Not too long ago I went to a tax sale in New Jersey. It was a really small tax sale in a small rural borough. There have been solely 7 properties within the tax sale and I used to be capable of get 2 liens at 10 and 12 %. That’s not dangerous in any respect in right this moment’s aggressive tax sale atmosphere in New Jersey. Normally at a tax sale like this I come away empty handed as a result of I’m not keen to pay premium for small tax liens.

Many of the liens on this sale (all however one) have been below $600. In some states, native governments promote utility liens on the tax sale proper together with the taxes. Something that’s paid to the native municipality might be offered as a tax lien at these tax gross sales. Most of those liens have been for both water or sewer delinquencies. Just one lien included taxes together with delinquent sewer quantities and was simply over $1700. The entire others have been for both water or sewer quantities or each.

The development within the final couple of years in New Jersey has been to bid premium on these small utility liens. Buyers are keen to pay premium on these liens in an effort to pay the next taxes. However on small utility liens, you normally don’t get to pay the next tax funds, however solely the next sewer or water quantities that are a lot smaller than the tax quantities. Take into account that in New Jersey, the curiosity on the lien is first bid right down to 0% earlier than premium is bid. Though you do get your premium again if the lien is redeemed in 5 years, you don’t get curiosity on the premium quantity bid or on the lien quantity. You do get a small penalty on the lien quantity and the statutory rate of interest (18% as soon as the tax payer is $1500 delinquent and eight% on something earlier than that).

What some tax lien funds have been keen to pay to get these small utility liens has gotten a bit out of hand. Within the final yr I’ve seen them pay as much as $1500 premium to get a small $200 or $300 lien. What that basically quantities to is that they’re making such a small blended return on their funding that it’s actually not price it in any respect; particularly for the person investor.

So how was I capable of purchase 2 small liens at respectable rates of interest on the final tax sale I attended? First I went to a small sale that had solely 15 liens on the unique tax sale record and there have been solely 7 properties left on the record on the day of the sale. Secondly, there have been no actually massive liens on this sale; the most important one was below $2000. Giant liens convey out all of the competitors.

Third, you’ve received to know when to cease bidding. I truly was a bit fortunate at this sale as there was just one different bidder representing a tax lien investing fund firm. I bid on each lien besides one, however I didn’t bid him down too far. If you happen to don’t get grasping and demand on bidding each lien to your backside line, then the opposite bidders won’t bid each single lien right down to their backside line.

The forth factor is that I used to be blissful to get the crumbs from this sale. What I imply is that the two properties that I received liens on have been the worst properties within the sale. One was financial institution owned and falling aside. It hadn’t been taken care of in years. You’ll be able to see an image of it on the duvet of this difficulty. You’ll be able to’t see it from the image, nevertheless it additionally had junk piled up within the driveway and yard and a dilapidated, falling down shed within the again. The opposite home was vacant and about to be foreclosed by the financial institution. It was additionally a really small home with no storage, in want of some TLC and numerous updating.

If I had determined to not bid on these properties due to their situation, I’d have missed out on a few good liens, and the one liens that I’d have been capable of get. It’s a must to be keen to take what the large boys don’t need or are keen to let go. These properties is perhaps vacant and in horrible form however they’re nonetheless good liens. The financial institution goes to redeem them in some unspecified time in the future, however most likely not till they promote them which might take a protracted, very long time. That can give me time to pay subsequent utility funds (keep in mind these have been small utility liens, add to my funding and make extra curiosity!