All Forum Posts by: Jerry K.

@Bret W. - I do tax lien investing in Arizona. I was away from my computer the last few days - sorry for not responding sooner. 

You are definitely better approaching the owner before trying to buy the tax liens. In AZ, the tax lien holder is not supposed to contact the parcel owner directly.

Research and determine if there are any other outstanding liens on the property (city, mechanical, etc.) The more you know that is owed the better. You already know what they paid for the land.

In AZ the lien holder has 10 years from the date of the tax lien sale to pursue tax foreclosure. They can start foreclosure 3 years after the original date the tax lien was sold by the county. So if nobody has started tax foreclosure yet, the first lien is getting close to expiring worthless. 

Find out the date the oldest liens were sold. Not the year of taxes (2006) because that year's taxes would be sold for the time in 2008. If the first lien was sold on (for example) 2/12/2008, then that lien holder has to start foreclosure by 2/12/2018 or they lose the lien amount and any interest that accrued. 

However, that lien holder can start foreclosure at any time. Actually, any liens that are dated before June 2014 can be used to start the foreclosure. So there may be more than one lien holder who can start foreclosure. (I'm assuming Maricopa county)

If there are no other liens and you know they owe about $15,000, you can base your offer to the owner on paying off the taxes. However, I suggest you don't reveal you know how much is owed in taxes. He/she knows, or they can easily find out. Once they see your offer covers at least taxes and maybe a little more, they might bite on your offer.

Do you know how much the parcel is worth on the open market? Don't over pay. 

A tax lien foreclosure in AZ could cost the lien holder $2k-$4K. If the land is worth less than that, that may be the reason no lien holder has foreclosed. 

If the owner does not sell to you, you could track down one of the older lien holders and offer to buy their lien for the amount they paid plus interest. Then foreclose yourself. You'll have to pay off the other liens. The owner may come up with the past money as well. I have not foreclosed in Maricopa, but in other AZ counties I've done a tax foreclosure, the parcel owner has to pay all legal costs you incur filing the foreclosure, plus the back taxes and interest.

The better play is to contact the owner before you buy any liens and work out a deal. 

@Solomon Strickland You can start with the Kane county Treasurer office web page.

http://www.kanecountytreasurer.org/

Kane county uses an outside company to sell any parcels that are not redeemed and the lien is never purchased or foreclosed by the lien holder. The next deed auction isn't held until 2018. But the website has a free list of the deed auction results. Any deed not sold at auction is still available. WARNING - do deep due diligence on these parcels! There is probably a very good reason they did not attract lien investors and did not sell in a deed auction! Kane county is a very popular county and any decent parcel should be snapped up. Here is the link to those past auction results:

http://www.iltaxsale.com/new/index.php/county/Kane

@Abdul Rauf M. you might also try LinkedIn.com and search for "Tax Lien" or "Tax Deed" under People. I've connected with several tax lien professionals there that are not on Biggerpockets. 

Thank you @Ned Carey for including in me in your list of experts - a very big compliment coming from you. I also agree on the others on your list. They have taught me a lot on other states and corrected me on some of my comments. Liens/Deeds are so specific. I always say an investor has to basically become a paralegal to understand just one state's statutes.

Abdul - I have a day job working with ultra high net-worth families (working with their family office employees is more accurate) and my firm offered a tax lien private equity fund about 5 years ago. (I was not involved - I'm a private investor) It lasted about 2 years as an offering since it was so heavy on expenses of research and administrative costs. It can be done, you just need to keep costs under strict control - and that's tough when there is so much legal work involved.

@Kin Lay, Good questions, and they highlight why tax liens can be too difficult for the individual investor. The answer to all your questions is "it depends".

1) In most states you will have to pay income taxes on the interest gain. I get a 1099-INT from the stated I invest in, but some states have a premium and you have to read the state statutes to see how the premium or interest is taxed.

2) Usually you still get your taxes paid back in bankruptcy. It can get tied up for months or even years. I've read where the amount of interest has been reduced on the lien by the judge. I have also read where the lien has been wiped out in total, but that is a very rare case.

3) You have to read the statutes of the state and maybe the county to see how they treat the premium. Both for which part(s) earn interest and which parts get paid back in redemption or foreclosure.

4) Again you'll have to read the statues of the state and the county to see which fees are refundable or earn interest.

One of the liens I bought in Arizona this past February paid off before March 1st. I got my money back with no interest. It was a little over $1,000.00. Interest starts accruing as of March 1st for liens bought in February. I've had liens redeem in March and got at least one month of interest, this was the first lien to pay off before March 1st. 

@Michael Frankel sent you a PM with a link to your state sign statutes and some very high level information. We can take it offline for the specifics for your situation.

Sure. My idea was the same as Jarrod. I can help point you to the resources unless Jarrod has experience in Colorado directly.

@Michael Frankel How close to the highway is the parcel? Is it adjacent or well off the highway?

Jerry

@Jon B I buy online tax liens in Arizona and look at other states (Florida, Colorado, Indiana, others) that are online. 

I purchase in Arizona because:

• I know the areas I invest in. I get there every 12-18 months and plan on retiring there.

• I have studied the statutes of Arizona for tax liens and tax lien foreclosures. (Still always learning)
• The top rates are 16%. That said, you rarely get a lien with a building on it for a 16% rate. You get vacant parcels for higher rates (see my posts in this forum about tax lien results from Yavapai, Coconino and Pinal counties)
• Arizona has a 3 year redemption period for the owner. That is a longer than many other states, but you can find liens that are for multiple years, so you are that much closer to the foreclosure date (if that is your end game plan).

There are many reasons/strategies to purchase liens - and to purchase in different states and counties. 

Online auctions make it easy for investors to participate - so that invites more competition than live auctions. The harder it is to participate the better the deals you can get, so don't rule out live, in-person auctions.

@David Faulkner It does seem strange to only go for 4%-5% (or less) when that is all you can earn. For Arizona, if you won a lien for 5% this year and the owner does not redeem nor pay next year's taxes - then you get first shot at paying the next year's taxes - but you only earn the same rate as the first lien, 5% in this example. There is a 3 year redemption period so you can end up paying 4 years of taxes before foreclosing. So for the most part, investors are looking for foreclosure if they bid the interest rate low. 

However, in Maricopa county (Phoenix) they do allow you to only buy one year of taxes and not the subsequent years. In most of (maybe all) the other Arizona counties, if you don't pay the subsequent taxes, then the lien is put back in the auction next year for all the previous unpaid taxes and interest. The winning bidder gets all the past years liens and is that much closer to the foreclosure process.

I think as interest rates go up in general, people who are using real estate tax liens for shorter term, interest bearing investments will move on to other, less research intensive, investments for an easier way to get above CD rate returns.