Tax Liens

[matjone]

Anyone on here ever invested in real estate tax liens?  Where I live they pay 1.5% per month, which is pretty interesting for a small investor, especially with the current low stock and bond yields and possible high inflation coming in the next couple years. 

 

Just wondering if anyone has experience they can share about tax liens or can point me to some good study material.  Most of the books I see about it remind me of infomercial get rich quick schemes.

[ERICOPOLY]

Anyone on here ever invested in real estate tax liens?  Where I live they pay 1.5% per month, which is pretty interesting for a small investor, especially with the current low stock and bond yields and possible high inflation coming in the next couple years. 

 

Just wondering if anyone has experience they can share about tax liens or can point me to some good study material.  Most of the books I see about it remind me of infomercial get rich quick schemes.

 

Impressive, that's 19.56% annualized. 

[matjone]

I got an information packet from Lee county in Iowa that stated their rate was 2% per month. 

 

The rate is not compounded monthly though, just simple interest.  And that return is before any costs that you incur on research of course.  Still a pretty good return.

[SmallCap]

I have invested in them in the past and very profitably. unfortunately my home state of Michigan no longer sells them.

 

Best book on the topic is the 16 % solution by moskowitz.

 

the appendix information in the back of the book is dated but you can update that yourself.

 

If you can't find the book let me know and I will let you borrow mine.

 

SmallCap

[bookie71]

This type of investment is great in a "non taxable" account, BUT do your due diligence.  We have bought "discounted" deeds of trust in our profit sharing for years but you have to be very careful and not get too greedy.

[matjone]

Thanks for the offer on the book, SmallCap.

 

I bought a small amount a few years ago when I was living in Louisiana.  Didn't really do any research on them, just bought some of the smaller ones.  One of the guys there was an old farmer who went in and bid on every thing that the courthouse had a record of the owners having a homestead exemption on.  His reasoning was that this would increase his chances of getting paid.  I did notice that the person in charge of the sale seemed to favor certain bigger money bidders who were obviously regulars there.

 

What kind of research do you guys do on yours?  For most of them it didn't seem like it would be worthwhile to do too much because a lot of them weren't more than a few thousand dollars if I remember right.

[netnet]

While in my late teens I did this sort of thing with my mom.  As in all investments diligence is key.

 

the issues:

 

• Make sure the value of the property covers the note, i.e. margin of safety.
  
• The bidding will ruin the returns--stay disciplined no auction fever.
  
• Bidders tend to flock to the least costly liens and leave the more expensive ones even if these are better deals (documented auction behavior!.)
  
• Due diligence is key both on the property and the laws governing the liens.
   
  

[SmallCap]

Remember that each state has completely different rules about how the entire process is done. be careful taking anyones word for how it is done because while it may be the case in their state the state that you buy them in is completely different.

 

also just so you know only about 20 states do take liens at all each with different processes, time frames and rates.

 

So chose your state and learn about that one.