As of the time that I am writing this text there are solely 8 states which have which have on-line tax lien gross sales. However a few of these states could solely have one or two counties or municipalities with on-line tax sale. For that, and for different causes that I will let you realize about later, these tax gross sales is probably not value your time. So listed below are what I contemplate to the be the highest 5 states for investing in tax liens on-line:
Florida is a state that’s value taking a look at for the web Tax software for tax preparers lien gross sales. The rate of interest in Florida is eighteen% per 12 months. Most counties in Florida do have on-line tax lien gross sales. Tax Gross sales are held every year in Could and the rate of interest is bid down fairly low, however there’s a minimal 5% penalty, so no matter how low you bid, if the lien redeems you’ll get at the very least 5% in your cash. One other plus for traders who don’t reside within the state is that so long as you do your due diligence and bid on good properties you aren’t more likely to get the property. As an alternative of foreclosing on the property if the lien does not redeem, in Florida you apply for the lien to go to a deed sale. The property will then be auctioned off in a tax deed sale (a few of these are on-line as effectively) to fulfill the lien.
One other state that has a default rate of interest of 18% per 12 months is Maryland, and whereas not many counties within the state of Maryland have on-line tax gross sales, the Metropolis of Baltimore does have a really massive on-line tax lien sale annually. In Maryland the rate of interest will not be bid down, as a substitute of bidding down the rate of interest, premium is paid for tax liens. You don’t have to pay your complete premium on the tax sale. You solely have to pay a portion of the premium together with the quantity of the lien on the tax sale. And provided that the lien doesn’t redeem and also you foreclose on the property, do you must pay the remaining premium (and any excellent taxes). The Maryland counties have a considerably difficult manner of figuring out how a lot of the premium must be paid on the tax sale (this is called “excessive bid premium”) and you must be sure to perceive this earlier than you bid in any of the Maryland tax gross sales. There’s a detailed description of the method for prime bid premium within the Shopping for Tax Liens On-line course. One other plus for the investor in Maryland is that the redemption interval is brief – solely 6 months in most counties.
Indiana is one other state the place premium is bid for tax liens and there are a handful of counties in Indiana that do have on-line tax gross sales. There’s a 10-15% penalty paid on the certificates quantity relying on when the lien is redeemed and 10% curiosity per 12 months is paid on the premium quantity and all subsequent tax funds. Not all of those tax gross sales are the common tax lien gross sales, a few of them are the county commissioner’s tax certificates gross sales. These are the gross sales of the liens that didn’t promote within the common tax lien sale. What’s good concerning the commissioner’s gross sales is that the quantity of the lien is usually decreased and the redemption interval can be decreased to solely 120 days as a substitute of 1 12 months.
Arizona is without doubt one of the hottest states for on-line tax gross sales, though final I checked, solely 6 of the 15 Arizona have their tax gross sales on-line. The default rate of interest in Arizona is 16% and the rate of interest is bid down on the tax sale. You’ll need to register prematurely of the tax sale and submit a deposit so as to bid in any of those on-line auctions. A number of the Arizona counties additionally drive you to pay the next taxes – for those who do not pay them they may promote your lien within the following 12 months’s tax sale.
The state of Colorado additionally has a number of counties which have on-line tax gross sales, premium is paid for liens in Colorado and the rate of interest is just one% above prime. Colorado tax gross sales are in November of every 12 months and the rate of interest is decided every September prematurely of the tax sale. For the final three years it has been solely 10%.Remember that any premium paid for tax liens in Colorado will successfully scale back the rate of interest obtained on the tax lien when it redeems. Nevertheless when rates of interest are low – as they’re now, traders are reluctant to pay massive premiums.
Different States With On-line Tax Gross sales
Within the final couple of years the states of Louisiana and Nebraska have additionally had counties with on-line tax lien gross sales. Each of those states have a bidding system that’s not in the very best curiosity of the investor. In these states it’s the possession curiosity of the property – ought to the lien not redeem, that’s bid down. It’s merely not a sufficient of an incentive for the proprietor of the property to redeem the lien if the investor will solely personal a small piece of the property, so I do not contemplate these states to be among the many finest states for tax lien investing.
The most recent state on the time of this writing to have on-line tax gross sales is New Jersey. In New Jersey, identical to all the New England states, tax gross sales are carried out by the municipalities – not the counties. So there are extra gross sales (over 500 yearly) in New Jersey then in another states. However most of those tax gross sales are very small – a few of them with solely a hand filled with liens bought to traders. I didn’t embody New Jersey among the many 5 prime states to put money into tax liens on-line for 3 causes.
First, presently solely two New Jersey municipalities have on-line tax gross sales. And whereas the bigger cities my observe their lead sooner or later, I do not assume that almost all of cities can have on-line tax gross sales any time quickly.
Secondly, the bidding process in New Jersey is a bit more difficult than in different states. The rate of interest is bid down, steadily to 0%, after which premium will be paid for tax liens. The institutional patrons do that as a result of as soon as they’ve the lien, they will pay any present or future taxes once they change into delinquent and get the utmost rate of interest (18%) on these funds. So they’re paying premium and getting no curiosity on the lien quantity for the suitable to obtain 18% on any future taxes that they pay. The issue with this for the person investor is that if the liens redeems in a brief time frame, you could not get to pay any of the next tax funds.