Another enjoyable podcast, thanks guys. However on tax liens, I want to mention some serious cautions. I'd welcome a counter-argument that this is a good place to invest. I spent a few months trying to invest in tax liens in NJ and Florida.
To net it out, in north and central NJ, on every one of 9 city auctions I visited, I had a handful of hedge funds completely price the liens out of reach of small investors. Not only were interest rates bid down to 0%, but the premium (over-and-above) paid, ranged from $25K to $150K. That is, you're paying a high multiple over the value of the tax lien, to have some small possibility in a few years that the entire property will default. I hear from those attending that this has driven average returns on tax liens to 6-9%, but that's for financial institutions with scale that can hire cheap labor to visit every site (which is a must to ensure the property is in good shape), go to the local assessor's office and look up all the liens, hold onto the lien for several years, administer the ongoing payments and any foreclosure proceedings, and run pretty sophisticated spreadsheets that estimate whether you're going to get 6% or 8% return, based on economic forecasts, etc. If you can't do all this, I don't think you're going to be competitive in Jersey liens. Even if you take all these steps, odds are you will lose most of your bids unless you pay aggressive top dollar and you've sunk the time in.
Florida has an online bidding process in many cases and you can bid on liens that didn't get assigned at initial auction. You'd still want someone to visit the properties. But the only ones available I could see were in large exurb plots where you could buy a lien on an green acre for a few $K, but noone was building anywhere near by.
Another BP member has told me that Georgia now also is swamped with hedge funds from NYC flying someone down to bid. They just hire someone inexpensively, tell them the max # and the person bids like a drone up to this number.
The other states with online auctions seem to have few if any attractive properties in the online inventory. Hedge funds are automating the analysis and capturing the returns across the country.
As intriguing as tax liens seem, I haven't found someone who has invested recently that says the returns are attractive. Most have told me don't bother getting into liens unless you have a big operation and money to play.
So, help!, I'd welcome someone's input that these investments are attractive and in which states.
