How do you find out about tax sales that are coming up in your state? There are three ways that I know of to find out about tax sales for free or almost for free.You can look in the newspaper, call the tax collector, or go to a web site that sells tax sale lists.
The first way to find out about tax sales coming up in your area is to read the legal notices in the local newspaper. Most counties have to post an announcement about the tax sale, as well as the list of properties that are being offered for sale, in the local paper anywhere from two to four weeks before the sale. This method is not entirely free because you have to buy the paper. You also have to know when the sale is held so that you know when to start looking for it.
A better way to find out when and where the tax sale is held is to call the tax collector, or whoever is responsible for the sale in your state, and ask. Most of the time, this will be the county Treasurer or tax collector, but sometimes tax sales are conducted by the sheriff’s office (particularly in some deed states). One to find out who is responsible for the tax sale is to consult my State Guide. My State Guide is available as an e-book along with another e-book on how to invest in tax liens. Both books are available for $39.95. My state guide is different from the other resources that you can get online, because I don’t just give you the type of investment, interest rate and redemption period for each state. I tell you who is responsible for the tax sales in each state, so that you know who you have to contact, and I tell you whether or not you can get information online and give you a link to that State’s website with links to the counties.
The third way to find out about tax sales is to go to a web site that sells tax sale lists. Sometimes they will provide information about what tax sales are coming up for free. TaxSaleLists.com is a web site that you can register with for free and find out about tax sales throughout the US. For New Jersey and some of the eastern states I use LienSource.com to find out about tax sales. LienSource is the best provider of tax sale information for New Jersey. It’s $49.00 per year for a membership to LienSource but you can get a six month free membership if you mention that you were referred by The Tax Lien Lady. Just call the phone number on the home page of www.liensource.com to find out how to get your 6 months free membership. Bid4Assets.com is a web site that you can go to, to find out about online tax sales. You can check this site periodically to see what online tax sales are coming up. Not all online tax sales are conducted by Bid4Assets. For all Arizona tax sales, I use www.ArizonaTaxLiens.com. Here you can get information on all tax sales for Arizona and order any tax sale lists for counties in Arizona, including lists of leftover liens.
To recap here are the three ways that you can find out about tax sales in your state
Read the legal notices in the local newspaper
Call the tax collector or whoever is responsible for the sale
Go to one of the following web sites to find out about upcoming tax sales:
www.taxsalelists.com
www.liensource.com
www.bid4assets.com
www.ArizonaTaxLiens.com
If you need step-by-step information on how to get started, I have a $7.00 Special Report on the 7 Steps to Building Your Profitable Tax Lien Portfolio that is available at http://yourprofitabletaxlienportfolio.com.
Tuesday, May 29, 2007
Where is the Best Place to Invest?
Where is the best place to invest in tax lien certificates or tax deeds? Most people are concerned about which lien states have the highest interest rates and which deed states start bidding at back taxes. I believe that the best place to start investing is in your own backyard. I think that it’s best to invest in an area that you know, because you’ll know what the property values are and you’ll know what to look out for. Each state has different problems that you have to be aware of, especially if you’re purchasing raw land.
In Pennsylvania where I invest in tax deeds, for example, I have to worry about whether a property will perk or not. If I buy a lot in a deed sale that doesn’t perk I won’t be able to get a septic design approved and won’t be able to build on the property. Its resale value will be a fraction of the price that I could get for it if it had an approved septic design. In another state you might have other concerns. In dry states, like Arizona for example, you may have to be concerned about water rights.
Don’t be too concerned about which state has the highest interest rate. In states with high interest rates, the interest is typically bid down extremely low. What you should be concerned about is will you have the opportunity to pay the subsequent taxes, and will you get the maximum interest rate on your subs, and are there other penalties that you are entitled to.
In New Jersey, for example the interest rate is typically bid down to 0% and then premium can be bid as well. The reason that investors do this is because they know that once they have the lien, they can pay the subsequent taxes and get the maximum interest rate on their “subs,” which is 18%, and they will also receive a penalty on the certificate amount of the lien.
In Florida where the maximum interest rate is also 18%, the interest is typically bid down to as low as ¼ %. In Florida you are not allowed to pay the subsequent taxes, actually you can pay them, but you do not receive any interest on subsequent taxes, nor will you get any subsequent tax payments back should the lien redeem. However, in Florida there is a minimum penalty of 5%, so if you bid less than 5%, you get the penalty instead of the interest rate that you bid.
Don’t be too concerned about which deed states start bidding at back taxes. The more important thing to be concerned about for deed states is, “what will the competition typically bid the price up to.” In some states, real estate is so valuable and the demand outweighs the supply of affordable homes. In these states (California, Florida, and the Northeast States) any property with a home or business on it will be bid up close to market value. Remember, tax sales are auctions and sometimes people get carried away at actions and pay too much money. Online auctions can be especially competitive, and may California and Florida counties have tax sales online.
To find out about tax sales in your county or municipality go to a sale and see what it’s like. Talk to the tax collector, or whoever is responsible for conducting the tax sale in your area to find out more about how to register for the sale and what the procedures and requirements are for bidding. If you need help determining whom you need to contact, you can consult my State Guide.
My State Guide is available as an e-book along with another e-book on how to invest in tax liens. Both books are available for $39.95. My state guide is different from the other resources that you can get online, because I don’t just give you the type of investment, interest rate and redemption period for each state. I tell you who is responsible for the tax sales in each state, so that you know who you have to contact, and I tell you whether or not you can get information online and give you a link to that State’s website with links to the counties.
What if you live in a deed state and you want to invest in tax liens? I’m in Pennsylvania, which is a deed state, but I’m close to New Jersey, which is a lien state, so I do my tax lien investing there. If you’re not close enough to travel to a state that sell tax liens, is there a state that you vacation in or do business in that sell tax liens? If there is maybe you can right off your next vacation if you go to a tax sale? If not, then you may have no other alternative than to invest online. There are only 2 tax lien states that I’m aware of that have online sales – Arizona and Florida. Arizona sales take place in February and March each year, and Florida lien sales (Florida has both lien and deed sales) are in May and June. Be very careful to do your due diligence on these properties. I don’t advise investing online unless you can go look at the properties or you have someone that can look at them for you.
Here are four action steps that you can take right now to find the best place for you to invest.
Call the tax collector and find out what happens in your state. Do they sell tax
liens, tax deeds, or redeemable tax deeds?
Go to a sale and see what it’s like.
If you are in a deed state and you want to invest in tax liens, then find out what
states sell tax liens, if you need help with this get my State Guide.
Find out about online tax sales at http://www.bid4assets.com.
Bid4Assets has mostly deed auctions, In order to find tax lien auctions online; you will have to go to the county’s web site. For this I recommend going through the links on my State Guide.
If you take the action steps above, then you’ll have a good idea of what state is the best for you to invest in. And if you read my State Guide, you’ll have a good idea of what happens at tax sales in each state. If you need step-by-step information on how to get started, I have a $7.00 Special Report on the 7 Steps to Building Your Profitable Tax Lien Portfolio that is available at http://yourprofitabletaxlienportfolio.com.
In Pennsylvania where I invest in tax deeds, for example, I have to worry about whether a property will perk or not. If I buy a lot in a deed sale that doesn’t perk I won’t be able to get a septic design approved and won’t be able to build on the property. Its resale value will be a fraction of the price that I could get for it if it had an approved septic design. In another state you might have other concerns. In dry states, like Arizona for example, you may have to be concerned about water rights.
Don’t be too concerned about which state has the highest interest rate. In states with high interest rates, the interest is typically bid down extremely low. What you should be concerned about is will you have the opportunity to pay the subsequent taxes, and will you get the maximum interest rate on your subs, and are there other penalties that you are entitled to.
In New Jersey, for example the interest rate is typically bid down to 0% and then premium can be bid as well. The reason that investors do this is because they know that once they have the lien, they can pay the subsequent taxes and get the maximum interest rate on their “subs,” which is 18%, and they will also receive a penalty on the certificate amount of the lien.
In Florida where the maximum interest rate is also 18%, the interest is typically bid down to as low as ¼ %. In Florida you are not allowed to pay the subsequent taxes, actually you can pay them, but you do not receive any interest on subsequent taxes, nor will you get any subsequent tax payments back should the lien redeem. However, in Florida there is a minimum penalty of 5%, so if you bid less than 5%, you get the penalty instead of the interest rate that you bid.
Don’t be too concerned about which deed states start bidding at back taxes. The more important thing to be concerned about for deed states is, “what will the competition typically bid the price up to.” In some states, real estate is so valuable and the demand outweighs the supply of affordable homes. In these states (California, Florida, and the Northeast States) any property with a home or business on it will be bid up close to market value. Remember, tax sales are auctions and sometimes people get carried away at actions and pay too much money. Online auctions can be especially competitive, and may California and Florida counties have tax sales online.
To find out about tax sales in your county or municipality go to a sale and see what it’s like. Talk to the tax collector, or whoever is responsible for conducting the tax sale in your area to find out more about how to register for the sale and what the procedures and requirements are for bidding. If you need help determining whom you need to contact, you can consult my State Guide.
My State Guide is available as an e-book along with another e-book on how to invest in tax liens. Both books are available for $39.95. My state guide is different from the other resources that you can get online, because I don’t just give you the type of investment, interest rate and redemption period for each state. I tell you who is responsible for the tax sales in each state, so that you know who you have to contact, and I tell you whether or not you can get information online and give you a link to that State’s website with links to the counties.
What if you live in a deed state and you want to invest in tax liens? I’m in Pennsylvania, which is a deed state, but I’m close to New Jersey, which is a lien state, so I do my tax lien investing there. If you’re not close enough to travel to a state that sell tax liens, is there a state that you vacation in or do business in that sell tax liens? If there is maybe you can right off your next vacation if you go to a tax sale? If not, then you may have no other alternative than to invest online. There are only 2 tax lien states that I’m aware of that have online sales – Arizona and Florida. Arizona sales take place in February and March each year, and Florida lien sales (Florida has both lien and deed sales) are in May and June. Be very careful to do your due diligence on these properties. I don’t advise investing online unless you can go look at the properties or you have someone that can look at them for you.
Here are four action steps that you can take right now to find the best place for you to invest.
Call the tax collector and find out what happens in your state. Do they sell tax
liens, tax deeds, or redeemable tax deeds?
Go to a sale and see what it’s like.
If you are in a deed state and you want to invest in tax liens, then find out what
states sell tax liens, if you need help with this get my State Guide.
Find out about online tax sales at http://www.bid4assets.com.
Bid4Assets has mostly deed auctions, In order to find tax lien auctions online; you will have to go to the county’s web site. For this I recommend going through the links on my State Guide.
If you take the action steps above, then you’ll have a good idea of what state is the best for you to invest in. And if you read my State Guide, you’ll have a good idea of what happens at tax sales in each state. If you need step-by-step information on how to get started, I have a $7.00 Special Report on the 7 Steps to Building Your Profitable Tax Lien Portfolio that is available at http://yourprofitabletaxlienportfolio.com.
Wednesday, May 02, 2007
Tax Deed Investing: Don’t Wait for the Leftovers
I recently went to the Monroe County Judicial tax sale in Pennsylvania. I didn’t actually go to the sale. I came in after the sale to see what was left over. When the sale is over the county gives everyone an hour or so to go to the bank and get the funds to pay for the properties that they bid on. All payment has to be in certified funds or money order, no cash and no personal checks are accepted.
When the time limit is up, the county will re-bid any properties that weren’t paid for along with any properties that didn’t sell in the morning auction. I went to this sale to see if there were any decent properties left over at the end of this final auction. What ever does not sell at this auction goes onto the “repository” list and is sold by private bid. When you buy a property from the repository list, you do not need to clear the title, since the county has taken the property. This can save you some money, since to do a quiet title process with an attorney would cost about $750.00.
There were not many properties in this sale, only 9 properties that were bid, but hadn’t been paid for and 16 that were not sold in the morning auction. Half of these properties were sold in the second auction. The only properties that didn’t sell were either undesirable lots or trailers. Trailers are not worth purchasing at a tax sale because you are only given the deed to the trailer, not to the property that the trailer is on. You will either have to pay rent to whoever owns the land or move the trailer. Undesirable land is also not worth purchasing because you can’t build on it, but you would still have to pay the taxes and any homeowner association fees if it’s in a community.
Basically there was nothing left of any value after the tax sale, so next year I will go to the sale and plan on spending an extra $750 to clear the title on anything that I might purchase. I often get inquiries from people who want to invest in tax liens or tax deeds, but they don’t want to attend the tax sale. They either want to invest long distance, where traveling to the sale is not practical, or they just don’t have the time to go to the sale. They want to know if they can buy liens or deeds through the mail from the leftover tax sale list. This may work in some states where counties have thousands of liens available, but it doesn’t work very well for deeds here in Pennsylvania.
When the time limit is up, the county will re-bid any properties that weren’t paid for along with any properties that didn’t sell in the morning auction. I went to this sale to see if there were any decent properties left over at the end of this final auction. What ever does not sell at this auction goes onto the “repository” list and is sold by private bid. When you buy a property from the repository list, you do not need to clear the title, since the county has taken the property. This can save you some money, since to do a quiet title process with an attorney would cost about $750.00.
There were not many properties in this sale, only 9 properties that were bid, but hadn’t been paid for and 16 that were not sold in the morning auction. Half of these properties were sold in the second auction. The only properties that didn’t sell were either undesirable lots or trailers. Trailers are not worth purchasing at a tax sale because you are only given the deed to the trailer, not to the property that the trailer is on. You will either have to pay rent to whoever owns the land or move the trailer. Undesirable land is also not worth purchasing because you can’t build on it, but you would still have to pay the taxes and any homeowner association fees if it’s in a community.
Basically there was nothing left of any value after the tax sale, so next year I will go to the sale and plan on spending an extra $750 to clear the title on anything that I might purchase. I often get inquiries from people who want to invest in tax liens or tax deeds, but they don’t want to attend the tax sale. They either want to invest long distance, where traveling to the sale is not practical, or they just don’t have the time to go to the sale. They want to know if they can buy liens or deeds through the mail from the leftover tax sale list. This may work in some states where counties have thousands of liens available, but it doesn’t work very well for deeds here in Pennsylvania.
Tax Lien Investing: Know What You’re Bidding!
I attended a tax lien sale in New Jersey yesterday. This particular sale is in the township that I used to live in, and I know it well, so I attend this sale every year. Last year I was able to pick up a couple of small sewer liens there for 18%. This year I came away with nothing. Almost everything went at premium, even small sewer liens.
Investors were bidding hundreds of dollars in premium on small sewer liens with no open taxes. They are sure to make very little profit if anything at all on this type of lien when they pay that much premium. So why do they do it? Some of the investors there I knew were bidding for large funds or tax lien investing companies, they paid quite a bit of premium for tax liens that had amounts due of over $1000.00. The largest lien in the sale was for $22,000.00 and went for $205,000.00 to one of these institutional buyers.
But this I understood, I know that these companies figure out just how much they can pay on these larger liens and still make a profit. Once they have the lien, they can pay the current taxes and make 18% on all of the subsequent taxes that they pay, and when the lien is redeemed they will also receive a hefty penalty on the certificate amount (6%). And as another bonus, in certain municipalities, if they more than $10,000.00 in subsequent taxes for the year, at the end of the year another 6% penalty will be added to the subsequent taxes that they paid. So for instance in the case of this particular lien, the annual taxes were around $68,000.00, (this was commercial property assessed at over 2 million). If they held the lien for a year and it redeemed, they would be able to pay in another $68,000.00 and make 24% (the 18% plus the 6% year end penalty) on that. Although they got 0% interest on the certificate amount, they still get a 6% penalty on it, so their total profit would be $17,640.00 on a total investment of $295,000.00, for a yield of 5.98%.
What I didn’t understand is why would someone pay a few hundred dollars for a small sewer lien with no open taxes. Some people see all the money that is bid for larger liens and think that they can apply the same percentages to smaller ones, but it just doesn’t work. A newbie investor paid $1000.00 for a small sewer lien that was a little more than $200. In this case it doesn’t really matter what the annual taxes are, since you will not get a chance to pay them. You may be able to pay the subsequent sewer amounts, but that is probably no more than $500.00 per year. And because the delinquent tax amount is so low (under $1500.00) the penalty that you receive on the certificate amount is only 2% and the interest received on the subsequent sewer payments will only be 8% until the delinquent amount reaches $1500.00. It would take you almost three years to pay enough subs to reach that amount and most sewer liens will pay off within the year. But in this case let’s assume that the lien will be held for one year and then redeem like we did in the example above and see how the investor does.
If the lien redeems in a year the investor will get back their $1000.00 premium – with no interest or penalties along with the redemption amount. Lets say that sewer tax is $500.00 per year and they paid the subsequent taxes for one year. They would receive back the certificate amount with no interest and a 2% penalty, which is only $4.00 and the subsequent sewer amounts that they paid with 8% interest, which is $40.00. So their total profit would be $44.00 and their total investment was $1700.00, giving them a yield of 2.3%. Right now they could get more than that in the bank without doing any work. But most sewer liens redeem in a few months, so it is not likely that an investor will even to that well.
These examples are a little simplified and it doesn’t work out exactly this way. In New Jersey taxes are paid quarterly, so instead of paying the taxes all at once, you pay them 4 times a year. So the actual returns are a little lower than the examples here, simple because you usually don’t get to pay a whole year of subsequent taxes at one time. But the moral of this story is “know what you’re bidding” when you go to a tax sale.
In this case the newbie investor did not know that she wasn’t going to receive any interest on the premium that she was bidding, or on the certificate amount. She really did not know what she was doing, but she kept bidding because other investors were also bidding. Sometimes seasoned investors continue bidding because they want to bid new investors up to the point where it is not profitable for them. Their reasoning is that they think they are getting rid of the new competition. And some investors that are bidding with fund money, or appropriated funds, must use a certain amount of money per year, so sometimes they pay more than they should for liens. Don’t let them bid you up to numbers that don’t make any sense.
Know what your bidding before you bid at a tax sale. It you’ve never been to a tax sale before, you might want to go and observe what happens before you actually bid. After the sale, if there’s something that you don’t understand, ask someone in the tax office. Different states have different bidding procedures. In some states the interest is bid down, and in other states premium is bid for liens. New Jersey is the only state where interest is bid down and premium is bid. So a lien can go quickly from 18% to $1800.00 in premium with no interest.
Investors were bidding hundreds of dollars in premium on small sewer liens with no open taxes. They are sure to make very little profit if anything at all on this type of lien when they pay that much premium. So why do they do it? Some of the investors there I knew were bidding for large funds or tax lien investing companies, they paid quite a bit of premium for tax liens that had amounts due of over $1000.00. The largest lien in the sale was for $22,000.00 and went for $205,000.00 to one of these institutional buyers.
But this I understood, I know that these companies figure out just how much they can pay on these larger liens and still make a profit. Once they have the lien, they can pay the current taxes and make 18% on all of the subsequent taxes that they pay, and when the lien is redeemed they will also receive a hefty penalty on the certificate amount (6%). And as another bonus, in certain municipalities, if they more than $10,000.00 in subsequent taxes for the year, at the end of the year another 6% penalty will be added to the subsequent taxes that they paid. So for instance in the case of this particular lien, the annual taxes were around $68,000.00, (this was commercial property assessed at over 2 million). If they held the lien for a year and it redeemed, they would be able to pay in another $68,000.00 and make 24% (the 18% plus the 6% year end penalty) on that. Although they got 0% interest on the certificate amount, they still get a 6% penalty on it, so their total profit would be $17,640.00 on a total investment of $295,000.00, for a yield of 5.98%.
What I didn’t understand is why would someone pay a few hundred dollars for a small sewer lien with no open taxes. Some people see all the money that is bid for larger liens and think that they can apply the same percentages to smaller ones, but it just doesn’t work. A newbie investor paid $1000.00 for a small sewer lien that was a little more than $200. In this case it doesn’t really matter what the annual taxes are, since you will not get a chance to pay them. You may be able to pay the subsequent sewer amounts, but that is probably no more than $500.00 per year. And because the delinquent tax amount is so low (under $1500.00) the penalty that you receive on the certificate amount is only 2% and the interest received on the subsequent sewer payments will only be 8% until the delinquent amount reaches $1500.00. It would take you almost three years to pay enough subs to reach that amount and most sewer liens will pay off within the year. But in this case let’s assume that the lien will be held for one year and then redeem like we did in the example above and see how the investor does.
If the lien redeems in a year the investor will get back their $1000.00 premium – with no interest or penalties along with the redemption amount. Lets say that sewer tax is $500.00 per year and they paid the subsequent taxes for one year. They would receive back the certificate amount with no interest and a 2% penalty, which is only $4.00 and the subsequent sewer amounts that they paid with 8% interest, which is $40.00. So their total profit would be $44.00 and their total investment was $1700.00, giving them a yield of 2.3%. Right now they could get more than that in the bank without doing any work. But most sewer liens redeem in a few months, so it is not likely that an investor will even to that well.
These examples are a little simplified and it doesn’t work out exactly this way. In New Jersey taxes are paid quarterly, so instead of paying the taxes all at once, you pay them 4 times a year. So the actual returns are a little lower than the examples here, simple because you usually don’t get to pay a whole year of subsequent taxes at one time. But the moral of this story is “know what you’re bidding” when you go to a tax sale.
In this case the newbie investor did not know that she wasn’t going to receive any interest on the premium that she was bidding, or on the certificate amount. She really did not know what she was doing, but she kept bidding because other investors were also bidding. Sometimes seasoned investors continue bidding because they want to bid new investors up to the point where it is not profitable for them. Their reasoning is that they think they are getting rid of the new competition. And some investors that are bidding with fund money, or appropriated funds, must use a certain amount of money per year, so sometimes they pay more than they should for liens. Don’t let them bid you up to numbers that don’t make any sense.
Know what your bidding before you bid at a tax sale. It you’ve never been to a tax sale before, you might want to go and observe what happens before you actually bid. After the sale, if there’s something that you don’t understand, ask someone in the tax office. Different states have different bidding procedures. In some states the interest is bid down, and in other states premium is bid for liens. New Jersey is the only state where interest is bid down and premium is bid. So a lien can go quickly from 18% to $1800.00 in premium with no interest.
Subscribe to:
Posts (Atom)
