All Forum Posts by: Ted Li

@David New

I agree with everything said so far. I think tax liens are really it's own animal while hybrids and tax deeds with right of redemption are more similar to notes. Pure tax deeds are basically like buying properties at foreclosure. If you plan on going the fund/partner route they can all be extremely passive. If you want to do it on your own then generally speaking tax liens would be the most passive.

I don't think anyone can really make generalizations regarding risk and return of notes vs liens. Perhaps once upon a time you can say liens were lower risk and steady returns. However, as @Ned Carey pointed out, there is more money coming into this space than ever before and the competition is quite fierce. Depending on the state you are looking at, it's suppressing returns and/or increasing risk, usually both. I assume the same is happening in the note space so you really need to nail down as many particulars as you can before you start making comparisons.

I would suggest you first decide how much money you want to invest, how much time/effort you want to spend, and what kind of return you need to make it all worthwhile. Then the experienced note investors like @Chris Seveney may be able to tell you how well that aligns with note investing. Similarly with tax liens with the additional caveat that it will be state specific.

As for tax lien courses, I suppose it is possible for there to be a useful course for a specific state. However, I do not believe there could be a useful course for tax liens as a whole. The statutes governing tax liens just vary too much from state to state.

Usually everything else (mechanics liens, judgment liens, code violations, etc.) but it's state specific. For example, some states give priority for water liens or HOA/condo liens over mortgages.

Tax liens have priority over a mortgage even if the mortgage was recorded first.

Since you're in Louisville I assume you are considering Jefferson County tax liens? It's very easy to just buy a few liens. It's not easy to do it right so that you minimize risk due to the amount of time you need to spend researching. It's very difficult to do it right and make it worth doing due to the combination of time spent researching, high initial capital outlay, lack of liquidity, and modest return. If you're looking for fast growth, look elsewhere. If you're looking for safety, do a lot more research before you jump in. I suspect all of this is generally true of all pure tax lien states.

What state and county is the house located in? Perhaps the house has delinquent taxes with the county as well as delinquent tax lien(s) that have been sold to a third party. If that was the case, even if you pay off everything owed to the county, you would still need to pay off what is owed to the third party as well before the auction would be cancelled. Is there a pending foreclosure action? If so, look up the case and see who all the parties are so you can figure out who all needs to get paid and what the payoff amounts are.

Unless you are looking at a type of tax lien that I have never heard of, in no way is the lien "backed by the city" and you are absolutely not guaranteed to get your investment back. The only thing you get with a tax lien is priority over other liens such as mortgages and judgment liens. If the underlying property is worthless or worth less than your lien plus what, if any, additional costs you may incur to enforce the lien, then you will lose money. You have to be especially careful of over the counter liens as those are usually the ones rejected by all the investors who attended whatever sale/acution held by the county when the lien was first offered.

@Chris Morgan and @Luke Jacob I recently acquired a small 2bd in Ludlow and is looking for contractors. It's a complete gut rehab and I will need a general contractor to oversee everything since I am out of state. If you have anyone you could recommend it would be greatly appreciated. Also, are you guys self managing? If you know any property managers would might be interested in managing for others, please let me know as well.

@Fergus Clare it's been a few years since I looked at Illinois so I can't say with certainty. I assume you mean that attorneys fees for sending statutorily required notices are added to the lien. That may be true in Illinois and that actually is true in Kentucky and Indiana. However, in KY and IN, there are strict limitations on that and it does not include any additional legal fees arising simply from an assignment of the lien between investors. I doubt that would be allowed in Illinois either because if they allowed it, you will have attorney investors passing liens back and forth to rack up effectively unlimited fees.

Perhaps you are talking about legal fees already accrued by the prior investor? I can only speak to KY and IN but in those states, you would not earn interest on anything other than the base lien amount. You could recover those legal fees assuming they were legitimate and also that the lawyer actually got paid or will be paid those fees.

You don't say which state's liens you are talking about but regardless, I can't imagine you would be entitled to recover any of the fees and costs associated with the assignment from another investor, much less collect interest on it. I buy in Kentucky and Indiana and that is certainly not allowed in either. 

Thanks @Dante Williams and @John Warren. I actually recently joined the Meetup group she hosts and plan on attending the one coming up in a couple of weeks. I will reach out to her.