Investing in Tax Lien Certificates - Posted by William (Keith) Fisher

Posted by Joe Torres on October 09, 2001 at 10:59:38:

There is a book that is exclusive to New Jersey Tax Liens certificates written by Merlin Coslick. The title is "How to Buy New Jersey Tax Liens that earn 18%. If you have trouble finding it send me an e-mail and I’ll try to help you with it.

Investing in Tax Lien Certificates - Posted by William (Keith) Fisher

Posted by William (Keith) Fisher on October 09, 2001 at 07:58:31:

Hello Group! I am directing my questions to those of you who have experience investing in tax lien certificates. I will let you know I reside in New Jersey. Are tax liens easy as it seems to invest in? What are the negative aspects? Once purchased can they be “flipped” to another investor for a profit? What are the pitfalls of buying them via the mail? If for example, I purchase a tax lien for $1300 secured by a property assessed at $40,000.

Do I now have the right to sell that certificate to another investor for say $3,000? Do I also have the right to sell that property to another investor for say $20,000?

I know I have asked a lot of questions, but I would like to know what I may be in store for if I decide to go this route to start investing in real estate.

Thank you.

Re: Investing in Tax Lien Certificates - Posted by Ronald * Starr

Posted by Ronald * Starr on October 09, 2001 at 21:14:41:

William (Keith) Fisher--------------

Well, yes you could sell the certificate to another person if you could find somebody who wanted it. Typically, though nobody will pay a premium for it. Put youself into the other investor’s place. Here comes “Keith” with a certificate that has a face value of $1,300 on it and asks you to pay him $3,000 for it. Does that make sense to you? Well, if the owner or some other lien-holder redeems the property, what will you, as the assignee, get for it? $1,300 plus some interest or penalty return, maybe around $1,500? Why are you going to pay $3,000 for it?

You might do so only if you had some assurance that the property would not be redeemed and that you will end up with the property. So, Keith had better have something to convince you that you are likely to get the property. Would you then buy the certificate?

Sell the $40K house for $20K? You could do that only after you are the full owner of the house, not earlier. Why sell it so cheap when you are the owner? Go for something closer to full market value.

Are their problems with tax sale problems? Of course there can be. Otherwise everybody and their brother-in-law would be doing it and getting rich.

Probably over 90% of properties are vacant land and lots. Even if there are no toxic wastes on the propery, they may still be hard to resell. Check first with title companies about title insurance. Can you get it? When? How about having to do a quiet title action to get it? How much will that cost you?

Why do you suppose the owner stopped paying the taxes and is letting it go for just back taxes? Often this is a sensible step because the property is underwater, a cliff, too small to build on, has no water or other utilities, or something else that makes it unusuable for most purposes. Do you know if the owner had it up for sale for three years and could not get a single offer? Now, why did you want to buy that property?

Now, about one third of the property owners have died. Lots of people stop paying their taxes when they die. I guess their attitude changes – “Yah, Yah, what are you going to do to me for not paying my taxes? Yah, Yah.” Not all do. I saw a house on the Sacramento County, CA, tax sale once where the owner kept on paying the taxes after she died. When her husband died, she stopped paying the taxes. Their son was living there and not paying the taxes.

The point is, death is a good excuse for not paying taxes, in my opinion. Those are properties that are most likely to be the best ones. Sometimes even improved with houses or other structures. Often, if the property is valuable, the heirs will pay the taxes and get the property through probate. But not always.

So there are some good properties that come up at tax sales. But, you had better be knowledgeable about properties so that you don’t get stuck with a bad one. I have seen more than one tax-sale bound house which had no floorboard due to rot, termites, and other insects. Many have no foundation. Some are vandalized. I would recommend that you look at every property before you buy it. And look carefully.

For the cautious investor with cash, tax sales can be very lucrative. But what guarantee do you get from the county? “You pays your money, and you takes your chances, bub.”

It turns out that some people who lose their property on foreclosure, including foreclosure of the delinquent tax lien, are not happy about it. The only law suit that I was everinvolved with was my divorce. That is, until I started investing in tax sale properties. Been in three since then. Expect to be involved in some more if I keep going. You might expect the same. You might want to search this site for “Ben(NJ)” to hear some of Ben’s advertures in taxsale land. And, as you read them, remember that he is an attorney. You might want to put “tax lien” into the search engine to find some interesting questions and responses to questions.

Good Investing*****Ron Starr

Re: Investing in Tax Lien Certificates - Posted by Mike SWFla

Posted by Mike SWFla on October 09, 2001 at 09:42:38:

Hey Keith,

The negative aspects of investing in tax certificates is that you cannot turn a quick profit on them once you purchase the certificate. There is a right of redemption clause which allows the property owner the right to pay off his back taxes up a specific period of time. In Florida, where I am it is 2 years.

You ask if you can sell the certificate to another investor, absolutely. You purchase one for 1,300 and then sell that certificate to another investor for 4,000 during the right of redemption is a good way to make a small profit if you no longer want to wait it out.

Hope this helps…