Tax Lien Information

[Franklyn Douglas III]

Hello everyone, I am located in Colorado Springs and interested in investing in tax liens. Online it says that the redemption period is 3 years. I am wondering if anyone has had any success with tax lien investing in Colorado.

[Will Sifert]

Quote from @Teri Feeney Styers:

@Franklyn Douglas III I have invested in tax liens in the past. Here is what is good: in Colorado they pay 9 points above the current US Federal Discount Rate (which is 5.5% right now) - so that would be an interest rate of 14%+. Here is what is bad: in most cases, when people realize their property has been sold in a tax lien sale they redeem (pay their property taxes) - so you may only earn that rate for a matter of a few months. Here is what is good: the county handles all the necessary paperwork and sends you a check. They also give you the option to buy the lien for subsequent years so that you stay in first priority (the whole process takes 3 years before the property is forfieted). Here is what is bad: only about 1% of properties actually end up in the hands of the lienholder. 99% redeem the property at some point. 

 You forgot the really really bad, Colorado is a premium bidding state and almost all tax sales will sell with a premium. The premium is not refunded and you don't make any interest on it. It's the cost to win the lien. So if the lien amount is $1000 and you bid and win it at $1,100.    You paid a $100 premium. You make 14% on 1K or 1.17% a month or $11.70 / month.    Say it redeems in 9 months, you make........... $5.30 profit.   $100 premium - $105.30 in interest.   You do the math if it redeems in 1 month  :(     You will LOSE money on lots of tax lien sales with premium bidding.   The people selling classes will just say "make 14% interest" but leave out the important details....