Eliason1963 said:
Pack, How in the heck do you guys afford the fancy toys you all seem to have? I'm 54 years old and am not sure that I'm even going to be able to retire, let alone buy some of the good stuff you guys show on the forum. Larry
Larry,
I don't know about the others, but I don't have as many of the fancy toys that the other guys have. When I was working, I was paid pretty decently, but When I was your age, my business partner absconded with all the funds from our commercial concrete company and ran off with some sweet young thing he met somewhere. I had to sell the house and empty my savings to pay off everyone and then borrowed a couple of grand from my dad, and took a job with another company. From the start, I maximized my 401k, didn't buy anything on credit and when transferred to Arizona I found out about Tax Lien Certificates that pay me
1.334% per MONTH interest, or 16% per year. This turned out to be a significant portion of my retirement income. Since I can't affect any of the other sources of income for you, will tell you about these.
I'm not going to go into a lot of detail, but will explain basically how Tax Lien Certificates work and the rest is up to you and anyone else that happens to live where they sell them. Hopefully this helps someone. When I first heard of them I went on to Ebay and bought a book called "The 16% Solution" by J.S. Moskowitz. After getting my interest peaked, I went down to the County and took one of the older ladies, (and her husband,) that dealt with Tax Liens out to lunch and picked her brain. Best $40.00 I ever spent. Her unfortunate tendency to want to play footsies under the table where her Husband couldn't see, I just attributed to my Animal Magnetism.
There are basically two types of states. Tax lien states and Tax Auction states. In tax auction states, if you do not pay your property taxes, after a specified period of time, the property is sold to pay the back taxes. In Tax lien states, if you do not pay your property taxes, they asses a interest penalty for a specified period of years and allow investors to buy the liens by paying the owed taxes. When eventually (Usually) the back taxes are paid, the taxing authority assigns that interest penalty to the people that loaned them the money by buying the lien. Since the taxing authority really needs the money to keep operating, the interest penalties are fairly stiff.
For example in Arizona, the Counties receive the property taxes. Unpaid property taxes are penalized at 1.334% (Roughly) per month
or any portion of that month, even 1 day, or 16% per year. By buying a Tax lien certificate, you will NOT receive any payments until the property tax is paid by the delinquent payor or until a specified number of years have passed and you can claim title to the property. Most (99%) are paid off within 2 - 2 1/2 years. So don't spend your Grocery money on them.
Here in Pima County for instance, you will find that the banks closely monitor the Tax Lien sale in February and the banks themselves buy an estimated $16 Million per year in tax liens, not only to generate the extra interest, but to also protect their 1st position mortgage interest in that property, which can be a total loss of the money loaned as a Mortgage, if set aside by a tax foreclosure.
Since the laws in each state vary significantly, you need to research where you live or where you plan on investing. As an example:
• 12% in Alabama (40-10-122),
• 16% in Arizona (42-18053),
• 18% in Florida (Sec. 197.172),
• 20% in Georgia (Sec. 48-4-42),
• 24% in Iowa (Sec. 447.1),
• 36% in Illinois (Sec. 21-355),
• 50% in Texas (Sec. 34.21 ).
As I recall there are 39 states issuing Tax Liens, but could be wrong. I know lots of them are now changing to tax Liens because of the hassle of Tax Foreclosure Auctions, plus they get the money RIGHT NOW to continue operations.
In addition, you do not necessarily have to attend the Tax Lien Auction where some bidders, on a particular piece of property, will under bid the going rate. I have seen Banks willing to settle for 6% interest on property where they hold the mortgage and are fairly certain that the property is going into foreclosure. However, once you have established yourself with the local tax authority, you can take whatever profits above the back taxes paid and the principal plus interest can be rolled right back into another tax lien the same day, either in person or even by mail, year round! This is what we did when we got here from Washington and have continued to the present day. States where you can buy Tax Liens year round are listed below.
Alabama, Arizona, Colorado, Florida, Minnesota, Montana, Oklahoma, Pennsylvania, South Carolina, South Dakota, Texas, Wyoming. There may be others by now!
I once took a flyer on 800 raw mountain land acres on a river in WY, but after 2 years and 10 months, they eventually paid the back taxes.....Darn!
Just as an example, the following calculations shows how fast the money compounds when rolled back in year after year. This is just an example:
$10,000 x 16% x 5 years =$21,003.42
$10,000 x 16% x 10 years =$44,114.35
$10,000 x 16% x 15 years = $92,655.21
$10,000 x 16% x 20 years =$194,607.59
And this is just starting with $10,000. Larger amounts compound proportionately.
You have to realize, this is under optimum conditions and constitutes a rollover of Principal and interest into a new certificate each time a certificate gets paid out. Also be aware that Tax Liens can start at $200 or less so you don't have to have $10,000 to start with.
There are several organizations out there that can tell you about the various state requirements. One of the best I've found is:
Tax Lien University - Learn How To Profit Buying Tax Lien Certificates They offer a course in either download or on CD and I prefer the CD, although it is more expensive, because I've already had one computer crash with non-recoverable data on the hard drive.
My brothers and a couple of cousins want me to invest their money and are willing to settle for 12% interest on it which would give me a 4% return on all their money, but not sure if I want to be involved or have to commit the time to it. It takes me almost 3 weeks a year to keep just mine under control. Of course, with $1 million invested, that would pay me $40,000 a year extra. Remember with all Real Estate, the secret is Location, Location, Location!
So far, my partnership with the county doing all the work has been totally profitable.
Good luck, and hope this helps someone!
Packrat