Posted by Bill H on July 04, 2003 at 12:28:54:
Tim & All
I buy in MS. Interest is 18 percent on the amount of the taxes. There are people there who will bid the taxes up and therefore the interest goes down.
Basic rules for MS are:
Interest is 1.5 percent per month or 18 percent per year.
Redemption period is 2 years. People redeem every month therefore you get a check every month. When you first start, you will get very little for the first year or so and then as you invest year after year it starts to come back.
Any overbid goes to the state…you get NOTHING for it, nada,zip,zero…last year the overbid was just over $400,000…All going to the state…they love the overbidders.
Say a parcel comes up for taxes of $1000.00. If you buy it for the opening bid then you receive the 1.5 percent per month or 18 percent per year. The average time from sale to redemption is about 18 months so you get 18 percent for the first year and 9 percent for the second or 27 percent total. Annualized…about 14 percent.
NOW is you get involved in the overbidding then the interest stays the same but theroetically it is on less money (Opening bid minus overbid). Same parcel…$1000.00 opening bid. You bid it up to $1,250.00…YOU get interest on $1,000.00 but nothing on the other $250.00…it is GONE. Therefore your return comes down. Same as before 18 percent and 9 percent total of 27 percent but you lost $250. So then you still get the interest on the $1,000.00 or about $270.00 for the 18 months but you gave up $250 to get it so your actually only earned $20.00 on your investment for 18 months… NOT a very wise investment.
We have people who consistently overbid. They are told before the sale, each morning and after the lunch break, “You are not buying the property…you are buying the taxes.” They never seem to understand and think that they are going to be the next land barons at the tax sales…it does not happen.
How do you avoid the overbid? Well you have to overbid some in order to participate. What do you do? You sit down and study the computer run and decide, as Ron Starr and others tell you, exactly what you can afford to pay. The rule of thumb amongst us who bid each year is NEVER go over 10 percent over the opening bid.
This means that the $1,000.00 parcel, you can bid up to $1,100.00 on it…so let’s look at that analysis.
Same 27 percent or $270 for 18 months minus the 100 or now you get $170 or about 10 percent per year. If you are careful you can cut the overbid to less than 10 percent and get the return into what we work for or abou 12to 14 percent peryear.
Bear in mind also that they sell in my county about 3-4 million dollars worth each year and if you have the staying power AND PATIENCE to wait until the last couple of days…the overbidders, next land barons, etc., are all gone…and you get the 18 percent in most cases.
I have been around the real estate industy since the 70’s (Yes, I’m an old fart!) and have had a lot of fun, made a lot of money, had my share of heartaches, losses, etc…AND STILL ENJOY THE HELL OUT OF IT!
I hope I have answered most of your questions. If not e-mail again and I will try.
Remember us crazy people get through the woods…on the psycho path.
P S…Success is when opportunity, luck and preparation come together.