000 in addition to the past years taxes plus interest. There are recording fees, application fees, stamp fees, advertising fees.... you get the picture. I actually purchase expiring tax certificates from people who don't have the time, money, or will power to file for the tax deed.
3) I assume these fees would not be shared with the other tax certificate holders, i.e. the one who actually applies for the tax deed is the 'lucky one' who has to pay all the feeds. Yes? Or would the fees be covered / reimbursed from the sale price of the property?
By "shared" you mean split between the tax cert holders, correct? Whoever files for the tax deed has to pay 100% of the fees. The amount of the fees are public record and can be found in the tax deed court case documents. The good thing is, you will be reimbursed every penny you've paid once the auction is held for the deed (assuming someone bids on it). The minimum bid on a tax deed covers all your expenses.
4) I found tax certificates as low as 40 USD. Why could it make sense to buy such small amount tax certificates at all? Because the costs to get a tax deed would most likely be much higher. Maybe I am missing something.
I buy tax certificates and tax deeds and can tell you $40 liens are usually the sliver of land next to a power plant that even the alligators won't cross. It is very appealing, but you are better to bid on the $500+ certificates. The Brevard site (and many others in Florida) has a great search feature where you can pull a report on the certificates by how many previous years are still owed, if other certificates have previously been redeemed, and even what type of property (SFH, land, mobile, etc.). You can play around with this using common sense to determine which liens have the best chance of being redeemed. The $40 certificates are bought by people who have not educated themselves on the full process of tax lien investing unlike yourself. This is why so many certificates expire every year, because it is simply not worth applying for the deed.
Some notes to take away:
- Certificates less than $500 are usually vacant land. These can be good because there is less competition, but most likely no mortgage company to pay the taxes before they foreclose on the property.
- I recommend you find the Brevard Tax Deed Court document search online and look up a few from the most recent auctions. The case files will most likely show you a list of fees and other goodies. Best advice is to not buy certificates that may not be redeemed by using the Report/Search feature on the BidBrevard website.
- If you end up buying a certificate that does not redeem after 2 years, you can still hold it for another 5 before it expires. The interest will keep accumulating the same and hopefully someone after you will file for the deed and pay off your balance. Many times I get a check in the mail from a certificate being paid and it's from another investor (that bought a different year's certificate) that filed for the deed and had to pay my balance off.
- A neat bonus that usually isn't promoted is that no matter how soon a certificate is redeemed, the investor will get a minimum 5% return. Meaning if you buy a certificate in June and the homeowner pays their taxes in July, you would actually be paid 5% return on your investment, instead of the 1.5% (18%/12 months). My theory is that this is why all the hedge funds bid 0.25% on all the single family homes in hopes they will be redeemed within 5 months to actually get a 5% return.
- You can see an example from what I mentioned above by looking at the Brevard 2014 Tax Year certificate #8439 (account # 2812693). On 10/08/15, my company, Blue Coast Property Group, LLC bought an over the counter certificate (leftovers that no one bid on at the June auction and were assigned to the county for a full 18% interest to whoever wants it) for $250.63. The interest rate was 18%. The taxes were paid on 12/19/15 and we were sent a check for $263.16, yielding a 5% ROI for just 3 months. The annual yield on this technically ended up being 20% (2% more than the guaranteed rate) which is why tax liens are flippin awesome!
Hope this helps answer your questions. Cheers and happy bidding next month!
