Tax Lien Auctions low yields this year
This was my first year of purchasing tax liens. I live in Florida and I have talked with veteran tax lien investors that have been in the Florida market for a while now. The base interest rate here is 18% and the average lien sold in Orange County this year was at .75% or something like that. While we do have a 5% minimum and foreclosure is at 2 years (2.5% annum worst case), I was wondering if other states are experiencing the same thing. With interest rates among Money Markets and CD's so low these days I would assume so. Thanks for the input.
I have been anxiously awaiting an answer, but it looks like no one wants to admit the slowdown in this market. Don't get me wrong... I think there are still some great opportunities out there, it just may take more work to find them.
It's no wonder... it's unbelievable how "traditional" forms of investing are killing people right now. Bonds, money-market funds, T-Bills are all generating just about zero (inflation adjusted) income for people. The stock market is finally beginning to rally, but the P/E ratios are still about double their historical average. Not many bargains out there.
I will be interested to see if any seasoned REIs answer your original question. Is this a tough year or is this pretty much the way it has always been? Are tax-lein companies and other professionals pushing the returns down? Are the "deals" being pushed farther and farther into the countryside?
Atleast one response. I talked around at the auction and got the notion that it had been this way ever since 99. One corporation was at the auction that picked up over 5million in liens. It was very interesting.
A few companies are pooling investor's funds and sucking up the cream of the crop...it seems to me. Tax lien sales were great at one time (like the note business), but once you begin seeing the idea on an infomercial perhaps it's time to seek other opportunities?
Smart man Lloyd. Time to be out whe everyone is in. So much time, gas and paper wasted in this biz these days by way too many seminar grads and refugees from other investment vehichles.
I am kind of curious as to what annual returns the Lennox Group gets at these actions nation wide. Are all states getting these same returns as florida?
We also are seeing competition heavy in NJ. NJ (18%) is a bid down state and then you can pay a premium over the lien plus interest. Bid goes to the highest premium. Liens of 8K are bid to 12K premium over. 15K to 39K. But we have our advantages, penalties of 2 to 6%, and ability to purchase subsequents at the full rate days later. Avg ROI 6 - 10% without unredeemed profits.
A fund with management & leverage could see 12 -18%+ not including properties.
Lennox only attends auctions in a few states. They quoted to me that 85% of the states they bid in are bid up. I am still on the fence with regards to signing on with them. I have been looking into trust deeds and notes as well. I am a bit concerned about the heavy influx of people into tlcs...
adam
I recently bought some FL tax liens OTC. They did not have mouch of anything available for the most recent sale, so I bought some that were 2 years old. I only plan to hold them for 2 years, so I'll still be out in plenty of time.
I looked at OTC tax liens in Florida and the largest ones I could find were about $100. Did you get ones larger?
I bought in Alachua in the $500 range. I only buy improved props.
Really? I will be up in Alachua County in about a month to attend school. Will have to check out those OTC bargains.