High Value Property Investing

[Jonathan Cover]

I was recently at a tax auction in SC and almost all of the properties with taxable values of over 75k sold at between 70% and 125% of their tax values regardless of the taxes due and the interest earned. Often the expected interest return minus the deed stamp cost was less than 1% if the property is redeemed. This happened hundreds of times throughout the day with many bidders willing to bid 40-90x of the taxes. This county historically has an 85% redemption rate so hoping to get the property is a bit of a long shot and doesn't make much sense if you're winning dozens of properties.

How do investors like this make any money? They surely aren't doing it for the interest rates if the deeds are redeemed. Confused and curious about this.

[Josh Carr]

South Carolina has what I call over the counter liens which at this point are forfeited and have a much better pricing range.  Try the forfeited lands commission and see what you can find.  You will get a listing of the properties,  you may have to contact the county, and at this point your listing would be considered tax deeds and you can purchase them for the price of the back taxes.  The thing is, you won't have all of the properties to choose from but you just need one good one to start.   

[Josh Carr]

Here is a listing of properties in Greenville South Carolina as an example of the previous post above:

http://www.greenvillecounty.org/county_treasurer/p...

[Jonathan Cover]

Josh,

Thanks for your response. While that is certainly interesting, it doesn't really address my question which is how are these bidders able to make money on properties with their bidding strategy of bidding 50-100x the outstanding taxes.

[Jonathan Cover]

I also did some checking with tax office personnel about who the bidders were and they said that they are banks nine times out of ten. If that's so, than perhaps their cost of funds is low enough to warrant such aggressive bidding. Anyone else have any other ideas as to what these bidders' strategies are?

[John Coleman]

I was going to go to the tax sale yesterday in Greenville but wasn't able to make it. Are you saying bidders were paying $90,000 for a $1,000 tax lean?

If that's the case I'm happy I didn't show up. How did vacant land trade?

[Jonathan Cover]

Yes, they were bidding that aggressively in many cases if the collateral was sufficient.

Vacant land basically didn't trade or went for 1-2x of tax value. No one wanted to touch it. Lots and lots of "no sales".

[Tabitha Cooper]

Jonathan, 

Please check this page for more information:

https://www.greenvillecounty.org/tax_collector/tax...

The investors and banks that are bidding on the property are looking for a return on their bid amount in the hopeful case the property is redeemed.

Month of Redemption Period Property Redeemed	Interest
First three months	3%
Months four, five or six	6%
Months seven, eight or nine	9%
Months ten, eleven or twelve	12%

[Jonathan Cover]

Tabitha,

Thanks for your answer. Unfortunately, my question was about something different. I was checking to find out how someone could make a reasonable rate of return on their investment while bidding 50-90x of the current and outstanding taxes.

I called some tax collectors and got an answer to my question though. 

[Amit Kal]

Jonathan Cover so what is the answer?

[Jonathan Cover]

They're all big household name banks that use extremely cheap money to pursue tax liens. They don't have to make hardly any interest in order to cover their costs so it's pretty much a playground for them and everyone else gets the scraps. I personally think it should be illegal to use cheap federal loans to play these markets. They should be restricted to lending or protecting their loans not going in with federally loaned money to get this interest.

[Jay Hinrichs]

Jonathan,, this is true in most tax cert and redemption states and has been for years.

like FLA  big players bid down returns into the 4 to 6% range..

if you did not have the big players buying all these up the counties would go broke.. they need institutional money to come into the county coffers..