Tax Liens VS 1st Position Notes

[Martin Sterling]

Recently I had a conversation with someone who was saying that tax lien investing is safer and more lucrative than Note investing. That tends to not be my understanding since I've been studying and networking with people who are into notes. I wanted to know the BP position on this.

Specifically, when the note strategy is 1st position with clear title, 40-50% discount, from UPB or FMV (verified by BPO) whichever lower, 12 month foreclosure state, owner occupied. You immediate foreclose, then set up a forebearance if borrower responds. If not, take ownership and sell to local investor.

How does a tax lien compare to that?

Thanks in advance.

[Bill Gulley]

Not very well IMO, state law dictates redemption rights on tax liens and the interest that can be charged, 10% here, then you have a waiting period to obtain a deed if the tax payer can't pay, chance are often good that they do redeem the property. 

From a security stand point, tax liens can be "super liens" coming before voluntary liens. Super liens might be child support, taxes, labor liens, court orders as judicial liens under state law can take priority over liens made voluntarily, like mortgage liens. 

I've played that game, 3 out or 3, owner redeemed and I got 10% interest on the money for my time and effort. Notes are more stable investments, just clear the liens if necessary. :)