Three Tax Lien Investing Strategies for the 2012 Florida Delinquent Tax Auction

Three Tax Lien Investing Strategies for the 2012 Florida Delinquent Tax Auction
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Continuing on from my previous post on how to prepare for the 2012 Florida delinquent tax auction this June, I mentioned the selecting a strategy prior to the Florida tax auction should be one of the first steps you take.  Some investors may just be interested in only a few properties, but if you’re serious about getting into this market, you’ll need to have a large number of properties ready to bid on.

To effectively compete and win a good number of Florida tax certificates, you’ll need to choose between three different strategies depending on your risk tolerance and goals for your investment.

1. I want a safe investment with a quick return. Florida tax certificates are a great vehicle for those that want a well-secured investments with a quick, no-frills return.  However, in the past couple years, the competition for these types of Florida tax certificates has been tremendous due to the number of large banks and institutional funds entering the market.  You’ll need to settle for a low rate of return.  Often that means accepting just the 5% penalty plus a very small interest rate.

In order to compete with these large funds, you’ll need to put alot of bids in for good quality residential properties.  This means you’ll need a complete database of property information to sort thu and select only those with high assessed values and good quality construction.

2. I want Florida real estate at a great price. Now is a great time to acquire Florida real estate at bargain prices through tax liens.  The financial distress that many real estate owners are under is at its peak.  By focusing on those properties that are out-of-favor or distressed, you just might be able to foreclose through a tax deed application and take the property for a good gain.  Look for vacant commercial properties and land to make your investment.  These are usually not bid aggressively and have a lower likelihood of redemption especially if there is a large tax amount owed on the property.

3. I want a good return on my investment but I don’t want the real estate. This can be more tricky in today’s Florida tax certificate market.  Yields on good residential properties are almost zero after the 5% penalty.  However, you can find fairly safe investments at higher rates in good quality commercial properties or out-of-the-way counties.  Try bidding on offices, warehouses, and other commercial buildings that have been built recently and are occupied.  Or, look for the more interior counties or rural areas that might be off the radar for other investors.  You can probably pickup returns in the high single-digits if you have a good list of properties to choose from.

 

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