What are the Five Best States for Safety on Your Tax Lien Certificates?

What are the Five Best States for Safety on Your Tax Lien Certificates?

In my last post, I discuss what I thought were the best states to consistently earn a high yield on your tax lien certificates.  Today, I want to discuss the reason why I chose tax lien investing for a majority of my investment capital.  It’s all about safety of investment.   You’ve probable seen all of the hype about “no risk investing” etc etc.  I hate that crap.  There IS risk to any investment and tax liens more than others. 

However, if you know what your doing and do your due diligence, tax lien certificates can be extremely safe.

And why not?  They are ahead of just about every lienholder.  You basically step in as the government authority and the lien-to-value ratios can be less than 1% of the value of the house.  Who’s going to lose their $200,000 home over a $1,500 tax bill?  And more so, what mortgage company in their right mind would allow this to happen.

I’m not going to go on about how you can lose money in tax lien certificates–you can read my earlier post about the risks of tax lien investing.  I want to focus on those states that you can safely put your money in and rest easy every night.  You won’t earn a huge double-digit return, but I’ll guarantee its better than putting it in the bank.


Arizona tops my list for the safest place to buy tax lien certificates.  It’s a bid-down state meaning that you don’t have to bid more than the delinquent taxes and the millage rate is very low compared to other states.  For those new to tax lien investing, the millage rate is the percentage of the value of the property that is taxed.

So, you’re total investment should initially only be less than 2% of the actual value of the property.  Plus, Arizona has a (more…)

What are the Five Best States for Yield on your Tax Lien Certificates?

What are the Five Best States for Yield on your Tax Lien Certificates?

It’s almost June and the tax lien certificate auction season is about to finish up.  From Florida to Maryland, it’s been a busy month of buying and I hope everyone did well with their respective bidding.  If you’re new to investing in tax lien certificates, I wanted to give you a two part series on the best states for earning yield and for safety (part II).  It’s just my opinion given the current competitive environment, so I’m happy to hear your thoughts on where to find the best yields or safety in the tax lien market.

Yield in the tax lien certificate market is a function of risk and competition.  Just like any investment, the higher the risk…the higher the rates.  The tax lien auctions work the same way.  You’ll find that those properties that are less likely to redeem and/or result in a profit will go for the highest statutory rate.  In fact, counties would be better off not having a top statutory rate if they wanted to sell all of their liens.  Often times, the risk is so high, that there are no buyers even (more…)

Three Strategies for the Florida Tax Certificate Auction

Three Strategies for the Florida Tax Certificate Auction

With the Florida tax certificate auctions about to kick off, I wanted to discuss three strategies to employ that should get you higher risk-adjusted rates.

First, the tax certificates on the best properties in the auction usually are picked up by larger institutional buyers and the minimum bid.  This means that the bid all the way down to a .25%.  By statute, the certificate holder will earn the larger of the 5% penalty (earned from the day you purchase the certificate) or the bid rate.  So, these institutions are able to accept the 5% rate and they are betting that the majority of the liens they buy will redeem in less than a year.

If you’re looking to earn more than 5% yourself, you’ll need to bid on properties that these larger players don’t bid or or bid higher rates on.  I’ll discuss three possible strategies that will give you an advantage over these buyers and possibly earn you up to 18% on your investment.

You can also find a much more detailed discussion about strategies and FL tax lien certificate investing from my new E-Book exclusively on Kindle: A Beginner’s Guide to Investing in Florida Tax Lien Certificates 

Top 10 Questions about the 2015 Florida Tax Lien Certificate Auction

Top 10 Questions about the 2015 Florida Tax Lien Certificate Auction

With the 2015 Florida Tax Lien Certificate auctions coming up shortly, I’ve compiled a list of most frequently asked questions from my newsletter subscribers about the Florida tax certificate auction. If you haven’t subscribed yet, click here! Florida hosts the largest tax lien auctions in the United States and it’s easy for just about anyone to get involved in since most of the auctions are online.

Top 10 FAQs about the 2015 Florida Tax Auction

1. How does the penalty and interest rate work?

Bidding starts at 18% and works in .25% increments until the lowest bidder is reached.  If there is a tie, then the winner is chosen at random.

You’ll actually earn the higher of 5% of the tax amount (the penalty) or the total accrued interest at your bid rate.

So, if you win a bid at 12% and the lien redeems in the first month, you’ll earn your 5% penalty.  If the lien redeems in the seventh month, you’ll earn your accrued interest (which is 7%) and the penalty drops out.

2. What are the typical rates that the liens sell for at the tax auction?

The Florida tax lien certificate auctions are very competitive.  There are lots of banks and funds bidding on these liens such that all of the decent property are bid down to a .25% (thus, they are counting on earning the 5% penalty and the lien redeeming quickly).

Commercial properties and viable land parcels tend to be bid down to between 6-12%.  Risky properties will go in the mid to high teens.  If you win a bid at the max rate of 18%, you probably did a poor job in your due diligence.

3. What is proxy bidding?

In the internet tax auctions, you can put your minimum acceptable bid in.  The system will automatically compare your bid to all of the other bids in the batch.  If you’re the lowest bidder, you’ll win the bid at .25% below the next highest bidder.  Thus, if you bid 5% and someone else bids 7%, you’ll win the bid at 6.75%.

4. When can I file for a tax deed application?

Two years after the taxes are due (typically, 22 months after the sale), you can file for the tax deed application also known as a TDA. Thus, you can file in April, two years after the year of the sale.

5. Can I contact the property owner or go on the property?

No, Florida statutes explicitly state that you cannot contact the owner of the property within 2 years of April 1st of the year of the sale.  Also, you have no possessory rights on the property until you have a deed issued.

6. What is a clerk sale?

If the tax certificate does not redeem after you file the tax deed application and the county clerk has made all of their required notices, the clerk will auction off the property publicly to the highest bidder above the total delinquent tax amount.  If the property is not purchased at this clerk sale, then the tax certificate holder will be issued a tax deed to the property (unless it’s a homestead property, see next).

7. What is the lands available list?

If a homestead property does not sell at the clerk sale, the tax certificate holder has the option to send it to a second sale.  If it does not sell then, the tax certificate holder has the right to purchase the property at half the assessed market value minus their investment.  If the certificate holder chooses not to purchase the property, it goes onto the county lands available list where it is available to the public for half the assessed value.

8. What liens are ahead of the tax certificate?

Municipal liens and fines are ahead of the certificate.  Also, a new law passed recently allows HOA fees to not be eliminated upon issuance of a tax deed.

9. Can I really compete against the corporate buyers?

It’s very tough nowadays to get a good rate–gone are the days when you could win liens on decent properties in the teens or high single digits.  Plus, the corporate entities put hundreds of online bidders into the mix so that they have a better chance at winning any ties.

10. Where can I find out more information on the auction?

Here, of course!

You can, however, find decent rates on commercial properties, some land parcels and the more rural counties where there is less competition.  Or, you can just be content with earning the 5% penalty on good properties–it’s better than what you can earn at the bank!


Get Thrown in Jail – Buy Tax Lien Certificates

Get Thrown in Jail – Buy Tax Lien Certificates

One of my first posts was about buying risky properties called the One Cardinal Rule of Tax Lien Investing; however, with some recent headlines in the news lately, I may have to change my one cardinal rule to don’t get thrown in jail buying tax lien certificates!

Bid Rigging at a Tax Lien Certificate Auction

For those new and old to the tax lien auction world, you should take time before each tax lien purchase and make sure you fully understand the rules about bidding in these auctions.  For three New Jersey tax lien investors, they sure didn’t and have subsequently pleaded guilty to felony charges (see this release from the DOJ).

Collusion at the Tax Auction

What is collusion? It’s when two or more investors get together to limit competition at the tax auction.  How does it happen at when buying tax lien certificates?

In most cases, an unscrupulous investor will approach other investors before the auction and get them to agree to not bid on certain tax liens.  It may be as innocent-sounding as someone asking you not to bid on a lien because they know the family that lives there or that they own another tax lien on the property; then, they buy the lien at the maximum rate.

What is an Overbid? What’s Recoverable and What’s Not

What is an Overbid? What’s Recoverable and What’s Not

This is a frequently asked question by my subscribers and can cause confusion especially because there are different uses for the overbid in some states.

An overbid is simply an auction mechanism to determine who will pay the most for a delinquent tax lien.

The opening bid at the auction is normally the total amount of taxes, fees and accrued interest owed.  The auctioneer then opens the floor for bidding.  These bidders call out amounts that are over and above the opening bid.  A winner is declared to whoever is willing to take the highest amount over the opening bid.

 The difference in price between the opening bid and the final bid amount is your “overbid”.

In most states, should the property not redeem (payoff) and be taken by an investor as a tax deed, this overbid can be collected by the delinquent owner.  States that allow this overbid to be recouped by their former owners feel that it’s a more fair system to those owners losing their property.  However, this mechanism leaves open several potentially profitable strategies we’ll discuss later.

States with Overbids

Numerous states utilize overbid auctions to sell their delinquent tax liens at their annual tax auctions.  However, every state is different in how their laws treat the overbid and it’s worthwhile to read the statutes and auction rules before attending the auction.  I’ll cover some of the differences as we dig deeper into overbids, but realize I can’t touch on every nuance in the law and it’s ultimately your responsibility to understand the statutes pertaining to your purchase.

I’d like to divide the overbid states into two sections.  The first is where the overbid is recoverable if redeemed and collectable by the former owner if a tax deed is struck off to the investor.  (more…)

Guest Post – Attending a “No Money Down” Real Estate Seminar

Guest Post – Attending a “No Money Down” Real Estate Seminar

One of the main reasons I started my blog was because of my frustration with the lack of good information out on the web about tax lien.  Worse still, there were numerous websites pushing expensive tax lien courses and seminars from “less than experienced” real estate gurus or were outright tax lien scams.  One of my newsletter subscribers Kevin wrote me with his experience with one of these guru seminars.  Fortunately, he was actually able to get a refund for his ‘less than expected’ seminar.

Kevin attended a tax lien seminar from (more…)