Experience with Tax Lien Sales?

I would like to hear anyone's experience with buying "tax liens" as a way of obtaining high interest and/or a nice property at a low price. Purchasing tax liens seems to boil down to two possible outcomes

  1. One loans money for not more than three years (where I live) at very low risk and a good interest rate, typically between
6% and 16%, averaging around 8% in 2008 where I am, based on one county I examined.

  1. After three years (where I live), one then owns property bought for the price of about several years (worst case) of back property taxes.

Tax liens where I am are typically bought through auction, where one bids the interest rate one is willing to accept for as much as three years. The lowest interest rate bid wins the auction.

I am considering putting about $5000 into this, which is well south of 5% of my total portfolio. I would like to own some land (carefully researched in advance). This means I would likely have to hold a few properties and, after three years, be prepared to own all.

I would deal directly with the involved local government, who "oversees" the person currently owning the property and owing property taxes on it.

Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup.

Reply to
Elle
Loading thread data ...

Check your local stats but in most areas #2 only happens with properties you wouldn't want like

2a. you get the property and meet a new friend named CERCLA 2b. you are the proud owner of a worthless strip of undevelopable land 2c. you own a vandalized wreck of a crack house in Detroit that will cost more to demolish than the land is worth (and the city requires that you remove it)
  1. owner files bankruptcy and your rate is adjusted or lien deemed worthless or nearly so
  2. you waste countless hours researching and bidding on properties with k and under tax liens and never win one because institutions grab all the low hanging fruit.
  3. you end up blowing 2X your k investment on foreclosure proceedings

Also - keep in mind the lien is illiquid and produces cash flow only at the end. For a measly 8% on $5k it's a lot of risk and work compared to, say,

formatting link

-Tad

Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup.

Reply to
Tad Borek

"Tad Borek" wrote

For the layperson, I think TB means the land is a toxic waste dump subject to laws known collectively blah blah as CERCLA. Are you ex-military, Tad? With all the acronyms you insert, I wonder. CYA may be best.

If one has researched the land and would like to own it (even if that's not definite), develop it, and one day maybe live on it, then I am not so sure the risk is comparable to a medium grade preferred stock also paying 8%.

All other caveats noted. I agree significant research is necessary. I just had a friend email me that, indeed, beware institutional etc. lawyers more familiar with the properties snapping up the best.

Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup.

Reply to
Elle

I pulled a copy of my towns current tax lien sales, and found just that. It's amazing to me how a 4 acre parcel can be landlocked, no right of way to get in, and no abutter cares to add it to their backyard. But I got to know the people at my town's tax and assessor's office. Nice bunch. JOE

Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup.

Reply to
joetaxpayer

I don't know if this is the same thing, but our township puts out a yearly paper listing of property addresses where taxes are overdue. A friend got me involved in this useless and time-consuming endeavor for cheap property about 10 yrs ago. We spent several days driving around, trying to find all these weird properties, some seemingly ditches, landlocked property, long strips, etc. After finding only one piece I was even partly interested in, I went to an auction at the courthouse, only to be quickly outbid by business-type people who seemed to know the game much better than I did. SandyBeth

-------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup.

Reply to
sandybeth

Sandybeth, this surely is the same thing. I am looking at land far from a major city. Hopefully this is an advantage. Chances are I will do a bit of research, attend an auction and get some kind of sense of the local competition. I suppose it's best to keep in mind the tenet, "there is no such thing as a free lunch." OTOH, times are hard. Opportunities for those with cash may exist. Thanks for sharing your specific experience.

-------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup.

Reply to
Elle

No but I've worked with a lot of regulatory law and it's full of acronyms, or as an ironic friend calls them, TLAs (three-letter abbreviations).

My other favorite is RPITA, the R being "royal" and PITA not being a bread product...a very useful acronym in tax law!

But on-topic -- I don't hear about these as much anymore but sometimes nasty environmental issues would come up with small properties. An old underground tank (you know, a UST!), or even a home business where a guy dumped a lot of chemicals into the back yard.

For a "deal on a property" I think I'd look for opportunities for a private-sale rather than a tax lien that might ripen into a useful holding. All the best stories I can think of are about properties that never went on the market, sold to someone who had a relationship with the buyer, who maybe put out feelers years in advance.

-Tad

-------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup.

Reply to
Tad Borek

BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.