Colorado Tax Lien Investing

6 Replies

We're heading to CO to visit our son & daughter-in-law soon and currently invest in Tax Liens in MD. As part of our effort to spend some time near them, we're looking to start up with TLs in CO. I don't see much information that is specific to CO in the forums or podcasts and thought I'd turn to the VAST knowledgebase that BP represents.

Are there some CO TL investors willing to share the low-down on the auction/OTC process and ins & outs of CO TLs & foreclosure and/or point me to a few good reference sources - either in the within the forum or via private messaging? Our desire is to end up converting some of the investments to ownership.  I see that some counties in CO use RealAuction and notice that there are some auctions underway now and another starting in early Nov.

TIA!!

Originally posted by @Keith Thompson :

We're heading to CO to visit our son & daughter-in-law soon and currently invest in Tax Liens in MD. As part of our effort to spend some time near them, we're looking to start up with TLs in CO. I don't see much information that is specific to CO in the forums or podcasts and thought I'd turn to the VAST knowledgebase that BP represents.

Are there some CO TL investors willing to share the low-down on the auction/OTC process and ins & outs of CO TLs & foreclosure and/or point me to a few good reference sources - either in the within the forum or via private messaging? Our desire is to end up converting some of the investments to ownership.  I see that some counties in CO use RealAuction and notice that there are some auctions underway now and another starting in early Nov.

TIA!!

 Keith, so I know some folks that have bought tax liens here. Colorado is not considered a great tax lien state. It takes three years to be able apply for a tax deed and then there is a redemption period after you apply. The City and County of Denver has a pretty good web page on the process if I remember right. Over the course of time I have run into a few tax lien investors. The summary is that you invest for the interest returns (10-12% if I remember right) and if you actually get a property it's a bonus. The chance of actually owning a property from your tax lien investing is likely less than 1 in 1,000. 

As you mentioned some sales are online (mostly large counties) and some are in person sales. Years ago when real estate was hot, a friend's husband went to an in person sale in the county they lived in. Almost all parcels were bid on which meant the returns were less than the 10-12%. Some parcels even sold for negative return. People were speculating that they would get a shot at the property ownership.

@Keith Thompson CO has an interest rate that is 9% plus whatever the federal discount rate is set in September.  So if the federal discount rate is 4 points then the interest rate is going to be 13%.  Since the federal interest rate has been kept at a low over the last few years it makes for a lesser interest rate.  I believe it is currently 1.75 which will take it to 12%.  The thing about CO auctions is that the liens go to the highest bidder and the bid increments are 1 dollar.  So if a tax lien is 1000 and you bid it up to 1050 you have just bid almost half of the interest rate away.  Think about it like this, if a property owner decides to redeem half way through the year then you will make approximately 10.00.  That's not a huge net.  One thing that CO does offer is "over the counter" liens or after the auction liens at the full percentage of interest and if you find one that is already past the three year redemption then you can start with an immediate foreclosure.  Denver rarely has any over the counter liens so it can be very tricky in the respect that you have to wait out the three year redemption period that makes it possible for the property owner to redeem.  There are many people who have received a treasurer's deed from their investment which is where you will make the most money from your investment.  Let us know how the auction goes.  Many are online hosted through www.realauction.com  All of the CO auctions will be from October to December.  The over the counter auctions are considered county held liens.  You will go to the Treasurer and look for "county-held liens".  Pull up the listing and research the property on the assessor's website.  You will find links connecting the property you are researching take you to the tax amount where you can see what the outstanding balance is.  

Thanks @Bill S. and @Josh Carr for sharing your knowledge.  I have registered for the upcoming auction on Nov 6, which is online through Zeus.  I'll be in Denver for a visit and intend to visit several county seats and am planning to attend 2 meetups.  IRROC and one by Josh Carr.  I'm also looking for a lead on a couple of Attorneys that handle TL Foreclosures so that I can set up a meeting to pick their brains.  An hour or two of their time will be well worth the investment.  Any recommendations in or near Denver?

Again - Thanks for your knowledge!

@Keith Thompson thanks for opening this thread. I am curious to hear about your experience with the tax lien auctions. What interest rates were most properties being bid down to? Were you ever able to talk to an attorney about the tax lien process? It would be great if we should get this thread going again as there are several Colorado counties that will be holding their auctions in the next two weeks.

@Matthew Holland

@Michael Mostrel

In FoCo it wasn't an auction at all.  You get a number and they gave us a list.  The go from the front of the room to the back one chair at a time.  When they get to you raise your number to buy, or say pass and it goes to the next person.  I didn't end up buying anything.  I was just there to see how it worked.

My experience with it is that each county has a different "personality", both in the bidding process, how much competition exists, the premium someone's willing to pay (if the county does premium bids, and let's you choose the parcel), whether it's online or in-person, and just the demand on a particular parcel too.  From talking to very seasoned TL investors at some of the in-person auctions, it seems that this fluctutates too, based on the economy.  The premiums I've paid vary substantially, from next to nothing, to 50% or more on the tiny parcels, but lets say, average 8-10% or so.

So this means you'll likely lose a little money if it gets redeemed the first year (many do).  And yes, few actually go to Treasurer's Deed, but, particular parcels have a higher likelihood, if you're willing to do some homework.  Once you get a Treasurer's Deed, most title companies consider it a cloud, and won't give title insurance for merchantability.  So, you either have to quitclaim it to someone (and disclose this), hold on to it for 9 years, and the cloud disappears by statute, or do a quiet title action on it to clear it.  

It's a numbers game, and a game of patience.  But worth it if you have the personality for it.

Hope this helps, also, hope I'm not too late, I know most of the auctions are already done this season, but there are 2 more counties on my list this month.  Good luck!

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