Here’s a question that I got a couple of weeks ago?and I thought it might be helpful for everyone to post the answer to here. This questions was from someone that had limited money and is somewhat disabled, and they asked a question that I think is on a the mind of a lot of people. I often get this question from individuals who have been recently laid off, or who have been without a job for a while.
The question is: “Is it worth it to start investing in tax liens with just a little bit of money, and build up from there?”
My answer to this questions is a whole hearted “YES it is, that’s how I got started.”
Recently I had a lien redeem. It was actually 2 separate liens on one property. I purchased the first lien back in December of 2002. That was the year that I started investing in tax liens. The amount of the lien was $444.62, and I paid $30 to record the lien. The following year I purchased another lien on the same property for $457.48, I paid another $412.88, a $40 recoding fee. Then I continued to pay the subsequent taxes of around $500 per year through 2008.
By December of 2008, six years after my original investment, I had invested a total of $3919.56. Then I stopped paying the subsequent taxes and going to the that particular tax sale. I was just too busy in December of 2009, and a little short of money, so in 2011, before the 2 year redemption period was over from the 2009 tax sale, I started foreclosure procedure on those 2 liens. Upon receiving the foreclosure notices the bank that had a mortgage on the property promptly redeemed the liens. I didn’t have to continue with the foreclosure, so I saved some money there. My total investment to the lawyer to foreclose on the liens was?around $300 for the title search and mailing of certified letters.
When the liens redeemed, I got a check for over $7807.74. Without counting the legal expenses, which were not reimbursed, I still?practically doubled my investment. Even with the legal expenses I still made out pretty good, wouldn’t you say. At least it was a lot better than I could have done in a CD or in the bank. Yes, maybe I could have made more in the stock market, but then all my profit would have disappeared in the last crash.
I used a large part of the?redemption money to pay the property taxes on a?couple of investment properties. The one thing that I learned from being involved in tax lien and tax deed investing is that you have to pay your property taxes! And I took some of the profit and bought 2 more liens and paid the subsequent taxes on another lien. Don’t you think that buying that small lien and paying the subsequent taxes each year was worth it? I do!
By Samuel December 11, 2011 - 5:54 am
Thanks for your answer!!
By Joanne December 9, 2011 - 1:56 pm
Hi Samuel,
This is somewhat state dependant, as in Florida you do not get to pay the subsequent taxes but if the owner does not pay the taxes the property will go up for tax sale each year. In most other states the lien holder can pay the subsequent taxes (and get interest on those payments) if the owner does not pay them. It is not a separate lien, but is added to your lien on the property and you usually have to submit an affidavit to the tax collector with your payment stating any payments that you have made. It does not effect the redemption period of your lien.
By Samuel December 8, 2011 - 4:47 pm
Hi Joanne,
I am not exactly clear on this sentence: “And I took some of the profit and bought 2 more liens and paid the subsequent taxes on another lien.”
So you have to pay taxes on a lien? I thought I just pay for the lien and that’s it? Is this “subsequent tax” just a lien on the same property?
Also, can I foreclose right after the 1st redemption period instead of keep paying for lien year after year?
Thanks!