Wassup with Tax Liens? Good cash, or is it slow and steady wins....

14 Replies

Been researching this, too.  I see different states have tax lien laws regarding redemption.  Is this something I can invest in - like Texas or Florida and get properties because of short redemption periods?  How much would I need, and how long before I can get title?

And can I bid virtually on taxes in other states?  Sorry for all the questions.  I love this stuff...

Yes you can bid out of state. Many auctions are online Grant street group is on online company that hosts county auctions. 

Yes all states have different rules and it is important to understand them because they can make a tremendous difference in the strategy you choose and how you bid.

From your post it is apparent you goal is to get properties as opposed to interest. In MD right now it takes 1 year to 1 1/2 years to acquire a property from the auction date. However MD is considering changing from 6 months to 1 year the time before you can start a foreclosure.  

The tax lien business is for patient people. You have no idea when you lien will pay off or a foreclosure will be complete. However now that I have a full pipeline of liens I regularly get foreclosures all year long.

You can start with a very modest amount of money.  My first lien was about $2500 and I foreclose and made $36K. Home run on my first deal. That is the most I have made on any deal so far.  Here is a post on Two members here that put up $500 each to buy their first lien and it was a winner.

http://www.biggerpockets.com/forums/223/topics/161...

Medium crab1 copyNed Carey, Crab Properties LLC | http://baltimorerealestateinvestingblog.com/

Thanks, Ned.  I'm not totally opposed to the interest to be gained, but it would seem there's more profit in acquiring the property and then selling it.  Does it always take a year to foreclose? Is it possible to bid on properties at the end of their redemption period or is that more expensive?

One last thing is there an average foreclosure cost to gain full title?

Does anyone know the tax lien process in Texas or Ca?   

@David Manfre  

  CA is a tax deed state you buy at auction just like a Foreclosure auction.. cash and carry. no redemntion period you buy it you own it... title insurance can be an issue if you don't know how to go about it or your not a regular customer.

Medium ksqoekox 400x400Jay Hinrichs, TurnKey-Reviews.com | Podcast Guest on Show #222

Thank you for starting this thread.

Is there another thread that may speak to tax liens in more general terms, as opposed to state specific?  I'm looking to get a broad education of the system before looking into how it works in any specific state(s).

Thank you, 

Loren Limatoc

Miles-  have you purchased Tax Deeds in Texas?   If so do you recommend for someone who is okay with tieing up funds for awhile?   Pros?  Cons? 

Tax deliquent properties are auctioned by the county at a constable sale.  The winning bidder gets a tax deed, not a lien.  However the original owner can "redeem" the proprty by paying the new owner (auction winner) the bid amount plus a penalty. The redemption period for non-homestead and non-agricultural is six- months. Otherwise it is two years.  The penalty is 25%. As far as I am aware all TX auctions are live, on the first non-holiday Tuesday of the Month - nothing on line.

Search Arnie Abramson in the Bigger Pockets forums for more info on TX tax auctions.

Originally posted by @Loren Limatoc :

Thank you for starting this thread.

Is there another thread that may speak to tax liens in more general terms, as opposed to state specific?  I'm looking to get a broad education of the system before looking into how it works in any specific state(s).

Thank you, 

Loren Limatoc

 There are many threads on tax liens. Myself @Jerry K. and @Tom Yung write about them a lot. Search the site and you will find a lot about tax liens. 

In general you buy a tax lien at an auction. Sometimes you are bidding what you will pay for the property if you foreclose on it. Sometimes you are bidding what the interest rate is, Sometimes both. 

Once you have the lien, you have no ownership in the property. You only have a lien against it. If and when the owners pays bac kthe taxes you get you money and interest back. If the owner does not pay, then you can foreclose and take the house. When a foreclosure is complete you own the property and any other liens and mortgages are wiped out.

This is the simple version and the specific rules vary by state and some states may deviate from what I just said.

Medium crab1 copyNed Carey, Crab Properties LLC | http://baltimorerealestateinvestingblog.com/

Originally posted by @Miles Presha :

Thanks, Ned.  I'm not totally opposed to the interest to be gained, but it would seem there's more profit in acquiring the property and then selling it.

 That is my strategy. I realized that the interest I got just didn't add up to much. When a property redeems after two weeks and I get a check with $5 interest, well that just doesn't move the needle much. 

Does it always take a year to foreclose?

that will depend on the state As @Jay Hinrichs says CA is a tax deed state and you own the property the day you buy it.  In MD I have had foreclosures take as little as 2 months and as long as three years. It depends on how many people need to be served. How hard are they to serve? Is there any contest to the suit? Does the court throw it back for some technicality? 

Is it possible to bid on properties at the end of their redemption period or is that more expensive?

The timeline isn't just because of the redemption period it is because of the length of the foreclosure process. Most liens are bought at auction. Usually that is once a year. 

Some areas sell liens "over the counter" ("Leftover" liens in Baltimore). This means liens that got no bids in the auction. You can buy them at face value any time. In MD for example you  could buy a leftover lien 6 months after the auction and start foreclosure right away. 

Keep in mind the vast majority of leftover liens were not bid on because they were junk. Finding good leftover liens can be looking for the needle in the haystack. But my most profitable lien to date was a leftover.

One last thing is there an average foreclosure cost to gain full title?

In MD it is about $2500 to $3000 for the legal work. You also have to catch up any taxes that have come up since you bought the lien in order to record your deed. It is typical for me to buy a $2000 lien and need to sell the property for $8-10K to brake even.

Medium crab1 copyNed Carey, Crab Properties LLC | http://baltimorerealestateinvestingblog.com/

Originally posted by @Miles Presha :

Thanks, Ned.  I'm not totally opposed to the interest to be gained, but it would seem there's more profit in acquiring the property and then selling it.  Does it always take a year to foreclose? Is it possible to bid on properties at the end of their redemption period or is that more expensive?

One last thing is there an average foreclosure cost to gain full title?

As @Ned Carey   Carey had suggested , investing in tax lien/deed is state specific & also depends entirely on your decision(interest or property). your decision will change your course of bidding at what criteria & which state.

Half of the states are lien states & the other half deed states. with around 6 of them being hybrid, redeemable deed state, meaning they have a redemption period. As @Karl James stated TX being one. 

In TX, instead of interest, they have penalty of  25% for the first year.

In the last 2 year or so, most tax deed properties has been bid up close to retail. A lot of these tax deed properties had been neglected for years. So in a lot of cases. I will run with 25% penalty anytime than owing the property. 

It may be very true in some case it is better to have the property instead of the interest, so you have to figure in rehab, holding cost, legal cost on each bid. Also plan you exit strategy ahead whether to hold or flip.So you know what is the maximum allowable you can bid on them.

Some company & individual sell their lien on the secondary market close to redemption, because the lien owner just want the interest, not the property.

If you read more Ned's post on BP. He is what you described in you post.

Good cash, slow & steady wins. Check out his site under his signature.

Also @Jerry K. post on AZ tax lien sale. AZ has their every February. Jerry provide very detail breakdown on each category of properties, a must to read for AZ lien bidders.

FL lien usually get bid down to .25%, they do have a minimum of 5% if the owner redeems. It is coming up in May.

Quiet title & barment cost around $4300 in GA.

Tony Martin (US Tax Lien Assoc.) is pitching:

1) You'll earn a guaranteed fixed rate of return of 16% to 24% interest per year.

Or...

2) You'll receive the deed to a valuable property 100% free and clear with no mortgage for about 5 to 10 cents on the dollar.

But I doubt its that simple.

@Mark Esposito  

  I tried tax certs one time one day.. dropped 10k and left.. not sure I ever got redeemed and lost interest and never really followed up...

I have bought hundreds of tax deed's though I CA.. and I like that...

Certs and perfecting title is a lot of work... and a certain expertise is needed , along with stick to it ness ( which I tend to fad ) and follow through.. interest rates are paid but they are also bid down in many markets.

Its just like anything in RE it can be done , it is done , some are wildly successful, and others go half way and never do much.. I went to my first seminar on tax lien investing I think in 1988... nothing has changed.

Medium ksqoekox 400x400Jay Hinrichs, TurnKey-Reviews.com | Podcast Guest on Show #222