Florida Tax Lien Certificates

Florida Tax Lien Certificates
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Florida is a very competitive state mainly because its auctions are online and it’s easy to manage.  It’s also the largest tax lien auction in the United States and brings in thousands of investors including large, corporate funds who buy millions of dollars in tax certificates.

I recently published an E-Book available exclusively on Amazon all about Florida Tax Lien Certificates. It’s minimally priced but contains great information that will keep you safe when buying at the Florida Tax Lien Auction: A Beginner’s Guide to Investing in Florida Tax Lien Certificates

With a low millage (tax) rate, Florida tax lien certificates tend to be very safe and payoff quickly.  The maximum statutory rate you can earn on each certificate is 18%; however, the rates are bid down in 1/4% increments until the lowest bidder is reached.  You’ll often see these auctions bidding down to less than 1%.  However, investors also receive a 5% penalty at the time of purchase (if that interest rate hasn’t exceeded the 5%. Remember, you don’t actually receive the interest/penalty until the taxpayer or other party redeems the tax lien certificate.

Here’s an example:

So, let’s say you bid and win a $1000 lien on a house at an interest rate of 10%.  If the taxpayer pays their taxes in one month, you’ll earn the penalty rate of 5% ($50).  In fact, if the taxpayer redeems anytime thru the sixth month, you’ll still earn that $50.  However, once the sixth month passes, the amount you would receive on the bid interest rate becomes higher than the 5% penalty and you’ll start earning the bid amount.  So, if the lien redeems in month 9, you’ll receive 9 months of interest at the 10% rate ($75).  Interest accrues monthly on the first of every month following the sale.

How does the auction work?

Beginning in May and lasting until June 1st of each year, every county in Florida begins their tax lien certificate auction.  Nowadays, most counties offer the auction online (a few counties still have live auctions).  You, as a bidder, simply register for the auction, put down a deposit, and then enter in the lowest amount of interest you’ll accept starting at 18% and working down to 0.25%.  If you’re the lowest bidder or you win a tie on your low bid, then you’ll be issued a tax certificate.

How can I end up with a property?

You can request a tax deed (called a Tax Deed Application or TDA) two years after April 1st of the year of the auction.  However, you must file it before 7 years or your certificate will expire worthless.  You’ll be required to pay all outstanding taxes and fees in order to get the TDA started.

The good news is that from that time forward, you’ll earn 1.5% per month (18% per year) on the entire amount including on any interest that accrued before you filed the TDA.

Most tax lien certificates redeem prior to the end of the 22-month period. Some certificates could redeem the day after the auction and others last all the way until the last day possible.  There is really no guarantee when they will redeem.  A mansion on the water in Miami will probably redeem pretty fast; however, there may be circumstances that it doesn’t.

Successful tax lien investors focus on finding Florida tax lien certificates on properties that will payoff and earn a good interest rate—they are not looking to own the property.  In fact, it’s rare that if you do receive deed to a property, it would be profitable.  Most of the properties need serious repairs or have other issues that bring the value to below what you paid for the delinquent taxes.  If you’re looking to acquire properties thru tax liens, you’ll want to focus on other states or attend the clerk sales directly.





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