I attended 2 New Jersey tax sales recently, after having not been to a tax sale in a few months. I was not able to buy anything at either of these tax sales. From talking to other investors that I know, who have been at this game longer than I have, I’ve come to find out that things have changed this past year in New Jersey. It’s getting more difficult in the past couple of years to get profitable tax liens in this state.
The reason that I wasn’t able to buy any liens is because other investors were paying way too much money for tax liens for it to be profitable. New Jersey is the only state where the interest is bid down AND premium can be bid for liens. In almost every lien, the interest rate was bid down to 0% and large premiums were bid. In some cases, it’s worth it to pay premium for a lien and get no interest on the certificate amount. That is because once you have a tax lien certificate on a property, you can pay the current taxes and any subsequent taxes that the owner doesn’t pay, and get the default interest rate (18%) on all those payments. So investors are happy to pay for the right to be able to pay all the subsequent taxes and get a nice interest on those payments.
But every couple of years a new company gets involved in the game of tax lien investing in New Jersey and pays too much for tax liens. They bid up the premium on all the liens at every tax sale. In the past these companies have been after the larger tax liens – because their the ones that you can make the most money on, and they’ve left the small tax and utility liens alone. But now there are a couple of new companies that bid on everything. This is bad news for all the other institutional buyers and for the individual investors. Because either they will come away with nothing or get caught up in the bidding and pay too much money for liens.
There were 64 liens offered for sale at both tax sales combined, out of these 64 liens, 36 were purchased by BV001 Trust out of Philadelphia, a fairly new tax lien investing company. The certificates they purchased at both sales totaled over $40,000 and they paid over $80,000 in premium. That in itself is not surprising, what is surprising is that more than half of the liens they purchased were sewer liens under $200 and they paid $400 or $500 for each of them. They paid even more for larger utility liens, as much as $2,100 for a sewer lien that was a little over $1100. But their were not the only ones. FNA is another tax lien investing company that has been around for awhile, they only purchased 2 liens at one of the tax sales. Both of these liens were larger utility liens and they paid quite a bit of premium for each of them – as much at $4700 for one utility lien that was close to $2000.
You do get your premium back in New Jersey – without interest, if the lien redeems within 5 years of the tax sale. If the lien doesn’t redeem and you foreclose on the property (which hardly ever happens) you don’t get your premium back. So it’s not like you’re likely to lose that money, you are likely to get it back. But it can sit there with the municipality for 2 years or more while you wait for the lien to redeem. Most of us can’t afford to have a huge chunk of money sitting at 0% interest for a couple of years, unavailable to us if we were to need it. But for the institutional buyers, doing just that allows them to corner the tax lien market.
The institutional buyers got 56 of all of the liens offered in both tax sales. In the first tax sale that I went to they got all but 2 liens. One was an un-usable piece of land that no-one bid on and went to the township. The other was picked up by an individual investor at a steep price – he paid $800 for a $229 sewer lien. I guess he felt like he had to come away with something. In the second tax sale, 2 liens went to the township and 4 were picked up by individual investors, everything else went to the institutional bidders.
Since I have been involved in tax lien investing in New Jersey, I’ve noticed that it changes from year to year. But I’m usually able to get some tax liens at 18%. That doesn’t seem to be a possibility right now with the new players in the market place. It’s still a good investment for those bidders who have a lot of money and can let some of sit at 0% just for the right to invest some money at 18% interest. But the blended returns that I see investors getting now are not worth it for most of us. Right now secondary tax liens and tax lien investing funds that invest in states other than New Jersey and Florida seem to be the better investment. And if you have more money to invest look into tax deeds and redeemable tax deeds.
Come to our next Tax Lien Investing Workshop and Conference on July 26 in Chicago Illinois to learn more about opportunities to buy Illinois secondary tax liens and investing in redeemable deeds in Texas and Georgia. Just click on the tab at the top of this page for the 2013 Tax Lien Investing Conference to get the conference details and register.
By Bob Ryan June 26, 2013 - 8:00 pm
Hi Joanne,
Las Vegas would be great for a conference and I am sure you would get a lot of participants. There is no shortage of hotel rooms which offer good rates to investment groups.
Bob Ryan
By Joanne June 22, 2013 - 12:59 pm
Here’s a comment from a New Jersey tax lien investor who would like to remain anonymous. It was sent to me in an e-mail. But I thought it contained very good information so I’m posting it with permission:
“BV001 isn’t really new. They are the old Virgo re invented . They are completely out of control. They are bidding down to 4% returns. I guess they think they might recoup if they get foreclosures. And get another 2 – 4 points that way at the end.
Don’t know if you caught that article ( I think it was online at CNN finance) they attended the NTLA conference in FL. They came back with a statement that said that 5 years ago only 5% of the investors nationwide were backed by hedge funds. Now they estimate over 40%!
Institutional buyers are getting their money at 4% at most! The actual banks are getting it for free.
They are thrilled with 5% returns! And in the world of institutional money, 100 or 200 million dollars is pocket change. The whole state of NJ is under 200 million. So you get 2 or 3 of these guys that have to put their money to use and the game is over. Unless there are other venues for Wall st to place money at better returns then I believe the tax lien business is over for the small investor.”
– something to think about for NJ investors. And for new investors in NJ now is not a good time to try to get into the game. Come to the Chicago conference and find out where the good places are to get started now!
By Bob Ryan June 21, 2013 - 9:00 pm
Hi Joanne,
Unfortunately, I won’t be able to attend the event in Chicago. Are you planning or aware of any RE tax liens/deeds events scheduled for the fall or winter?
I enjoyed your conference in Baltimore, I learned a lot from you,PIP, and the other presenters. It was great planning and timing on your part having it coincide with the RE conference.
Take care,
Bob Ryan
By Joanne June 21, 2013 - 9:36 pm
Hi Bob,
I may be doing it again in the fall in either Las Vegas or California, which will be closer to home for you. I’m glad you enjoyed the Maryland Conference and the Expo.
By Jon June 21, 2013 - 11:18 am
I had the same experience recently.