Are you making money on your investments? I spend a lot of time thinking about how to help more people become successful tax lien investors. You see, it wasn’t long ago that I started researching tax lien investing because I wanted to learn how to be a successful tax lien investor. I interviewed experts to determine how they became successful at tax lien investing. Then I took what I learned from them and what I learned from my own experience and turned it into good instructional materials to teach other people how to invest in tax liens and tax deeds successfully.
That’s why I created my website, www.Taxlienlady.com®, and this blog ? because I like helping others follow a successful model and avoid costly mistakes.
I’ve spent a lot of time thinking about this question:
“Why do some people make money with tax lien investing, and other people spend lots of money and time learning how to do it, but never really make any money at it?”
Of course I have some of my own ideas about why this happens, but I’d like to hear from YOU – why do people NOT make money at tax lien investing? What holds them back?
Please share your ideas and comments below
By Ron M. February 10, 2011 - 10:03 am
Dear Joanne,
I first of all would like to congratulate you on your ability to deliver this information with honesty and to the point without any fluff like so many others are trying to luer the public in buying their incomplete over priced programs. Keep up the good work. After trading in the stock market for some time I’m not satisffied with the results and therefore I find myself searching the internet just to find so many RealEstate opportunities that are available out their in so many different area’s of Real Estate. One of the uncertanties I have is living in Canada and not having the same exposure and some of our du-deligence involves physical presents although my wife and I will be visiting her Dad in Jupiter the latter part of March 2011. The other delema I have with TaxLien is I need to make some serious coin now, not in Two years or more, any suggestions Joanne?
By Joanne February 11, 2011 - 12:08 am
Hi Ron,
Thanks for the kind words about my web site! Since you are – or were, a stock trader, you will appreciate the difference between trading stocks and investing in stocks. When you invest in the stock market, you expect to get a return over time, but you do not expect it in a few days or even a few weeks. Investing in tax lien certificates is like investing in the stock market (only much safer) because you expecting steady profit on your investment over time and not right away. With stock trading, on the other hand, your not investing in a particular stock, but playing it. In other words you have you’re money in a stock just long enough to make a quick profit. There are ways to do this with tax delinquent properties, here’s a link to an article with some ideas for you:
https://taxlieninvestingtips.com/blog/?p=371
By Christian February 9, 2011 - 5:23 pm
Here is my take: This is a business and not all people are destined nor have the temperment to be in a business where they are in some degree of control over their own success or failure. Many people are more comfortable being told what to do. This is a business where “the devil is in the details” and where there can be different strategies that depend on one’s individual preferences. One critical litmus test of an individual’s temperment and likelihood of success in this business is to obtain a copy of the relevant Annotated Codes for your particular state. Read those that apply to this business. All of them. Every word. If it is not clear to you what the statutes say and what circumstances they are intended to address…then this is likely not your business. Understanding the details is an absolute necessity and indeed some codes are a bit obscure. In the process of reading them you should be making mental notes as to which sections are obvious and which are gray areas. Further DO NOT assume that the treasurers know what is going on either. Quite often they are elected officials and the mere fact that they were elected does not necessarily mean that they understand the nuances regarding liens and deeds. For them it can be a learning experience, too! I deal with one who has only been on the job for about two years and has still not figured out the really obscure details and treats the whole process as a nuisance. Caveat emptor!
By Joanne February 9, 2011 - 11:53 pm
Hi Christian,
So true about tax lien investing not being for everyone, and about knowing the laws in your state. The county treasurers and tax collectors can be a big help with procedural stuff, but when you need to know your rights as an investor and specifics about things like foreclosing, lien priority, and other legal aspects of tax lien investing, it’s best to seek out an attorney who does a lot of work with tax liens.
By Robert January 24, 2011 - 1:43 pm
Jo,
Have you thought about selling those liens? Do those counties allow reassignment? Some people may be willing to pay a premium since the parcels are eligible for a tax deed without waiting. That would get them off your hands and you wouldn’t have to pay future taxes. At the very least, you could get your money back.
By Joanne January 24, 2011 - 2:57 pm
Good point Robert,
My thoughts also, see my experience with assignment of lien that in my replay to Jo.
Joanne
By Henry F. Glodny January 23, 2011 - 10:27 pm
Tax lien investing is not all that simple or easy. I tried it in 2008 in Cook county, Illinois.
In our county, we bid down interest rates. In reality, this means that interest rates are almost always bid down to 0.0%.
There is also a requirement to put up 150% collateral and these funds are typically tied up for a month, regardless if we win any bids.
I would never consider investing in another state without traveling there. This makes it too difficult and time consuming.
I have had much more success over the last twenty years investing in open end no-load mutual funds, REITS and real estate.
I wonder where there may be some professionally managed mutual funds or unit investment trusts investing in tax liens?
By Joanne January 24, 2011 - 2:49 pm
Hi Henry,
I understand completely, Cook county is probably the most competitive county in Illinois, especially now that it’s online! New Jersey, where I do most of my investing is also very competitive and liens can be bid down to 0% and premium is bid, so yes that does cut down your interest. There are a couple of things that I’d like to point out though, big business is involved in buying these liens and they are making profit or they wouldn’t be doing it. In some cases the profit is made on subsequent tax payments and not on the original lien amount. Secondly, even with the competition in my state, I’m able to get a good return on my money. There are 3 reasons for that:
1) I invest small amounts of money at a time. If I went after the larger liens I’d have to pay premium.
2) I go to out of the way places to bid at these tax sales. Anytime you go to tax sales where there are big cities and affluent suburbs there’s going to be lots of competition. I try to stick to more rural area away from the big cities.
3) I go after the type of liens that the larger investors and institutional buyers don’t want, such as utility liens and liens on vacant land. Of course I do my due diligence before I purchase these liens so that I don’t get stuck with junk properties that I can’t build on, but I’ve had a lot of success with building lots.
Also there are tax lien funds that get decent returns and tax lien agents that get very good returns. The fund managers and agents can do better than the individual investor for a couple of reasons. First they are experienced and know what they are doing better than the new investor and secondly they have a team of experts and tools in place to help them do their due diligence and manage accounts. You can get my recommendations for tax lien funds and agents by clicking on “tax lien agents” or “tax lien funds” in the categories section of this blog (check the right sidebar).
By Jo January 22, 2011 - 12:38 pm
I can relate to what Robert is saying. In 2007, I bought 20+ online auction tax liens(land & homes)not knowing about “due diligence” and “premiums”. I was just starting out in tax lien investing, having attended a few webinar presentations. Some of those liens redeemed within days, some within a few months, and I still have 3 of them from 2007. Obviously, I lost money on the ones that quickly redeemed. Overall, I did make some money which would have been more, had I not paid “premiums”. The 3 liens from 2007 are for land and I can now “apply for deed”. 2 of the liens would cost me “deed application costs” that would make my cash investment close to the overall value of the land parcels. Not worth pursuing! I’ve learned a lot about “due diligence” and “premiums” – the hard way! I have since acquired other tax liens that I researched before buying. “Learn before you earn” is my approach now… 🙂
By Joanne January 22, 2011 - 2:28 pm
Hi Jo,
Great lesson! I’ve had a few of those myself! It’s always better to do your research before you buy. I have been able to salvage my investment and still make money on some of these deals though by finding a buyer and assigning my lien to another investor. I’ll give you an example. I had purchased a lien on an undersized lot in a nice little town, but I never would have been able to get a variance and build on it. I found a builder – who I met at tax sales, that specialized in building on undersized lots. He would apply for a building permit and when he was denied, he would appeal the decision in court. The township almost never showed up in the state court to fight his appeal and he usually won. He had the experience and knew what to do, so he was happy to pay the face value (what the lien would redeem for) for the lien and the right to foreclose on the property.
By Robert January 22, 2011 - 11:41 am
I would say there are two issues. The biggest one is that people pay too much of a premium on bids. The low cost tax liens are speculative in that a $5 premium on a $50 is 20%. I would have to hold a lein 2 years to make my money back. If the liens get paid off quickly, you lose money. The reason for speculating is hoping that one lein doesn’t get paid off and in a few years you get a piece of land worth $30,000.
The second is lack of research. I could probably get a plot of 40 acres real cheap by getting a lien the will not get paid off. Ask yourself this, why would it not get paid off? Maybe it is an inheritance or trust where the owner is clueless about paying taxes (You can hope), but more likely it is because the land is unbuildable with no access (landlock) and basically worthless. So $150 for 3 years of liens and $350 for a tax deed and you have land that you can’t sell that cost $500
By Jean Norton January 21, 2011 - 6:23 pm
I don’t get it either. If I pay for an expensive training session – I’m going to darn sure get my money back out of it!
FEAR
There’s a missing step between teaching and doing. And that’s the taking somebody by the hand and showing them. Think about fishing. You can teach someone all the mechanics of fishing, but you can’t really get someone to be an accomplished fisherman unless you take them to the water, show them how you fish, have them watch you catch a fish, then have them watch you as you try to catch a fish, then when they finally catch one, there is nothing to stop them.
Then you have hard headed people like me that just figure it out and do it.
By Joanne January 21, 2011 - 8:02 pm
Hi Jean
I’m one of those hard headed people like you, I like to just figure it out and do it. That’s how I got started. But I know there are things that I do like to have someone take me by the hand and show me how to it. Internet marketing was like for me. I have a mentor that has taught me to set up and market my web site, do teleseminars and webinars, get traffic to my web site and just about everything I needed to do to have a successful online business. She’s such a great teacher and I love the way she breaks things down into easy to follow steps. I try to do the same thing in my courses for tax lien investing. In fact I’ll be doing a live webinar training starting next week to do just that for tax lien investing.
Anyone who is interested in finding out more about the Build Your Profitable Tax Lien Portfolio Workshop you can go to http://www.ProfitableTaxLienPortfolio.com.
By Tracey January 21, 2011 - 5:08 pm
Sometimes people are motivated to move forward; however, worry that the lack of having extra money (or limited funds) to start investing will hold them back.
By Joanne January 21, 2011 - 5:53 pm
Hi Tracey,
Good point. I think it’s always good to start out with enough money, but how do you know how much is “enough.” This can be confusing for the new investor, especially when there are people out there talking up tax lien investing and making it sound like you don’t need any money to get started. Well it is “investing” after all and you do need money to invest. I always recomend that a new investor should have at least $2000 seed money to start with and of course more is better.
By Joanne January 20, 2011 - 7:41 pm
Hi Greg,
You’ve identified a couple of reasons that I have seen of why some people don’t make money at tax lien investing. I’m probably guilty of not taking action for other types of real estate investing myself. I always buy these courses for real estate investing programs that are going to “make me rich” but then I don’t take action. Or I take some initial steps but then I get distracted and don’t persevere and follow through. I guess it’s the same for some other people as far as tax lien investing is concerned. I can certainly relate to that!
By Greg January 20, 2011 - 4:40 pm
There are also people for which Tax Lien investing is just not a good fit.
Other investment types may fit their needs/capacities better.
By Greg January 20, 2011 - 4:38 pm
I’m guessing that this can be summed up to:
* lack of action (eg. not doing anything)
and
* wrong action (eg. doing something wrong)
I’m probably guilty of wrong action which in my case plays out as too much learning (or directionless learning) and not enough doing. I’m trying to make up for that by having a consistent volume of action to push past that so that there is enough ‘right action’ there along with the ‘wrong action’.