Looking for some advice on Tax lien auction sale
Hi BP community, I know lots of you have various experience when it comes to real estate investing. I would like to find out more about your experience specifically in the tax lien sale/auctions. I have done some due diligence on my part but I know there are more to it than meets the eye.
What I would like to know are:
1) What are your personal experience with tax lien sales if you have done any before.
2) Is there any golden rule to buying tax liens
3) What exit strategies can you prepare to help when buying tax liens
4) If you have bought tax liens before and have run into an issue or problem, what was it and how did you problem solve the issue.
One of the famous four questions from the Podcast -
5) What tax lien book can you recommend if interested in tax lien.
Thanks
Yia
@Yia Her I have experience and have purchased thousands of tax liens and tax deeds in several states. It is a great field and a niche of real estate. The number one question would be, what is the best state to work in? For me it is what is the most "user-friendly" state with ease of access and ease in process. I like a state with ease of what needs to be done. Once you learn the ropes in the state of your choice, get ready to make your first purchase. Timing is everything when it comes to investing and making a good ROI. There can be problems or issues along the way but the number one problem would be not doing your due diligence and then gaining acquisition of something you don't want. With over 3,100 counties to choose from you will be able to do well. Everyone here on BP will hold your hand along the way. CA is a state that sells tax-defaulted deeds and they will have at least 5 years of delinquency, if there is a structure on the property, for the opening bid price. If you are the highest bidder, you win the property. You could get agricultural or forest land with less years of delinquency as an opening bid price, however. Keep us posted on where you decide to begin. I am always excited to see a person start out and I think I was there once too. Keep in mind, experience helps but there are always things to learn and rules can change along the way.
@Yia Her I'm newer to the tax lien space. I've only participated in about a dozen sales in the last two years. But I've done well and think I have a winning strategy in my area. Time will tell. Depending on age and money, I think tax lien strategies are drastically different. I'll answer your questions.
1) Mostly Indiana deeds. Everyone says 95-97% of liens redeem but that number is much lower in Indiana. Don't know what the overall number is but mine is 23.5%. You make the money from the property not the redemption. Although 10-15% is good for a lot of people.
Although people say Florida liens are great I think they suck. After the long redemption period is over you have to bid for the deed. You either get the house for retail or your bid down %. Buying the deed is speculation and not investing.
Iowa tax lien sales are fun.
2). Don't bid too high. I think you need to buy liens in volume so I've looked at all the properties on the list. So there'll be another one.
3). All of them. While I'm looking at all the properties online exit strategies is the most important item on the list. Wholesale, rehab, rent, burn down and collect insurance (kidding but can't say I haven't thought of it). My favorite is owner financing. Collect a nice down payment to cover your investment then collect a nice interest on your profits every month.
4) Don't look at them as problems but issues to take care of. I wish the plumbing wasn't stolen. I wish there were no code enforcement liens. I wish roofs weren't leaking. I wish there was a clean title. I wish the government employees were nicer. I wish that dead body wasn't there. You deal with them
5) "Profit by investing in tax liens" by Larry Loftis
"Zero Risk Real Estate" by Chip Cummings
The books give you a basic understanding but after you understand the basics the most important thing to read is the specific county laws and rules concerning their tax sale.
Happy Investing!
Hello - I've done a little investing in tax liens in Iowa and Wisconsin.
Iowa is pretty cool: you buy the tax lien for the amount due and then make the semi-annual tax payments to keep it "current." The amount you pay earns interest at 2% per month if the lien is paid by the property owner, but after 20 months you can file to claim the property. So you either get 24% annual interest or the property for the cost of past due property tax. I've bought about 15 tax liens and have enjoyed the interest but have not gotten a property.
Wisconsin expects that fair market value will be paid for the tax liens. I've done these twice and neither one was much of a deal, but hey, I tried!
Hope this helps. Good luck with your investing!
1) I have bought well over 1000 liens and it is essentially my full time business.
2) Yes a) Know the rules in the area you invest. b) Know what you are bidding on and the true value (not just the assessed value)
3) My exit strategy if I am able to foreclose is simply to auction the property off. If you have bought right then you should have a good enough deal that many exit strategies should be viable. My goal is to acquire properties through foreclosure and if I am doing via tax sale then I believe it should be a home run not just some mediocre deal I can get off the MLS any day.
4) I have misjudged the value of properties or the property has deteriorated between the time I inspected it and foreclosed. I have had 1 fire destroy a house. In many of those cases I just walked away from the lien and chalked it up to the cost and risk of doing business. In some cases I sell and recoup as much as I can.
Another issue was a IRS lien that my attorney did not catch. We went to one of the national tax lien title insurers and are waiting for them to clear the title. It has just taken a lot longer and will cost us more. However it will still be a solid winner for us when we are done.
5) I don't know. I suspect most books are going to be generic and the laws and how they affect your bidding and strategies vary tremendously form state to state. You will find a lot of tax lien experts here on BP. Most of which focus on specific states and can give excellent detailed advice. My expertise is Maryland. Outside of MD my advice tends to be very general.
In Iowa, the method is that you bid down the percentage of ownership if you end up foreclosing at the end of the redemption period. One auction I was at, everything was bid down to 1%. What is the thinking behind that? Do you get back to full ownership once you pay the follow up taxes? Does this seem to be different in different counties?
That happens in a lot of counties in Iowa. These investors are going for the 2% per month return because a vast majority of liens (on residential property) are paid by the property owner before the tax lien expires. If the taxes aren't brought current by the property owner, the owner of the 1% tax lien can file to become a 1% shared owner of the property and will collect if/when the 99% owner ever sells/transfers the property (hypothetically, assuming the property is ever transferred and that it is worth enough to cover the taxes plus interest outstanding at that time).
Personally I haven't invested if my share of ownership would be less than 100%, but there are many investors who do. It would be interesting if any investors who bid down Iowa tax liens would chime in with their experience...
@Ned Carey @Josh Carr @Dennis Weber @Clint Farlinger @Ryan Parnow
Wow - Thanks to all the responses. It gives me a better idea on this topic. I will commit to learning more and actually attend some of these sales and try to meet someone local and see if I can get some one on one training or help. I will definitely reach back out to some of you guys who's been in this arena for personal advice. Seems to me like if you put 100% and truly make it work, there is opportunity in it.
Yes there is opportunity but just not as much or as easy as the people pitching it would make it sound. But that is true with all forms of real estate.