Recently I went to New Jersey to cut taxes. This is a small tax sales in small rural areas. In the tax sales, there were only 7 real estates, and I obtained 2 liens at the price of 10% and 12%. This is not bad in today’s competitive tax sales environment in New Jersey. I usually go home empty handed at such tax cuts. Because I don’t want to pay instalments on small tax liens.
In this sale, most(except one) liens were less than $600. Some states sell utility liens when local governments sell taxes. All amounts paid to local municipalities can be sold as tax liens. Most of these liens were used to default on water supplies or sewers. A detention right, including taxes and overdue sewer charges, is slightly more than $1700. All other liens are for water, sewer charges, or both.
The trend in New Jersey over the past few years has been to pay a premium to these small-scale utility liens. Investors are willing to pay a premium on these liens to pay subsequent taxes. However, for the lien of small-scale public utilities, it is generally not necessary to pay the subsequent taxes, but only to pay the sewer or water supply that is far lower than the tax. Keep in mind that in New Jersey, the interest on the lien will first reach 0% before the premium occurs. When the lien is repurchased within 5 years, the insurance premium can be charged, but the amount of the insurance premium or the interest of the lien amount will not be charged. You do get some fines on the amount of the lien and the legal interest rate(18% if the taxpayer defaults on $1500, and 8% for any money before).
Some tax lien funds have lost control of the costs of obtaining these small utility liens. In the past year, I have seen them pay up to $1500 in insurance premiums to obtain small liens of $200 or $300. This actually means that their return on investment is very low and worthless. Especially for individual investors
So, in the last tax auction I participated in, how did I buy two small liens at a reasonable interest rate? First of all, I went to a small auction. There were only 15 liens on the original tax auction list, and only 7 real estates remained on the list on the auction day. Second, there is no real big lien in this sale; the largest is less than 2000 dollars. Huge liens bring all competition.
Third, you must know when to stop bidding. In fact, I was a bit lucky in this auction. Because only one bidder represents the Tax Lien Investment Fund. Except for one, I quoted prices for all liens, but I did not quote too low a price. If you are not greedy and insist on marking all liens on your bottom line, other bidders will not mark all liens on their bottom line.
The fourth is very happy to receive bread crumbs in this auction. I mean, the two properties I got liens on are the worst properties in this sale. One of them is owned by the bank and is fragmented. No one has taken care of it for many years. You can see its picture on the cover of this issue. You can’t see it in the photo, but its driveway and backyard are also full of garbage, and there is a dilapidated and collapsed hut behind it. The other house is empty and will be cancelled by the bank soon. This is also a very small house without a garage. It needs some TLC and a lot of updates.
If I decide not to bid because of the situation of these properties, I will miss the only lien I can get – a good lien. You should be willing to accept what the boy does not want or wants to give up. These properties may be empty and the situation may be bad, but they are still good liens. The bank will retrieve it at some point, but it may have to wait until it is sold, which may take a long time. This will give me time to pay for subsequent utilities(remember these are small utilities liens that can increase my investment and earn more interest!
