Anyone know the Illinois Tax Lien game, rules and procedures?

Question

Someone at our REIA meeting today was pitching a connection/service for Illinois Tax Liens, which supposedly pay 36%.  With great restraint, I didn't call BS since I don't know the actual process, but I'm sure it ain't that simple.  Someone please school us.

James Bitakis · Answer

In Illinois, it is 18% if redeemed in the 1rst 6 months. Another 18% if redeemed in month 7-12. So yes, if you won it for 18% and the owner redeemed in month 7-12, you'd get your investment back plus 36%.

Wayne Brooks · Answer

Nope, I don't buy tax certificates.  Don't like the yields, and you usually have to pony up 2 to 3 times your investment to send it to auction, 2-5 years later, if it isn't redeemed.  For those yields, I'd rather just have it available for other things.

Ronald Perich · Answer

@Wayne Brooks Do you do any Lien investing? I'm just curious if it works well for you. Most of the properties around here go for 1%, which is still better than a bank. But if I can get at 2 or 3%, and it doubles every six months after that, I don't see the negatives other than tied up money.

Wayne Brooks · Answer

Nope, rate remains fixed.  If you get one at 18% here, it's because you screwed up.  The property isn't worth the taxes, and the other certificates you have to redeem, to send it to auction.

Ronald Perich · Answer

@Wayne Brooks You are welcome. I should mention that there are scavenger tax sales as well. Those have been delinquent for at least two years.

So does the rate go up every six months in Florida, too? If I bid 1% and win at auction, I get

1% if redeemed in the first six months;

2% if redeemed within 12 months

3% if redeemed within 18 months

4% in 24 months

and 5% if redeemed in 26 months

Imagine if you get it at 18%???

Wayne Brooks · Answer

As I sort of figured.  The "max" rate here is 18%, but the same scenario where the rate gets bid.  Average rates this year I think we're 2-4%.  There is a "total" 5% guaranteed, but it could still be years to collect.

Thanks @Ronald Perich

Ronald Perich · Answer

Not quite BS, but also not completely true. The average purchase rate is 1-4%.

Illinois uses an auction system in every county. The starting bid is 18% for a six month period. The bids go down until someone wins. The really interesting part of the rates

Most of the counties use an automated system for the bidding process, but some still use a verbal system. Where I live in Illinois, our former county treasurer was sent to prison for his role in fixing the auctions.

What's really interesting is how the interest rates change over time. They can go up significantly over time.