Rental Property Investor · Orlando, FL · Member since 2017 · 56 posts · 33 votes
This tax liens cycle, in Florida, I am considering giving bids on 1k+ properties tax liens certificate. Anyone done it here before and have advices to share?
For the past 2 years I purchased some certificates, very low scale, about 1 per county.
From my experience, every 30 bids I get one certificate. However you usually get the certificates worth $600ish. Which 5% on that is nearly nothing.
I figure that for one to make some money you need massive scale purchasing certificates.
Some napkin math: if I aim to make $3k this cycle I need need to buy about 100 of the $600 certificates, which means I need to bid on at least 3000 certificates.
Is this what people do to make money on tax liens? Any advices one can share here?
@Arthur Neves The tax certificates here have just never made any sense to me. As you know, they get bid down to 0.25%. Since you get a minimum of 5% over the Life of the Certificate it makes no sense. With many of these the certificate will expire worthless after 7 years, due to the process to send it to a tax deed auction, where the cost of paying off all the other certificates exceeds the value of the property.
@Arthur Neves The tax certificates here have just never made any sense to me. As you know, they get bid down to 0.25%. Since you get a minimum of 5% over the Life of the Certificate it makes no sense. With many of these the certificate will expire worthless after 7 years, due to the process to send it to a tax deed auction, where the cost of paying off all the other certificates exceeds the value of the property.
@Wayne Brooks you hit the core of my question. 5% in a few months is a very good return for some. Including me.
However it is very low that you need to scale massively. And that’s what I want to get advice on.
From my experience, I always got the certificate paid after a few months. But indeed that it is not the truth. What is the percentage of certificates that get paid after 1 or 2 years? Anyone has that data?
@Arthur Neves Yes I buy a lot of liens. I wouldn’t consider doing so in Fl for the reasons @Wayne Brooks Mentions.
I see lots of big money bidders jumping into tax lien investing and I don’t think they truly understand the risks involved. That is who we are competing with. I expect some hedge funds taking some heavy losses in the upcoming years.
The problem with tax liens is it can take years to realize your losses. You can think you are making solid money on interest, then you have losses that don’t show up for years when your lien expires.
@Ned Carey interesting. I think I dont fully understand what the consequences are, as all my liens folks paid back after a few months.
When you say "when your lien expires", you mean like @Wayne Brooks mentioned? they expire after 7 years and the property going to a deed auction, and nobody buying it, thus you would not re-coup your money?
My strategy so far has been only buying certificates of some type of property, for instance, Single-family homes, that are valued at more than 200k. The expectation there is that they will be paying the taxes at some point.
Also, before the 7 years, could I be the plaintiff and get the property myself?
@Arthur Neves You don’t become the “plaintiff”. If you want to collect your money, and send the property to tax auction...
You pay off all the other outstanding certificates, along with 18%/yr interest, plus fees, and it gets scheduled for a tax deed auction.
High bidder wins the property.
If it doesn’t sell for the amount of money you now have in it, the minimum bid, you get the property.....but if no one else wanted it for that price, you probably don’t either.
But if you stick to $200k plus properties, someone will redeem or pay it off.
@Arthur Neves in FL you don’t get the property as a lien holder. All you can do is force the property into a tax deed sale where you get paid out of the proceeds of the sale. If 5% is enough return for you than this will work most of the time. But as Wayne brooks says it is possible to lose money. For me 5% is not enough return.
In some states a lien can expire worthless in much less time. In Maryland liens expire in 2 years and many don’t redeem and the property may not be worth the taxes and cost.
If you buy a lot of liens as you suggest you will have some lossers and you need to calculate in the cost of that.
@Wayne Brooks you hit the core of my question. 5% in a few months is a very good return for some. Including me.
However it is very low that you need to scale massively. And that’s what I want to get advice on.
From my experience, I always got the certificate paid after a few months. But indeed that it is not the truth. What is the percentage of certificates that get paid after 1 or 2 years? Anyone has that data?
5% min is great if they redeem right away in the first couple months. Not good if they wait a couple years. I will never buy liens in a state where I wont get the deed when the redemption period expires. I am not going to bid against other people for the deed when I bought the lien.