Typical tax lien investing advice. Post 83

How to make money in a declining real estate market-Phoenix Real Estate

Real Estate News April 25th, 2008 categories

Tax Liens.

With an increasing number or Phoenix foreclosures and short sales have you ever considered buying a tax lien?

The source of this information is from http://treasurer.maricopa.gov/research/tutorial/tutorial.htm

Tax Lien Sale Guide – Introduction
“The Tax Lien Sale provides for the payment of delinquent property taxes by an investor. The tax on the property is auctioned in open competitive bidding based on the least percent of interest to be received by the investor.

Property taxes that are delinquent at the end of December are added to any previously uncollected taxes on a parcel for the Tax Lien Sale. The sale takes place in February of each year. Please read the disclaimer before deciding to bid, and see our lien FAQ page and lien history page.

Parcels whose taxes are subject to sale will be advertised, in January, in a Maricopa County newspaper of general circulation. They are listed by sequence number. Parcels fall into 1 of 2 groups. Each group is sorted by parcel number.

The advertisement appears about three weeks before the auction and is also posted on the internet.

Copies of the newspaper are usually available for purchase at Treasurer’s Office. In addition a CD of those parcels can also be purchased.

The investor is responsible for all research on the parcels available for auction. County maps for research may be obtained by visiting the Maricopa County Assessor’s Office.”

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Coach Mitch’s REFLECTIONS

This is the typical view from most real estate advisers

As you can read, the common view is to deal in tax lien certificates. In this situation, an investor will bid for the right to pay someone’s taxes and, after several years, hopefully, they will either get their investment back with some interest or they could get the property if the property owner does not pay the back taxes. BTW, it is extremely rare to get a property in this manner.

Bidding is high, lowering the ROR

Real estate prices are at all time highs, even if they have backed off a bit. Therefore, these days, most folks are seeking a deal. Tax sales are perceived as being a good place to get a good deal in real estate. In many places, it still is, but extreme care must be taken when bidding.

In a tax lien certificate sale, the more bidding there is on a particular tax lien, the lower your Rate of Return. In Maricopa County, at the last tax lien sale, every single tax lien was sold. The bidding was often fierce and the interest rate went from the statutory beginning rate of 16%, down to 5% in many cases and 0% in some cases.

You MUST know the rules

Why would an investor bid 0%? He seemingly gets no ROR. Well, there is an advanced strategy in play here. The owner of the tax lien gets the first bid at next year’s tax lien certificate sale, if the owner does not pay the taxes. Typically, there is no competitive bidding on this next tax lien and the investor would get 19% in NJ, for instance. If you divide 19% by 2, that gives an investor an 8.5% ROR over two years. If the property is worth the tax investment, then it is a good investment, as measured by most opinions.

Unfortunately, in this case, Arizona’s rules do NOT allow for this. In Arizona, the rule is that the subsequent year’s tax interest rate is the SAME as the rate bid the previous year.

Therefore, if an investor bid 0%, anticipating getting 16% in year two, he will be sadly surprised.

There ARE ways to make great money with TLC’s

Coach Mitch’s “Ridiculously Simple System…” teaches several ways to make significant profits in tax lien certificates when utilizing certain advanced techniques. These techniques are not hard, but they are not obvious.

The biggest thing to understand is that in every business there are lessons to be learned. You can learn the lessons from an experienced teacher or you will learn your lesson from your own bad experience.

See Coach Mitch’s “Ridiculously Simple System…” ™ for details.

Be prepared,