Answers to More Questions About Utility Liens

This blog post is?in response to some very good questions from Mike about utility liens. Mike had submitted these questions in comments on the post “Are Sewer Liens Worth Buying?”

Here are his questions and the answers:

Question #1: It seems that water/sewer liens can be big losers if the recording fees are greater than the returns. The returns on subsequent payments of water/sewer liens for one year might only be $20-40 and I have seen recording fees for $30. I guess you’re really banking on being able to pay the subsequent delinquent property taxes.

Answer: Yes, when you purchase a water, sewer, or other small utility lien, you are counting on being able to pay the subsequent utility amounts in order to make good returns. However I have to point out that though you might not make a lot of money on these small liens, you will not lose money on them. Where I invest the recording fee is $40, but it is paid back to the investor, along with a $12.00 search fee, when the lien redeems. And although you are making small amounts of money, where else are you going to be able to invest those small amounts for 8-18% returns?

Question #2: Also, when you say states give you the opportunity to pay the subsequent taxes what does that actually mean? Do you receive a notice that the owner was late on making payments and what amount or do you have to dig through municipal records to find this information?

Answer: This depends on the county and the state that you are investing in. In some states, taxes are payable quarterly, in some twice a year, and in others once a year. Sometimes a notice is issued, but most of the time it is up to the investor to contact the tax collector, in writing and request the amount of sub taxes that are due.

Question #3: Does it matter when you pay the subsequent taxes?
For example, quarterly installments versus an annual payment right before the next tax sale.

Answer: Different states have different times when you can request this information, and some states have deadlines of when you can pay them. I want to point out that in Florida you are not allowed to pay the subsequent taxes and must bid on the lien each year. I also want to point out that in some Arizona counties if you do not pay the subsequent taxes (or utility amounts) your lien will sold in the next tax sale along with the current lien. These 2 states handle subsequent payments a little differently than the others.

I hope this clears up some questions about utility liens. If you have any other questions or comments please leave them below.

About Joanne

Joanne Musa is known online as the Tax Lien Lady. She helps people who want to invest their money profitably in tax liens and tax deeds and get high returns on their money without the typical risks of real estate investing or the uncertainty of the stock market. Get your free special report on "7 Steps to Building Your Profitable Tax Lien Portfolio" by Clicking Here.
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