Is Investing In Property Tax Liens A Good Idea?
You need to know what you are doing because a lien on a tiny half meter of vacant land is not usually a good bet; however such a “worthless to others” item was once worth several hundred thousand bucks to me for a $10 investment.
If a tax debtor redeems, that is what you usually hope for as he must pay you (in most places) from 24% to 36% a year return on the money you advanced. If it is a lot less, I would not bid on stuff where the return is say 10% per year. I like 2% or 3% per month. But sometimes you can do exceptionally well, and in my own case, I can tell about a half dozen cases where I made out very well on my standard $10 investment in many of these deals.
Here is my story. I went to a tax auction once and just bid $10 each on everything. There was nobody there that day. I discovered one piece I had just bought was an abandoned island in a river. There was no way to get to it, but it was in a very expensive snooty neighbourhood. To make a long story short, after I had cleared the title and the redemption period had passed, I bought one of the several riverside properties opposite the island. I put in a driveway for access and a bridge. Then I had a buildable lot on a great site with a natural “moat”.
This unique lot was worth then, maybe $300,000. By building on it with borrowed money, I probably made another $200,000. Not a bad return on ten bucks.
If I told you what the property was worth today, you wouldn’t believe me. But in the real estate business you can’t hold on to everything forever. At least I couldn’t. Some families have as their motto - “Never sell” and for them, it works out very well. Ultimately, I wanted to retire to the Riviera and not worry about tenants, taxes, assessment, taxes, zoning, rent controls and all the rest. So 30 years ago, that’s what I did.
- W.G. Hill