A question that pops up a lot in the Tax Lien threads "Why not just concentrate on Over the Counter (County Held) liens?" Seems simple enough. In most counties that offer them, you get the highest rate return and you have no auction with competitors.
Some counties, based on the statutes and sheer number of liens that are never sold - it makes sense. For the counties where I usually invest (AZ & FL), and because they use online auctions with plenty of bidders - only the junk is leftover. So OTC liens are not usually worth the time it takes to find the needles in the haystack.
To prove my statement, I wrote a blog post on my BP blog where I randomly pick 3 liens that nobody bid on, from the recently completed online auction of tax liens. I do a high level look to see what types of property are underlying those liens.
Of course, it didn't turn out as planned. I would have made a horrible lawyer. Never ask a question unless you already know the answer! I could have not published the blog post, or picked a different lien to prove my point, but I figured, it may be a good lesson to show that maybe you can get lucky - and also teach myself a lesson too. Don't make blanket statements hastily. But I'll say this, a sample size of 3 is too small to draw definitive conclusions.
With that, if you want to read about me eating a little crow, here is the link to the blog post.
I went to a tax lien sale for Nassau County NY Friday and in the couple of hours I was there, only three properties were taken back by the County. Considering some propertoes were bid down to an Internet rate of .25% made me wonder what was wrong with them.
@Jerry K. my most profitable tax lien was the first one I bought which was a Leftover. I made $36K in about 2 years on an original lien of about $3K
Guess I will follow up on those liens now.
I have had good success with Jones Act Tax Sales in New Jersey (it is its own unique beast in NJ OTC liens) but it is much more intensive and tougher to find deals.
This post has been removed.
Over the counter liens (not all counties and states call them that), are a great way to get the most interest on a property tax lien. You want to watch the date of the auction and hit the listing of what did not sell as soon as it comes out to get the best pick of what is available. You can utilize an auction calendar as a focus point. Knowing what's coming up gives you a time frame for when to approach a specific state or county for a listing of over the counter tax liens. It is easy to continue following that same pattern each year as the auctions come and go.
Once an auction has taken place, an over the counter listing will be available within 2-3 weeks providing there are some. You may even begin to feel comfortable enough to participate in an auction and be successful with a few less points, with more to choose from with the first time listings. These are a few of the things discovered along the way with investing strategies put to the test. There are many other states as well as FL and AZ that have good over the counter listings and because the interest rate is a little lower there may be more to choose from. Most people go for the higher interest rates making the competition very stiff. If you are willing to work with a little less interest you may end up with better listings of tax liens and do very well with your over the counter purchases. You can even structure your investing towards tax liens that are foreclosure ready like we do! Worst case scenario after going through the foreclosure process is that you get your money back with interest, which really isn't so bad after all. At times I get so excited about possible property ownership that when the redemption comes I am sad even though I've just made money. :) Then there are times when I have acquired the property and I know I can do more with a possible fix and flip or a cash flow from renting. Once you have decided what your goal is, either acquiring the property or getting a rate of return on your investment you can utilize different strategies to insure a greater chance of the outcome.
The answer to this is going to revolve heavily around the size of your portfolio and how much time you intend to spend on each dollar you deploy.
In my opinion they are worth a look. I have purchased six such certificates in Florida and will likely purchase more in the future. I am more inclined to want the interest than the property so I look for owner/occupied properties with a history of past redemptions and liens that are about to expire so there is a likelihood that the owner of that certificate may begin foreclosure so that he or she does not lose his or her investment and I will be bought out at that point. I have made all of these purchases within the last several months so none of the certificates have been redeemed. So we will eventually see whether my strategy will work as anticipated. If not they were all low dollar investments and I will live to fight another day.
Jeff, that plan works. Been doing it for a number of years. Just got a check in the mail from a cert in Brevard, had it for 18 months at 18% annual. ;)
It's my middle of the road strategy for tax certificate investing
Hi @James Mikel - so I know this is an older thread - but hopefully you might still be interested in shedding light. So this is Brevard, Florida. So the 18% Lien you got, that was from a lean with a property on it? And other than the normal due diligence, like making sure there wasn't a nuclear waste dump in the yard was that all that needed to be done to then go ahead and purchase this? I noticed on the Florida websites they will put a Primary Residence tag on there letting you know I guess someone considers it that - which kicks in those special Florida rules, but that doesn't seem like a big deal. I guess in summary - was there a particular GOTCHA you had to eliminate for this Lien - or is there too many to list? Anyway inside is appreciated as I am learning...Thanks!
Hey Steven. Aside from the due diligence there is no big gotcha to eliminate, at least not in Florida tax lien investing.
I have published pages on Florida tax lien investing you can google my name for more info.
You must be a BiggerPockets member to post on the forums
Join the world's largest, most open Real Estate Investing Community online, 100% free forever!