This question is for anyone that can help, but looking for a response from @Ned Carey. What are the pros and cons to buying tax liens especially the ones that haven't been sold in auction. There seems to be quite a few that are sitting as low as $350, are these not worth the effort? I understand you won't get much interest with 1 2/3% they publish but it seems like after 6 months the house can be yours. Am I incorrect about this? And, what should you look for when finding a good buy when searching for tax liens?
Thanks in advance
They are done by county in MD and each county is a little different. For PG, you need to sign up for the online auction, otherwise the leftover is junk land.
Anything left over at this point is definitely junk. The owners aren't going redeem them, so you've put out money to participate in the auction and/or to purchase the property, and you're not going to get any money back out of them. They haven't been sold at the auction because they have no market value.
I've purchased a few Maryland tax liens, and I've made decent money for the amount invested, but I do better elsewhere. By the time you pay to register for the auction (in many counties), have the interest bid down at the auction, and then only have it invested for a few months, there are a lot of other ways to make money.
Very few houses actually end up being owned by the tax lien holder, because any mortgage company will pay off the lien in order to protect their interest. Not that it can't be done, but statistically, you would have to buy a lot of good liens to end up owning a house. You can increase your odds by buying liens on houses without mortgages, if you have the time and inclination to do that leg-work ahead of time on the 100s of houses you might possibly want to bid on.
Please feel free to correct me if I have anything wrong here. I'm not an expert; I've only participated in 2 or 3 sales. I just found it wasn't worth the hassle for me.
Thanks for all your responses it has been very helpful. @Kate Horrell in the auctions do most of the liens usually go for close to what the value of what the house is worth? And, how do you know which ones are the good buys? are they the ones that will be posted as getting foreclosed on?
What are you doing now that you enjoy doing instead of tax liens?
@David Taylor My very first two tax liens were leftover liens. I foreclosed on both of them and made a killing, $36K profit on one. However I have not had as profitable a tax lien deal since!
You can make money by going through to old tax liens however sometimes it can feel like a needle in a haystack. You have to know what the lien is on. The property is security for your lien. The property has to be worth enough so that if you foreclose You will clearly make money.
You might ask well what property isn't worth $350? Well a small parcel of land that is not large enough to do anything with. Or perhaps a house that is so run down the cost to repair it is more that the house would be worth. There are a ton of those leftover in Baltimore City.
Also you have costs to foreclose and once you do you have to catch up all the taxes to record your deed.
Regarding the house can be yours after 6 months; That is when you an START a foreclosure. The foreclosure itself will take another 6 months to a year.
Thanks Ned, that gives me a little more understanding on it. I just need to find out now on each listing if its on the land or the actual property. It shows mostly properties on the maryland website, but I need to do more research. Also, I read on some of these forums that when you purchase a lien and foreclose on a property that all you pay is the taxes and the loan is free and clear. Is this the case also or do you have to pay the existing loan?
I went thru the leftover list, lots of alleys and vacant lots. Didnt see much left that was worth anything
@David Taylor , the liens I've purchased were not sold for anything near their market value. I don't have the exact details, but I'd say they were a 25%-50% discount. The closer to fair market value you get, the more you've discounted the interest rate that you are receiving because you've put more of your own money into the deal.
I've actually been hoarding cash to buy my (relative) dream house. Now that has been completed, and we're doing renovations, I'm planning my strategy for after I have money again. (So far, purchase and renovations have been completely funded by profits from my SFR properties. I know, I should be putting that money back into more properties, but a family needs a place to live :)
@Ned Carey, thank you for sharing that there are successes out there. Do you remember what year(s) those were? It seems the market has gotten a lot more competitive over the years, but that just could be because online auctions make it easier to see who is buying.
On line auctions has really taken the fun out of the bizz... Especially in the tax SALE states. back in the day I am talking the 60's through mid 90's.. in CA. you had to do your homework. But we routinely bought 100 plus properties a year in our county. and made great returns on 90% of them... And some were stellar 10X 20X type deals..
But now with bid for assets handling many of the counties we worked.. people bid on line from all over the world and drive the prices right up to retail.
rarely if ever in our counties would there be a home or improvements on the properties maybe 1 or 2 homes a year tops.. the rest was land... And there are companies that specialize in buying these type of properties then selling them through marketing channels.
Its a big bizz in Riverside and San Bernardino counties.
I had the same experience you had with TAX certs I tried it once... the amount of work it took to really make any true money at it was far more than individual investors could normally do ( at least me with my 15 minutes attention span) plus having them bid down. It was funny I think I spent 10k I brought much more.. then quit when I realized I had no idea what I was buying I don't think I ever got one redemption.. So just a 10k learning experience for the old experience bucket.
Now I did see folks in the room working as teams with their laptops spending 100'
s of thousands of dollars so I am sure if you run it like a full blown bizz you can do well and certainly in those tax cert states end up with some homes... but like many said most of them are bombed out... I know as a lender I have let a few of my homes go to tax's and just took the overages as I did not think there was any value taking the asset.. I did more of those than I would like to admit.. But man when those neighborhoods turn to ghettos your screwed... Unless some TK company comes in and starts scooping them up to sell them to OUt of area investors who do not know any better..
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