The 2 most common questions I get from new tax lien investors and people that are just starting out investing in tax liens or redeemable tax deeds are:
“Which state can I invest in and get the highest interest on my money?”
And…
“Where can I invest and get my return in the shortest time period?” In other words, “Which liens have the shortest redemption periods?”
The answer to both of those questions is “Illinois Secondary Tax Liens.”
Why Illinois Secondary Tax Liens?
Illinois is the tax lien state with the highest statutory interest (18% every 6 months) on the certificate amount. They do have a fairly long (2 and half to 3 year) redemption period. But when you buy secondary liens from the investor who purchased them at the tax sale, you can buy these liens at the end of the redemption period when they are ready to foreclose.
Illinois is the only state where you can earn 36% on your money each year. It is a 6 month penalty, not an annualized interest rate, on tax lien certificates. That means that if you buy a tax lien at an Illinois tax sale and it redeems in 7 months, you get 36% return. If it redeems in 13 months after the tax sale, you’ll get a another 18% added to that for a 54% return. Depending on how long the certificate is held – you can make up to 108% on your money!
The catch is that the interest rate is bid down at the tax sale. So how does an investor get those great rates. The truth is that most investors don’t. Especially if they go to the most popular places and bid on the pretty properties. And there are hidden expenses to attending these auctions as well.
What about OTC liens in Illinois?
Buying OTC (over-the-counter) liens directly from the county is not a strategy that I recommend. Yes it is a way that you can get the maximum interest (or penalty) without bidding at the tax sale. But if tax sales are so competitive that you don’t want to bid at the sale, what makes you think there is anything good left over? In recent years there has not been. Most of what is left over (if there is anything left over at all) are liens on junk properties. Sometimes you can find a good property on the list, but it is not likely and very time consuming to find.
And if you were willing to put in the time involved, you would have to be ready to grab these liens as soon as their available from the county. That means shortly after the tax sale, and you’d still have a long wait for the redemption period to end. But when you purchase a secondary tax lien from an investor, that lien is usually close to the end of the redemption period and ready to foreclose. Can you see the advantage to buying secondary liens over the OTC liens?
The trick is to buy secondary liens at a discount to the full redemption value, so that both you and seller make money. And so that you will get a return on your money whether the lien redeems or you get to foreclose on the property.
Want to learn how to make money from Illinois secondary tax liens?
Join me as I host a training with the foremost Illinois tax lien investing agent, Charles Sells, of PIP Group LLC. On Wednesday December 5 at 8:30pm Eastern Time (5:30pm Pacific), Charles will show you just how you can profit big time on Illinois tax liens without attending a tax sale!
This webinar is part of Tax Lien Lady’s Wealth Building Webinar series. The live presentation is free for the general public. To get access to the recording of this training and the rest of the Wealth Building Webinar replays you can subscribe for only $29 per month. Less than a cup of coffee a day! Find out more about Wealth Building Webinars at www.WealthBuildingWebinars.com.
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