Hello Fellow Investors!
I just attended an education sales seminar calling themselves "Simple Real Estate." The speaker guaranteed the listeners that we can earn 24% investing in tax liens from Florida. Also, they said they have pre-vetted all the liens already, ensuring that we will be buying liens on great properties.
My question is if the tax liens are so lucrative, why does the speaker himself not just reinvest everything in tax liens and just make a fortune instead of selling the tax liens to us? Also, the speaker says he does NOT purchase his tax liens at the auction. If that is the case, where does he purchase his tax liens?
Aren't tax liens subject to a bidding process where if there are enough bidders interested in a tax lien, the returns are bidden down?
Any advice and guidance would be highly appreciated.
Ues, you are right. The "maximum" rate is 18%, and is Never paid on any kind of Certificate you'd want to own. @Jerry K. has dealt with them. Rates get down to probably 2% for Any decent safe play.
@Crystal Chang What follows is based on my experience alone. I don't know the program you are speaking about so I have no opinion on what they offer.
In most counties you can buy the "leftover" tax liens after the auction. These are the liens that nobody wanted to buy during the auction period. In an online auction you can bid on any of the liens at any time. So the the liens nobody wanted to touch are left. You get the maximum 18% annual interest on those liens. Calculated at 1.5% per month - so if the owner pays off after 4 months you get 1.5% x 4 = 6%.
Are there decent underlying properties in the leftover liens? Yes, but they are tough to find. Usually they are properties worth less than what it would take to pay off all remaining city liens, costs to bring to foreclosure and prior real estate tax liens that may be on the property.
It's tough to "reinvest" when the auction is held only once a year and the leftover liens are picked through. It can be done and investors are doing it, but they have systems in place to find the gems that are left and they do a lot of research to find and keep track of them across many counties.
Not sure where 24% interest comes into play in Florida. Other states have higher rates, or maybe they buy Florida certificates at a discount from other investors.
@Wayne Brooks can speak to the quality of most of the underlying properties in the leftover status. I've seen parcels that the county website shows the lot lines overlayed on Google Maps and the parcel is literally in the middle of a lake. But I have also seen a gem or two - after several hours of research.
Counties that use an open outcry auction instead of online can bring a little higher rates overall since the number of bidders are limited and they may not get to all the liens in the auction period. In that case, the leftover liens can be very good. But you will be doing all research on-site at the county offices, and not from home.
What happens if it is a tax lien tied to a middle of a lake, and no one bids on the tax lien? When the property gets foreclosed on, does the property just go back to the county?
@Crystal Chang Good question. I have never seen that type of parcel end up being foreclosed. There is no reason an investor who bought the lien by accident would ever pay for foreclosing on it once they found out the property was actually in the lake itself. Most likely the parcel ends up being owned by the county.
FL tax lien sale is happening now. There are two sites that sells most of the lien. They both have a training for bidding.
FL is one of the easier state to learn bidding on tax lien, most liens get bid down to .25%; but when the owner redeems, you will get a minimum 5% return.
@Jerry K. had explained the OTC lien. as he said , it is very difficult to find good left over liens & it is not quite suitable for out of town investors. It's first come first serve.
@Crystal Chang I think there's an "underwater" joke trying to surface.
I think the basic concern that you ought to have is that other people will never treat your money like you will.
A question that I wonder is what the value added proposition is for using a 3rd party broker to buy tax liens, given your concerns? Why not study and fo this yourself?
At the root of this is the simple problem that would be solved by doing your own marketing, lead generation and research.
Of course, most will not and when things go wrong, they will be unprepared for bad news or how to solve the problem of an unmarketable asset.
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