Three Strategies for the Florida Tax Certificate Auction

Three Strategies for the Florida Tax Certificate Auction
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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 

Tax Certificates on Vacant Land

If you’ve subscribed to my tax lien newsletter or read my free e-book, you’ll know that I’m hesitant to recommend buying riskier property types such as land.  However, I’ll make an exception in Florida because land values have gone down so much, there might be an opportunity to cash-in on some good-yielding yet safer tax lien certificates.  This is because the Florida tax assessors have kept up with the property values pretty well.  This brings down the amount of taxes owed on each parcel and thus keeps your investment at a small fraction of the value of the property (usually 1-2%).  Other states haven’t kept up with the decrease in land prices and you might buy a tax lien that’s actually 10% or more of the actual value of the land.

Land is risky because it could turn out that the parcel or acreage you’re buying the tax certificate on is not buildable or zoned in such a way that it limits its value.  You’ll want to do your due diligence and verify that it is worth what the assessor thinks it is worth.

Buying Tax Liens on Less Popular Property Types

Most larger investors tend to not want to spend a lot of time reviewing each property in their portfolio. They also take loans that force them to limit their exposure to certain types of properties.  These are tax certificates held on properties that might have environmental issues such as gas stations or industrial properties.

However, for you as an individual investor, you may find that you are comfortable with these types of properties and are willing to bid on them.  The majority of industrial properties, gas stations, etc are perfectly fine — no environmental issues, hold active businesses or tenants, and are well-located for its type.  You can focus your efforts on properties that were built in the past 10-15 years as most of these properties are well-regulated.

Buying in Rural Areas and Counties

In Florida, there are some very rural counties.  They are away from the high-priced real estate markets in Miami and Palm Beach.  Because they are so small and the areas not as developed, larger buyers tend to not waste their resources on them.  Yet, every county has good properties and an active real estate market.  There might be farmland, timberland or large houses that go unnoticed by most bidders.  You should be able to pick these up at rates in the teens rather than just single digits.

If you’re going to be bidding in the Florida tax certificate auction, I have a list of counties and auction sites here.  You can also look to the right sidebar and see all of my articles about Florida.  Best of luck with the auction!

One Response to “Three Strategies for the Florida Tax Certificate Auction”

  1. David says:

    Nice informative blog, thanks for sharing.

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