How did you do this past year with your tax lien investing? Did you buy any tax liens or tax deeds? How profitable were you? Are you finding it harder to compete, or are you afraid to jump in to investing in tax liens or deeds? Here is my assessment of went on in the tax lien investing industry in 2014, what’s ahead for this year, and what I’m currently doing to insure profitability with my investments.
Tax lien and tax deed investing have gotten extremely competitive in many states over the past couple of years. As more counties are conducting their tax sales online and big banks and hedge funds are jumping into tax lien investing, it’s getting difficult in some states to get good deals. There are still some places where the individual investor can get properties (deeds or redeemable deeds) and good returns (tax liens and redeemable deeds). The key is doing your homework ahead of time and finding the better places to invest.
Online Tax Lien Investing
The states with the highest interest rates, in which the interest is bid down, and have online sales, suffer from the toughest competition. This can really be seen if you look at the results of some of the online tax sales. In Florida for example the bidding still goes quite low on most of the “good” liens – typically to 0.25%. Even though investors are likely to get the 5% penalty instead of the interest that was bid, it’s still not a good deal compared to the average interest rate that investors got in some of the online tax sales in Arizona last year. So if you don’t live in a tax lien state, or are investing from outside the US, then I would recommend the Arizona tax sales over some of the other popular tax lien investing states that have online tax sales, like Florida or New Jersey. But even the returns on the Arizona online tax sales were low in some counties and higher in others, so look at the results of past tax sales before bidding this year to see which counties are the better counties to bid in and how low you will have to bid to be successful.
I went to a handful of tax sale in New Jersey this year, after staying away from them last year because of the intense competition – and that wasn’t even at the online sales. At half of the sales I went to, I came away with nothing, but I did manage to get a few tax liens at the other tax sales I attended. If you want to be successful bidding at these tax sales, you just need to attend as many as you can and not get discouraged. Eventually I did get some pretty good liens. But it is hard to place your money if you have a lot to invest. A few more of the New Jersey municipalities went online this year, there are now 46 municipalities with online tax sales up from 13 just a year ago. And I expect more of the NJ municipalities to move to the online tax sales in the future. The problem with this is that the online tax sales are even more competitive than the live tax sales, investors have to have at least $10,000 to participate, and there is an extra charge per lien that is passed on to the investor. It’s good for the tax collectors, but not so great for investors.
Secondary Tax Lien Market
I believe that the best way to get your money invested this year is in the secondary market. There is a big market right now for secondary liens. There are small, medium, and large institutional buyers that want to unload their liens. The trick is finding the good secondary liens among all the junk that’s out there. That means finding a secondary lien broker or agent that you can trust. I do have quite a few contacts for secondary liens and I make those opportunities available to members of the Tax Lien Profits Accelerator. I was very happy with my secondary tax lien investment this past year, I made over 40% in 18 months on one of my secondary lien purchases and one of my students made over 30% in 9 months on his! But I have to tell you that these results are not typical, and you do have to know what you’re doing when you buy secondary liens. There are some markets where you just won’t make money unless you get to foreclose on the property. Beware, just because a lien has gone the full redemption period or beyond and foreclosure procedures have been started doesn’t mean that it won’t redeem sometime during the foreclosure process. It’s important that you know what you’re doing or have someone to guide you if you’re investing in secondary tax liens or redeemable deeds.
Tax Lien Funds
The private tax lien investing funds that I’ve invested in have also done well. Unfortunately Comian (the fund company I’m invested with) won’t be taking any new investors this year. But for those of you who have at least $50,000 to invest, I do know another good tax lien fund that is managed by someone I trust.
What We’re Planning For 2015
This year we’ll have more guest webinars with experts that can make your life easier and more profitable by doing most of the work for you and circumventing the competition or cutting it out entirely. I’ll also be including more tools to make your research easier if you want to do the leg work yourself. And you’ll also be seeing these experts, and expert tools and resources in any live events and workshops that I do. I plan on speaking more this year at various places around the country, so keep your eye out for me at your next local real estate investing or wealth building seminar. In fact if you would like me to come and speak at your local REIA, let me know. Send me an e-mail at firstname.lastname@example.org.
We’ll be having done-with-you online workshops during some of the online tax sales, so you can get help registering for the tax sales, researching properties and bidding at the sale! We may even have a couple of bus trips to live tax lien or redeemable deed sales, plus we’re planning our next live conference/workshop.