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Old 08-23-2010, 08:16 PM   #1
Demetrius
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Tax Deed/Lien Sales

Just wondering if anyone is familiar with these auctions? Some counties/states have tax liens while others do tax deeds. My state does deeds and I was interested in buying up some of these for the high interest they pay or the possible (but remote) chance of actually acquiring the property. Unfortunately the auction was today and I missed out but I will probably look into it more next year.

Tax Deed Sale vs Tax Lien Sale

What say you?
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Old 08-23-2010, 09:25 PM   #2
wm671
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Re: Tax Deed/Lien Sales

I bought three liens this year in Louisiana, if they don't pay you back for one year then you make 17 percent interest. 5 percent penalty plus 1 percent per month. First year I've done it and I wish I knew more, looking forward to this thread
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Old 08-23-2010, 10:02 PM   #3
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Re: Tax Deed/Lien Sales

Mississippi, which is an 18% (1.5 per month) tax lien state, has their auctions once a year on the last Monday of August (next week).
I've read everything I could find online, including a couple old threads on this site, in the last week.
I've also read the books by Loftis and Burrell, and they've helped me learn a little.
I visited the courthouse Friday, picked up the fact sheet and spoke with the tax collector a bit.
There will be app. $2m in liens sold.
150-200 bidders expected.
The auction is expected to last 3 days, and although Mississippi is technically a premium bid state, it is basically a round-robin format.
Premium bids must be made in $100 incriments, and I was told only the largest liens will have any premium.

Although I'm happy that the liens mostly go without a premium, the round-robin format makes it daunting to do any in-depth research, as you don't know what you'll be offered.
With literally thousands of liens up for sale, I'm curious to learn how the experienced investors go about it.

I'm planning on purchasing as much as I can afford, and I'm also looking forward to learning as much as I can from the people there.

It appears to me that, in the south anyway, Georgia and Texas are two prime states for investing.
Both are tax deed states with a redemption period (known as hybrid states).
Both have a large (20% and 25%) penalty for redemption, and bid on the deeds.
I'm curious to learn more on these states.
What is the typical premium on the deeds?
Are they true auctions, and what increments are used?
Are they very competitive, how many bidders are typical?

Also looking forward to reading this thread, and I will report back after Monday with my experience.
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Old 08-26-2010, 02:33 PM   #4
JTrout
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Re: Tax Deed/Lien Sales

http://taxsaleuniversity.com/texas-r...exas-tax-sales

This site gives some details for each state.
I thought there would be some investors on 2p2 that could share their knowledge and experience on tax liens and tax deed.
Guess not?
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Old 08-26-2010, 05:27 PM   #5
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Re: Tax Deed/Lien Sales

Where I did my sale, in Louisiana, I was able to research the houses that I wanted to bid on since the properties with unpaid taxes were listed before the auction. Using the Clerk of Courts, I looked for houses that seemed as though they likely weren't going to be able to pay their taxes in the same neighborhood where I have two rent houses. Reasons include being sued, recent death with no probate filed, etc. I am good friends with a few attorneys so that should help with the cost of filing a lawsuit against the previous owner for clear title which is required in Louisiana after 3 years of non-payment of taxes.
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Old 08-28-2010, 02:31 AM   #6
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Re: Tax Deed/Lien Sales

I looked into it for DC area.

Based on my DC experience, I don't see how people would be getting such huge yields anywhere. It seems like big money investors have this to a science and many deeds were selling for small *negative* interest (the ones with high chance of default), or yielding a measly 2-4%. Or not getting sold at all because they were too big for the real property they were backed by.

If this is the case in immediate DC area, I don't see why it would be so much better elsewhere in the country. These guys had millions to lock up in these things and they can certainly afford plane tickets if such great yield are available in TX/GA.

Basically, I never figured out if it's worth it. Most info I find on the net seems to be spammy and my real world info has me very suspecious and makes me doubt that I can be competitive without special processes and research team in place that the big players have.
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Old 12-04-2010, 11:35 AM   #7
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Re: Tax Deed/Lien Sales

I purchased 50 tax liens in August, with a 2 year redemption period.
I had read that they will, on average, take a year to redeem.
I've had two redeem each month so far, so it's right on schedule.

Wanted to bump this on the off chance that someone may have missed it that had experience to add.
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Old 12-04-2010, 06:51 PM   #8
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Re: Tax Deed/Lien Sales

Would you mind giving some details about your experience?

How much did the liens cost?
What info did you get ahead of time about the properties?
...From where?
Did you go view the properties?
How did you select which you'd bid on/purchase?
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Old 12-04-2010, 08:07 PM   #9
JTrout
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Re: Tax Deed/Lien Sales

Quote:
Originally Posted by Wyman View Post
Would you mind giving some details about your experience?

How much did the liens cost?
What info did you get ahead of time about the properties?
...From where?
Did you go view the properties?
How did you select which you'd bid on/purchase?
I spent $49,000 on the liens. The auction took 2 days, in which they sold over 3,000 liens.
So doing any indepth research was difficult. I did not visit any of the properties before hand, but I live in the county and am familiar with the neighborhoods and areas.
The only thing I had before the auction was the newspaper giving notice to each property owner, with the legal description and amount owed.
I also purchased the list from the court house for $10, but didn't receive it until the first day of the auction.
As I said, the auction lasted 2 days. The second day I was able to do a little more in regards to preparation.
This being my first auction, I was completely unfamiliar with the procedure, except what I could gather from books and online.
Mississippi is a bid up state, meaning that the property is offered, and whoever bids the most gets the lien.
However, in order to speed up the process, all overbids had to be in $100 increments.

But before the auction began, a fellow stood up and asked everyone to agree to a "round robin" format, where they start at the front of the room, and each property is offered to one person, who can accept or decline the property. If declined, that person loses their turn and it's offered to the next person in line.
All liens under $100 and over $1,000 (the first day, $1,500 the second) were not included in the round robin.
Everything over $1,000 (then $1,500) was up for bid, with the usual overbid being 5%-8%.

Regarding the round-robin liens, I'd say over 90% were accepted by the first person.
On the less than $100 properties, everyone interested would hold up their paddle and they would randomly pick a number.
On the over properties, bidders would raise their paddle and announce "$100",
"$200" and so on. If more than one bid the same, they would pick a paddle at random.
After the first day, I eliminated buying anything under $300, and focussed on properties over $1,500 that I could get.
I was able to go through the second half of the properties the night before and circle the liens I was willing to overbid on.
Basically eliminated most businesses and undeveloped lots.
Focused on improved property, especially homestead property.

I ended up purchasing 9 liens for $100 overbid, and 2 properties for $200 overbid.
In Mississippi, the amount overbid is not returned, and you do not earn interest on it.

I'd say there were around 100 bidders the first day, and 80 the second.
The overbidding early the first day was much more fierce than later.

The way the auction is set up (on the last Monday of the month), you are practically assured of not having any redeem the first month.
So you can assume that on the properties where you pay a premium, you'll get at least 2 months interest (3%).

Out of the 50, none redeemed the first month, 2 the second, and 2 the third.
None of the properties I overbid on have redeemed yet.
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Old 12-06-2010, 05:10 PM   #10
Ray Zee
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Re: Tax Deed/Lien Sales

also learn completely all of the applicable laws for your state. including bankruptcy and federal liens. and exactly how you get the property if you dont get paid.
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Old 12-10-2010, 12:53 PM   #11
JTrout
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Re: Tax Deed/Lien Sales

Quote:
Originally Posted by Ray Zee View Post
also learn completely all of the applicable laws for your state. including bankruptcy and federal liens. and exactly how you get the property if you dont get paid.
Yes, very important info.
It's been difficult for me to have a firm understanding in these areas.

Finding up-to-date accurate info is a challenge, and very few people have any idea about it.

The info I've gathered has been contradictory, and sometimes (in sales books) stated through rose-colored glasses.
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Old 01-02-2011, 06:24 AM   #12
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Re: Tax Deed/Lien Sales

Quote:
Originally Posted by JTrout View Post
I purchased 50 tax liens in August, with a 2 year redemption period.
I had read that they will, on average, take a year to redeem.
I've had two redeem each month so far, so it's right on schedule.

Wanted to bump this on the off chance that someone may have missed it that had experience to add.
What county did you do this in? I'm on the coast and was considering doing this before, but never really knew how it worked. Great input btw, very informative.
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Old 01-02-2011, 11:17 AM   #13
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Re: Tax Deed/Lien Sales

Quote:
Originally Posted by RedBean View Post
What county did you do this in? I'm on the coast and was considering doing this before, but never really knew how it worked. Great input btw, very informative.
Lee.
I expect each county is somewhat different in their auctions. I don't know how common the $100 overbid rule is, but I spoke with someone on the coast, Jackson Co. I think,
and it was not used in that auction. I think they were taking bids in $1 increments, and the auction lasted several days.

I think one of the main barriers to purchasing tax lien certificates is finding out accurate information.
Each state, each county, is somewhat different. But I'd certainly recommend you check it out next August.
I think this year I will try to participate in two or three different county auctions to compare differences.

For Mississippians, I highly recommend finding a copy of:
An Introduction to the Mississippi Tax Sale by David Lewis.

It is a no nonsense book written by someone that has been purchasing liens for years, and is filled with the laws and decisiona concerning liens.
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Old 01-04-2011, 07:17 PM   #14
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Re: Tax Deed/Lien Sales

In Colorado, each county sets its auction rules. There are historically only about 1% that do not redeem, so it is an interest bearing investment. The property owner has three years to redeem.

Each county sets its own rules, so some are round robin and others all open auction. The auction starts at the max rate (determined by the Colorado Secretary of State at t-bills + 9%, ie, this year was 10%). One of the catches is that the original purchaser gets the first right to buy the next years taxes at the prevailing rate. Most of the larger counties are going online, so you do not have to go to the auctions. The counties release the property lists and there is typically data on each property online so you can screen them somewhat.

Over the next few years, there will be some turds in the auction due to higher assessed residential lots that have not been improved with streets, etc., but are separately assessed and have high real estate taxes relative to their values. I would avoid any lot without a house. Commercial real estate should be ok, but they can be polluted or not functional.

PM me wiht any questions. I am a commercial appraiser here in the Denver area.
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Old 01-05-2011, 12:45 PM   #15
mayers4
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Re: Tax Deed/Lien Sales

My state (Tennessee) does not do tax lien sales. From what I have read tax deed sales are not as attractive.

How challenging/dumb would it be to try to buy liens in other states? Can you do most of the research online?
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Old 01-18-2011, 05:01 PM   #16
JTrout
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Re: Tax Deed/Lien Sales

Quote:
Originally Posted by mayers4 View Post
My state (Tennessee) does not do tax lien sales. From what I have read tax deed sales are not as attractive.

How challenging/dumb would it be to try to buy liens in other states? Can you do most of the research online?
In some cases, I think tax deed states are more attractive.
Don't think it would be terribly challenging or dumb to buy liens in other states.
Happens all the time.
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Old 05-26-2011, 02:25 PM   #17
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Re: Tax Deed/Lien Sales

Update:

9 months into tax lien investment,
17 of 46 liens have redeemed
44% of investment redeemed.
Average ROI first 9 months (of the 17 redeemed) = 5.6%
Average time of these redemptions a little over 5 months.

Of the 29 liens yet to redeem:

Upon looking at them closer, there are 4 liens that have a high probability of not redeeming.
3 of these are for $159, $72, and $52.
If they aren't redeemed in 2 years, they probably aren't worth the cost of trying to acquire the property.

The 4th is for $739, and has a tax assessed value of $32,000. It will be worth pursuing if it ever comes to that (in 15 more months).

Lesson learned on the small liens. I'll set a minimum limit (probably $500) for future auctions.

Of the 11 liens that I overbid on, 5 have redeemed, including the 2 that had a $200 overbid.
Average of 7 month's time of redemption, and earned 5.2% on them.
This would be great if I had another auction to reinvest without having to wait til August.

Of the 6 that haven't redeemed, I should earn a minimum of 11.6%.

That leaves 19 other liens, that if redeemed next month would return 15%.


At this time I'm happy with the results, but need to figure out ways to keep the money invested longer.
Options:
Other state auctions. Travel is an obvious downside. Online auctions seem to have poor returns.
Research the liens to acquire ones that don't usually redeem quickly. This is time consuming, and could possibly limit the potential purchases to a number where I don't get as much money invested as I'd like.

Finding solid info on the topic is difficult. I welcome all questions, comments, and advice.
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Old 05-26-2011, 04:03 PM   #18
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Re: Tax Deed/Lien Sales

it is great that it is working for you so far. as you get more experience you may do much better. keeping your money working is the key to get it compounding.

you also must put a figure on what you time is worth. as in what you would be making at doing something else. subtract that from your results as this isnt a totally passive investment. then you get your real return.
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Old 08-04-2011, 02:31 PM   #19
JTrout
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Re: Tax Deed/Lien Sales

Thank you, Ray, for the encouragement and the advice.
Here's a one year update:

25 of the 47 liens redeemed in the first year of the 2-year redemption period.

Profit earned (interest minus overbid) on the redeemed liens: $2,539.57 (8.2%)

Interest accrued on the unredeemed liens: $3,487.61

Total return around 12.5%

Overall, I'm very pleased with the results, as it looks to be a solid return for a relatively safe investment. (Granted I'm a newbie with much to learn.)
The 2011 auction is later this month, and I'm looking forward to investing more this year.
I'll give another update then just in case there's anyone actually interested!
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Old 08-05-2011, 02:20 AM   #20
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Re: Tax Deed/Lien Sales

Quote:
Originally Posted by JTrout View Post
Thank you, Ray, for the encouragement and the advice.
Here's a one year update:

25 of the 47 liens redeemed in the first year of the 2-year redemption period.

Profit earned (interest minus overbid) on the redeemed liens: $2,539.57 (8.2%)

Interest accrued on the unredeemed liens: $3,487.61

Total return around 12.5%

Overall, I'm very pleased with the results, as it looks to be a solid return for a relatively safe investment. (Granted I'm a newbie with much to learn.)
The 2011 auction is later this month, and I'm looking forward to investing more this year.
I'll give another update then just in case there's anyone actually interested!
I am, this is great stuff that I didn't even know existed, thx for posting (this forum is so badass)
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Old 08-05-2011, 09:26 AM   #21
JTrout
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Re: Tax Deed/Lien Sales

Quote:
Originally Posted by yimyammer View Post
I am, this is great stuff that I didn't even know existed, thx for posting (this forum is so badass)
Thanks yimyammer.
This time last year, I knew practically nothing about the topic either.
I've since learned quite a bit.
Couple things I've learned:

There is a bunch of false info and misinformation on the subject.

This is understandable to some degree. Each state has it's own way of doing tax liens/deeds, and what's true in one state may not be useful in another.
Plus what was true in your state 10 years ago may not be true now.
I've read most of the books on the subject, and practically all had some things that were outdated and/or never were right to begin with.

Also,
There are several different strategies of investment.

Although there are similarities, tax deeds are a completely different animal than tax liens. (for now, I've focused on liens)
Info regarding one area of focus may be completely useless if your focus is in another area. Finding accurate info that is pertinant to your area of focus can be difficult.

Other things of interest to me, although I haven't pursued them out of an abundance of caution, are investment funds that are strictly into liens/deeds,
and self-directed IRAs that allow you to put your IRA dollars into the liens.

The self-directed IRA on the surface appears sweet, but I've read conflicting opinions as to their legitimacy. Plus the fees are higher.

Enough rambling.
Would love to have others add their experience to the thread.
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Old 08-05-2011, 10:02 AM   #22
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Re: Tax Deed/Lien Sales

This thread got me thinking about how these private tax liens are treated in bankruptcy. (I practiced bankruptcy for a while and now I work for a bankruptcy judge.)

I didn't do too much research because I'm at work, and even if I wasn't I have better things to do, but I found a bankruptcy case out of New York saying that the private tax lien holder was entitled to the same statutory interest rate that the municipality would've gotten. The court rejected the bankruptcy trustee's argument that the private holder wasn't entitled to the same rights the city was.
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Old 02-24-2012, 11:25 AM   #23
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Re: Tax Deed/Lien Sales

27 month update:

33 of the 47 liens have redeemed.
$50,252.02 invested. $47,357.77 recouped.

Ave ROI of the 33 redeemed = 10.8%
Ave time it took to redeem = app. 9 months

Of the 14 yet to redeem:
3 probably won't ($158.81, $72.25, $51.82)
which leaves 11 liens totalling $7,237.32
times 28.5% interest acquired so far ($2,062.64)

I found it informative to break down the liens by size:

11 liens required overbids totalling $1,300 that cannot be recovered.
All of these liens have now redeemed.
$29,620.38 invested, $32,708.29 returned.
10.4% return in 11.2 months

Liens from $800 - $1,500:
7 of 11 have redeemed.
$12,744.76 invested, $8,868.51 returned to date.
$4,832.62 have accumulated 28.5% interest ($1,377.30)
Expected total profit from these 11 liens: app $2,400
Expected return: 18% over an ave. of 12 mos.

Liens from $300 - $800:
9 of 11 have redeemed.
$5,700.78 invested, $4,937.60 returned to date.
$1,340.91 have accumulated 28.5% interest ($382.16)
Expected total profit from these 11 liens: app. $550
Exp. return: 16.5% over an ave. of 11 mos.

Liens < $300:
7 of 13 have redeemed.
$1,970.34 invested, $1,601.01 returned to date.
3 liens I'm expecting 0 return.
The other 3 total $251.46, and have accumulated 28.5% interest ($71.67)
I expect to lose app. $50 total on these 13 liens.
2.5% loss.


All comments, questions, and criticisms welcome!
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Old 02-24-2012, 05:16 PM   #24
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Re: Tax Deed/Lien Sales

This is really interesting. I know nothing about the process but it looks to be relatively safe in comparison to other investment choices.

Thanks for the updates.
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Old 02-24-2012, 07:39 PM   #25
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Re: Tax Deed/Lien Sales

I've been wanting to go down to the monthly auctions for some time here where I am at (Texas - Tax Deeds) and still plan to, however it is all cash deals, and I have no surplus cash to purchase anything, and from what I hear most people are over paying here anyways, though following the results there seems to be a little meat here and there.

Most of the good stuff gets pulled, and I am convinced that there are people in the business of getting to these people who own the property before it goes to auction and striking better deals, but I have no first hand or inside knowledge that this happens, but if I had the money this is exactly what I would do so I am sure others are.

Most of the auctions go for over $10K, and generally $30-$80K for houses......last month there was a large piece of land that went for $100K (assessed value at over $1M). The problem here is that while the property might be a good deal at $100K, there is a reason why nobody has developed it, bought it, or paid their taxes on it.

Last edited by PFUNK; 02-24-2012 at 07:44 PM.
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