Tax Lien????
I have read and do some research on Tax Lien investment. In NJ, they're bidding from 18% interest down to 0% then go to premium. That part I understand now, but what's happen when you win the bid? The clerk in borough explain to me that after you win the bid the only way to make money is to pay for subs tax for the next coming year if the homeowner fail to pay within ten days then you have the right to step in and pay for those taxes then you will earn the 18% int. on those money not from what u won the bid. Then after the redemption period which is two yrs in NJ, U have the right to file for the property. This is when come the question. What's happen for the mortgage company that the homeowner have? If U file for the property, what will U have to pay for?Other lein such as mechenical lein etc.? What about the mortgage and IRS Lein? How is this really work? I tried to read on forum and do research on them but I couldn't find any detail about it. Most of them just tell U that U can file for forclose the property and than U got the property. If you know anything about it please explain to me. Thanks..
Once you file for foreclosure on your lien, you have to notify ever person with an interest in the property, mortgage companies etc.... then they would have an opportunity to pay off the lien, if they do not do so within the specified time period allotted them then you would be eligible to receive a tax deed.
If you look around you might see something that says...
If you are mostly interested in the interest then look for properties that are improved (a home or something similar) and have a mortgage. The message is someone will care. If the owner does not take action the mortgage company will step in and pay the taxes and then sue for foreclosure.
Hence if you are buying a lien on a property that has a house with a mortgage you are 99.5% sure of getting your investment back with interest (if any) but you almost will never get the home. The lender has too much at risk.
What would your objective be for buying liens? If it to get a property at below FMV? If so the strategy might need to be different then if you only want the interest.
BTW - there are many investors who only want the interest and try to avoid situations where they will get a property.
John
[addsig]
Thank you for the reply. I'm new at this. I read some book and some forum and still curious about this. None of them tell about the detail of how is this work. It's only tell you that you can get the house that why I'm wonder about the mortgage because who would want to loose the big money. Your answers help me a lot. I'm looking to do both, but interest is prefered since it seems easier to obtain the property. Thanks again.
I think you also get %2 if it is over $200.00, %4 if it is over some other amount, then It goes up to %6. With all the time and effort, and I see very few priors, it is not obviously clear how someone can bid a $10,000 premium on a $300 lien and expect to make any kind of return. %2 of $300 is $6. You could work at McDonalds for 1 hour and make that kind of money without any investment. These people are playing a different game than the way things are supposed to go. I suspect it works something like they buy the lien at a premium. Then they contact the Owner and state that they can help them pay off the lien with a fraction of the Penalties they would pay the town. Then they get the lien released without paying through the Tax Collector. I am comtemplating not paying my next sewer bill to see what happens.
I went to a couple of the Tax sale in NJ. I saw the same people attend. I think they work for the company. They bid on the property with high premium which an indevidual wouldn't go that high. They also know each other. No way you can outbid them.
I'm doing preliminary research on tax lien investments. It was mentioned that "the same people show up for the auctions and probably work for the company". What company are you refering to?
If your assessment is true that they can't be out bid on the premium stuff, then what chance does a small investor have in this game? If one is only interested in the interest then wouldn't the premium stuff be a better investment?
My math is a little shaky. Please help me understand this scenario.
property goes up for tax lien auction at 2000.00 of back taxes. Those big timers bid the offering to 5000.00
If the interest paid is on the 2000.00 why would the big timers want to bid the tax lien to 5000.00?