So which state is the most profitable state for tax liens?
The most profitable state for tax liens is Illinois. The rate in Illinois is 18%, but that is a six month penalty, not an annualized interest rate. So the real maximum rate of return in Illinois is 36% per year. Instead of an annualized interest rate, it’s a penalty amount applied every 6 months. Therefore, you can actually make more than an annualized return of 36%. For example, say you get a tax lien at 18% and it gets redeemed in the seventh month. Then you’d receive 36% on your money in the seventh month, that’s better than an annualized return of 36%. It’s more like an annualized return of 62%!
Illinois tax sales start soon, and will run throughout the remainder of the year. None of the IL counties have online tax sales. So investing in these tax sales can be a little difficult,if you don’t live in Illinois or in a nearby state. And since it is a very profitable state for tax lien investing, the competition is intense. It’s not easy for new investors to get decent rates. Even though the maximum rate is 18% per six months, the rate is bid down at the tax sale. In the more popular counties the rate can be bid down to 2% and in some counties even as low as 0%.
Why would investors bid down to 0%?
Investors are willing to bid down to 0% because once they have the lien, they can pay the subsequent taxes and get interest on their subsequent tax payments. When you go to a tax sale, you are buying previous year’s delinquent taxes. This year’s taxes can still be paid by the tax lien investor, if the homeowner doesn’t pay them. The next two or three years of taxes (until the redemption period is over), can be paid by the investor as well. If the lien redeems the investor will collect a 1.5% per month penalty on all his or her subsequent tax payments. If the lien does not redeem, the investor can foreclose on the property.
How do you get the highest rates in Illinois?
The best way to get the highest rates in Illinois is to have an expert do your bidding for you. Even though you can make a lot of profit in Illinois, the novice investor is not likely to get those high rates. Moreover, Illinois is a state that puts a lot of requirements on the lien holder, so you really need to know what you are doing in this state. I’ve been dealing with agents who specialize in investing in Illinois tax liens for years. For the last 10 years their average bid rate at these tax sales has been 28% and they will be attending 97 tax sales in the next 4 months. It’s not too late to have the experts bid for you in Illinois, but if you don’t hurry up and make that decision, you might have to wait for next year, because the tax sales are starting now!
How to find out more
You can find out more about investing in Illinois and how you can have experts take care of all aspects of investing for you by on our next Wealth Building Webinar with Charles Sells of PIP Group. These webinars are usually only for Tax Lien Profits Accelerator™ members. While the recording of this training will only be available to Wealth Building Webinar and Tax Lien Profits Accelerator™ members the live call is free for all to attend. Register Now Here!
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