Tax Lien Sale Update

Earlier this year, I went to a tax lien sale with my father in law. We had a good time, and unlike the two that I had been to prior to this, I actually got not only 1 lien, but 2! Needless to say I was pretty excited. My total cost for the 2 liens was ~$110. The liens were both in what I had guessed were areas that were looking to be developed into cabins or weekend properties and the developer had gone sideways and wasnt paying his taxes anymore. On one of my liens, there was even a small pond on the acreage (40 acre parcel).

As I mentioned in the last tax lien sale post, my goal for going to these isnt for the tax lien interest of 15%+ that you can get paid for holding the note. My interest is in the property that you can take over after paying for the taxes for 4 years. Since the only property that my wife and I currently hold is our primary home, some land that we could build a small cabin on and recreate during the summer and winter is very appealing to us, and even more so if we can get it at a rock bottom price.

Of course, things dont always work out the way I hope they will. One of my tax liens got paid in the middle of february, and the county dutifully sent me a check for $58.42. Even though I didnt get a shot at some land for us to play around with, I did get the alternative: an 18% return on my investment after approximately 6 months.

Part of me wishes that I had bought a more expensive parcel (those typically go fairly fast) so that I could get paid the mondo interest check (the largest one I’ve ever seen was for 16k, which would have generated a first year interest check of $2,880). Even though the money is good, I think I’d still rather have the land.

This may alter my strategy going forward though. From the information I’ve been able to gather, the land transferring hands doesnt seem to be too common of a thing. It seems like most of the liens get paid after a year or two, and you’re just left collecting your investment + interest back (not a bad deal). Since this is the case, I think going into this years round of tax lien sales I’ll try to get one lien that’s higher priced (and that I expect to be paid off early) and one that’s lower price and more raw land (in hopes that I’ll be able to take over possession at some point).

By doing this, I think that i’ll be able to maximize my returns and give myself the greatest chance at getting some raw land in my possession without having to pay full price for it. A win-win for me.

Note: While I say that statistically many properties get taxes paid on them after 1-2 years, my personal experience has differed thus far. A friend who is a lawyer has been working on 1-2 of these cases per year (where someone is taking land because of back taxes) and quite a few people that I’ve talked to haven’t quite got to that point of taking land, but will be within the next 12 months.

Just for updates sake, both my father in law and I got 2 liens at the sale last fall. As of now, both of his have been paid off (one was paid off within 2 months). The latter of my father in laws that got paid off was in the same development that the one of mine that has been paid. Right now, I’ve got 1 left from this years tax sale (in a different development) that I’m hoping will continue not paying. I’ve already paid the taxes for 2013 on that property, so I’ve got 2 years worth locked up (I think around $70 total.

As I mentioned earlier though, I’m going to change my strategy for this next year. I’m going to try and go to more sales (maybe even some in a new state). I’m going to focus on getting higher priced ones just for the interest at the sales where it’s a random draw (like the first one I went to), and at the ones where the people are picked first (like the one I got 2 parcels at last year), I’ll focus on getting property that I’d like to own in the future.

Readers: Are you going to try tax lien sales this year? 

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