Investor · Folsom, CA · Member since 2010 · 85 posts · 9 votes
Have you ever sold for $15k or more a property that you acquired by foreclosing on tax lien certificate ? If so, please post the details (state, county, how much money you were into the deal before you sold it, etc.).
The reason I am asking is, I have acquired and sold several properties (all but one are houses) though tax lien certificates. All in Oklahoma county. But none of them sold for more than $15,000.
And I am wondering if it's worth continuing investing in them. I am not interested in the interest rates from TLCs. I get better deals through notes investing for less work. The only thing that would keep me in TLCs would be a reasonable prospect of acquiring a decent property. Not that I would consider a $15,000 property decent (I want at least $30,000 for a sale as is without any fixup). But I picked the $15,000 figure since I never even achieved that.
Let me add that you have to really not care about a property in Oklahoma County to let it sell that way. Taxes are low ((average tax on vacant and abandoned house was ~ $112 in 2012) and not much pressure from city to maintain, though that's soon to change.
I'm in liens mainly for the interest, so I won't be much help. It's rare to get a decent property via liens. Tax Deeds are much better, but they cost so much more up front because you're buying the property as opposed to paying the taxes and waiting for a redemption.
People do get improved properties from liens (not me), but it tends to be a numbers game. If only 2-5 percent of liens ever go to foreclosure, then you have to buying hundreds of liens each year. The better the property, the more likely it will be redeemed by the owner or other lien holder (mortgage, bank, etc)
Thank you all for your replies. I see nobody topping the $15,000 mark. Can you at least match my record: $13,750. Here is the picture of the house now:
it's now assessed at $47,507. It was assessed at over $40,000 when I sold it, but needed a lot of work. It was even assessed at over $40,000 when I bought the lien. I had assumed I could sell it for half the assessed value.
I've actually lost money on that deal. But less than $500, if you assume my time is worth zero.
On a related note, what software do you use to calculate the IRR of your TLC portfolio (including foreclosure costs and some post foreclosure cleanup) and/or your notes. That's one way to see which strategy provides you with a better return. I know how to calculate IRR in Excel by entering yearly cash flows, but not monthly. Would be nice also to have something that interfaces well with a good accounting software such as Quickbooks online or GnuCash so I don't have to enter the data twice. Right now, I don't know for sure if I got higher IRR from notes than TLCs. I suspect from notes, but don't know. Even if I knew for sure it was from notes, I would like to know how close the TLCs came.
Yes I regularly foreclose on tax lien properties and sell for both large and small amounts. I sell a lot of properties for $15K or less. If I am all in for $6K I figure that is a great deal. Sometimes I am in for $16K and I am simply hoping to recoup l some of my sunk costs.
I have also sold a number for upwards of $40K as Jerry K said it is a numbers game. But more important than the selling price is the profit. I have made decent money on inexpensive properties and made very little on some more expensive properties.
I have gotten properties already starting to collapse (sold for $10K and made a $1K) and properties that are virtually move in ready. good luck - Ned
Thanks Ned for sharing your experience. Wow ! So owners do let $40k properties go unredeemed. That's refreshing to know. That gives me hope of acquiring houses assessed at around $80k or so (assuming that such houses are worth around $40k as is).
I agree with you that the profit is more important. I picked on the sale price since that's an easier parameter to remember or even to calculate. I don't know yet how much profit I will have made on my 3 most profitable properties, since I sold them owner financing to the same buyer and, if he walks away without any more fixup, it may not be worth foreclosing on two of those mortgages (the first one I sold him, he is already done mostly rehabbing it).
Also, at the time of buying the lien, out of state and sight unseen, I can guess a sale price based on the assessed value better than I can guess profit. In states where the sale price is not bid up (like Arizona, where I started dabbling in TLCs again), sale price will correlate fairly well with profit. In your case, in Baltimore, you have a max bid parameter to worry about. So sale price doesn't correlate well with profit there.