Tax lien bid strategy - mentoring friends
I've mentioned my own checklist for investing in Arizona tax liens in the online auctions. I've talked about why I like online auctions versus in-person bidding auctions, and I've talked about looking at past year's results to scope the competition and set my bid strategy.
This year my friends who have been hearing about my AZ tax lien investing for the last few years decided they wanted me to "mentor" them through buying their first tax liens.
We've had a several lunch sessions since last summer where I taught them the basics of tax liens and doing due diligence. I also gave them the lowdown on my bid strategy (to see if I could teach it).
So I have 4-5 newbies looking to take the plunge. Most just want a lien or two to see how the process works, get an interest rate of 7% or higher, and dream of the unlikely event that the owner may not pay the taxes over the next 3 years.
I've drilled into them the reality that they will have their money paid back at some point and they should look forward to a great safe return for this idle cash. Many are using a little of the money they set aside for their kids college funds that is sitting in regular savings accounts earning next to nothing.
My strategy this year is to use my spreadsheet analysis to "pick off" a few certificates in highly competitive areas. My interest rates won't be very high, but the properties will be excellent.
Last year I went for all high rate certificates and I succeeded in getting 16%, the highest rate you can get, for all my purchases. My spreadsheets pointed the way to those certificates.
This year I picked some certificates on great properties. Looking at the last couple of years auction results, I know what rates people bid to win for parcels in the same geographic area, so I can use that create my bid strategy for giving me the best chance to win certificates this year.
I'll update the blog when the auction ends this week.