Our Weekly Things To Consider

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Bidding on your Tax Liens

Saturday March 6, 2015

Bidding at any auction can be an exhilarating experience regardless of whether you are bidding on tax lien certificates, homes, automobiles, or even just bidding on ebay. So to help remove some of the emotion out of the bidding process, it is recommended that you consider the maximum and minimum percent of return that you are looking to receive before you arrive at the auction. If you're a competitive person or if you hate to lose, then you may need to find someone...ELSE to bid on our tax lien certificates for you. :)

So to calculate the maximum bid that you should use before arriving at the auction, the first thing that needs to be done is to determine what your desired rate of return is. The next step is to find out what the the interest rate is for the county that you are purchasing the tax lien from. For example, in the state of Maryland, depending on the county you are in, the interest rate for the certificate is between 6% and 24%. So if your desired rate of return is 10% (for example), then you know automatically that you must select a county that is offering an interest rate of 10% or greater for the redemption of the tax certificates. If the county is offering an interest rate of 10% then your maximum bid will equal the minimum bid amount. If the county is offering an interest rate that is greater than your rate of return...for example 15%, then your maximum bid should not be greater than the minimum bid amount + 5% of the minimim bid amount.
Example: If the minimum bid is $5000 for a certificate that has a return rate of 15%, then the maximum bid should be no more than $5000 (the minimum bid) + $250 (15% - 10% = 5% of the minimum bid) = $5250. This will give you a return of 10%.
Here's a helpful article that can be referenced for more information:

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Disadvantages of Purchasing Tax Liens

Monday February 23, 2015

Purchasing tax lien certificates are considered a win - win investment by some investors. Their thought is that you either walk away with property (or land) free and clear or you get your money back + interest. Well, I beg to differ and highly recommend that any investor looking to purchase tax lien certificates truly do their research. Purchasing tax liens definitely have their pros. But with every pro (in the world of investing) comes its con.

One of the disadvantages that must be considered when dealing with tax lien certificates is whether or not the property that you are purchasing a tax lien on has additional liens on the property. If they do, you MUST determine if the state and county which is hosting the tax lien auction will trump all other liens against the property. If it does not, then you will be obligated to pay all other liens before you can take sole possession of the property. You may be fine with paying the additional liens on the property depending on how great the opportunity is. BUT it is still wise and definitely something to consider when thinking about purchasing tax liens.

Here is an article that contains other disadvantages...or really just other things to consider before purchasing a tax lien.