Real estate tax lien funds
Hoboken, NJ · Member since 2015 · 14 posts · 4 votes
Hello BP Community, has anyone been able to find a trustworthy real estate tax lien fund that offers reasonable fees and transparency? If so, could you please recommend one to invest in? Thank you very much!
There is at least one more thread here about PIP. It was not positive as I recall. You might want to search.
I am skeptical of tax lien funds in general. Locally I have seen a lot of people that thought they were smart and they crashed and burned because the didn't understand the risk. I know how competitive the business is and I have seen some pretty bogus statements made by some of these funds.
and everyone else:
Please remember that using a third party does NOT mean you do not need to do your own due diligence. We buy tax liens and deeds from people when they no longer fit their investment strategy. A number of the folks we have talked to bought them on recommendation or from a listing group. While liens are a complex strategy and investment goals are different or changing, it doesn't hide the fact that someone relied on others to do the due diligence and wound up with a bunch of liens on properties (including vacant lots) in East St. Louis. They wont be redeemed and between the high taxes, high foreclosure costs and low values, winding up with the properties has no financial benefit. Anyone who claims they do any prior due diligence and still sold these liens as investable is either ignorant or nefarious.
There's a bunch of tax lien funds out there. I've met a few of them when standing in line to pay for liens in auctions in SC. The one caveat with most of them is that you have to be an accredited investor in order to put money to work with them, which means you have to earn more than 200k per year or have more than 1M in assets.
Huge funds:
- Magnolia Advisors - these guys focus on FL only and borrow heavily, they have access to cheap financing so they bid the interest down to low single digits on most liens (http://www.magnoliaadvisors.com)
- Tower Capital Management (they are backed by Fortress - a huge private equity firm, I've contacted them before but they are not accepting new funds (http://www.tcmfund.com)
- Alterna - they operate in more than 10 states, bundle the liens, and securitize them (http://alternacap.com)
Medium size funds (not pure play - these guys invest in tax liens but they also invest in other stuff):
- Kislak Organization (https://www.kislak.com)
- Broad River Capital (http://broadrivercap.com)
Small funds:
Comian Investment Group - Ms. Dougherty seems to know what she's doing - every once in a while she raises new funds, I believe in the size of $2.5M per fund. You can invest through an IRA into one of her funds. She doesn't have a website, but her presentations are available online: (http://taxlienlady.com/Comian/FactSheet.pdf) , (https://gem.godaddy.com/s/5032c7?o=fm). I've requested her PPM before - she charges 3.5% annually of all the assets and also collects 25% of any profit from the sale of properties. She doesn't take any profit from the interest income and passes that to investors.
Distressed Realty Fund - they are raising a $5M fund (Their PPM is public) - they promise a 1% per quarter dividend to investors. They also pay out an annual dividend of whatever profit they make minus 25% that they keep as their performance fee. They also take a 2% fee of all the assets as their management fee per year. (http://www.distressedrealtyfund.net)
Blueprint - These are young guys that operate in 3 states (SC, GA, TN) - they focus on technology to help them do due diligence quickly. Their fees are lower than others because they are new - I think they take 20% of profits (after all expenses) - regardless of whether they come from interest of sale of properties. They also have a threshold - if they don't earn their investors at least 8% IRR then they don't get any of that 20% fee. Their annual management fee is 1.5% of assets. (http://blueprint-ventures.com)
The whole tax lien market is about $15B per year, but I actually think smaller funds have the ability to get better returns than larger funds because they can be more selective and don't have the pressure to constantly put their money into something. If I was making $200k a year I'd probably go with one of the 3 above.