All Forum Posts by: Kent Braaksma

I own a vacant rental property that I am looking to sell. I have an interested buyer, but they want contract terms. I have a current mortgage on this property totaling aprox. 23k. The purchase price will be 60k.  I am thinking 10% down, with an interest rate of 8.5% (depending on credit report) for a 10 year term. 

This seems like a really straight forward contract sale, but don't know if I am in-line with interest rate. Also, can I sell this property on contract without paying off the current mortgage? I would double the payment made on the current mortgage to about $400/month, but would receive $668/month on the contract. 

Am I dreaming here?

@David Piqueira The interest rate is set at 24%. What your are bidding down is the ownership of the parcel if you would need to foreclose. I would never bid less than 51% ownership, as I would never pay a premium to buy a tax lien. I would assume these are huge corps, or big banks that buy 1000's of liens, in hopes that more of them will make money than will loose money. If that is the case, I will bail on tax liens, and find another investment.

I have to agree with Ned here. Stupidity. I don't claim to be an expert on anything. However, if I make an investment, I want to make that investment at the lowest risk possible. I know nothing about note investing. I know that there are good notes to invest in, as well as there are bad notes to invest in. Tax liens are the same. Some are good liens and some are terrible liens. If you know notes, that is where you need to invest. 

I don't understand why they  would only average 6-8%. Yes, some of them will be redeemed in the first 2-3 months, which would yield 4-6%, but there would be others that would continue for a full year. Let's say you bought 2 liens at the tax sale in June. Each property was 1/2 year behind, and each lien cost you $1000. The first lien gets redeemed in September. You would earn 8% on that cash(2% per month). Let's say the second lien stays active for a full year, and redeemed in May, just before the next tax sale. In October, there is subsequent tax due of $1000 on that property. You take the cash from lien #1 to pay the sub tax on lien #2. In April there is another sub tax due on lien #2 of another $1000. In the first year of lien #2, you have invested $3000. If it were redeemed in May, your payout would be as follows: On your original lien you would earn 24% (2% x 12 Months). On the first sub tax, you would earn 14% (2% x 7 months). On the second sub tax you would earn 2% (2% x 1 month). Overall you have earned $240+$140+20, or $400 in interest. $400/$3000=.1333 or 13.3%. I gets even better than that through the second year.

Iowa's interest rate is set at 2%/mo, (24% annual). The bid down is for % of ownership. I have seen 3-4 bid downs in my primary county in the last 8 years, and none of them have been below 95%. This is at the live auction. From what I have seen, the on-line auctions are a little different. I would be hesitant to bid below 51%, unless I knew for sure that it was going to be redeemed. It would, likely, need to be an income property, or have a mortgage on it before I would even remotely consider it. Even then, I would be a little nervous. The first couple of years, research was a task. I researched all of the liens that I was interested in. I searched each one on IowaAssessors.com, then I took a Saturday to drive the county to see each one of the properties first hand. Since I go to the same county every year, I don't do the drive by any longer because there are very few liens offered that have not been offered in the past years. Some of the liens offered are on the list every year, if not, every two years. After a while, you get to know which liens will be redeemed in the first year, and which ones you will be able to hold for the second year.

Sorry for being so long winded...hope this helps!

It can seem overwhelming at first. Hang in there, it gets easier, and more difficult, as time goes on. Iowa is a 24% state, with a 2 year redemption period. So far, I have limited myself to 1 county, but have another research ready in case I need to invest more cash.

Our strategies are a little different. I manage a group of investors. This allows more investment capitol with less of my own cash. The investors then pay me a commission (on profits only) to invest their cash. Investors are not interested in ownership, as that is where the bigger risks start, but I have a backup plan in case I do have to take ownership. Win, win!

I don't discard the lower value liens. I would rather purchase 2) $500 liens than 1) $1000 lien. This way, if one of the liens are redeemed, I still have $500 invested. For this reason, I try to buy as many liens as possible with the available cash, rather than buying a fewer number of the higher dollar liens. The cash from the redeemed liens is then invested in the sub taxes, when due, on the active liens.

Research, research, research! It can be the key to your success, or a nail in your coffin. June is a very hectic month at my desk. Everyone around me knows that I am no good to anyone until after the tax sale is over. However, I have gotten very familiar with the properties in the county that I concentrate on and have purchased liens on the same properties multiple times over the last few years. 

I send 8 bidders to my target county. I usually come out of the tax sale with 20-22 liens, and can invest somewhere between 14-16k. I then have another county close by, that holds their sale in the afternoon. If I need to, I can attend that sale to pick-up more liens if I have the available cash. The only downfall is the registration fee. It is possible that I spend $25 per bidder on fees, and never attend the sale.

This system has worked well. In the last 8 years, I have never had to take possession of a property. The investors pay me 25% of the realized gains, and still see an annual R.O.I of somewhere between 13-17%. They are happy, I am happy!  Win, Win!

Happy investing

Thank you all! I am looking forward to interacting with fellow investors.

Hello, my name is Kent Braaksma. I have been investing in single family housing and county tax liens since 2009. I am here to expand the scope of my real estate investing, and tax lien investing, by learning from others and sharing my knowledge to others as well.