I recently did my first tax lien assignment. I “assigned” or sold one of my tax lien certificates to another investor. This was a tax lien that I though I was going to lose money on. Why was I worried about losing money on this tax lien? Let’s just say that I purchased this tax lien certificate early in my tax lien investing career and did not do the proper due diligence. I had made three critical mistakes when I purchased this tax lien certificate. My first error was in purchasing a tax lien certificate on a property that I did not look at myself. I relied on the word of another tax lien investor, someone who was bidding for a large company and is actually my competition. My second mistake, since this was a vacant lot, was in not checking on the zoning. The lot turned out to be undersized thus un-buildable. My third mistake was in paying the subsequent taxes for almost 2 years before I checked the zoning.
By the time I had realized my errors, the redemption period was almost over and it was time to foreclose on the property. I did not want to start foreclosure because I didn’t think that there was anything I could do with the property, and I did not know if I would be able to sell it. I tried to sell this lien to other investors, packaged with a couple of good liens, but no one was interested. So how did I find a buyer for this tax lien and make over 40% on my investment?
When I attend tax sales I like to meet other investors and get to know them, especially the investors that see repeatedly at tax sales and have more experience than I do. I happened to find out that one of the investors who I often saw at these sales used to be a builder and he specialized in undersized lots. He knew how to apply and obtain variances on undersized building lots. I told him about the lien that I was looking to assign. I sent him all of the information about my tax lien certificate with a report of what I had paid in subsequent taxes and what the lien would redeem for. He took a look at the lot and determined that it was a good lot that he could do something with. He paid me the redemption amount of the lien and I assigned my tax lien certificate over to him. I gave him the certificate and signed an assignment contract. Since the tax lien certificate and subsequent taxes paid were at 18% per annum interest, and I had held the lien for more than two years, I received over 40% profit on my investment. I was happy to sell him the lien and get the interest and he was happy to have a tax lien certificate that was ready to foreclose on a property that he thought he would eventually be able to get a variance on and build on.
If you have tax lien certificates that are ready to foreclose, and you don’t want to go through the trouble of foreclosing on them, you may want to consider assigning them to another investor. Tax liens are hot right now; there is a lot of interest in them and it is usually easy to find a buyer for your lien. Not all states allow the assignment of a tax lien from one investor to another, however, so check with the laws in your state first. Assigning your tax lien certificates to another investor is one way that you can reap the rewards of tax lien investing without ever having to foreclose on a lien or own and manage the property. As always, make sure to do your due diligence and you’ll have no problem finding a buyer for your tax lien.
For more information on how to buy profitable tax lien certificates and tax deeds get my Tax Lien Investing Secrets II home study course at http://www.taxlieninvestingsecrets.com/.