Investing Opportunity Overview
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Tax certificates "tax liens" or tax deeds "tax foreclosures" Which Florida tax sale investing opportunity is right for you? In Florida there are two distinctly different investing opportunity highways (tax sale highways)to travel, tax certificates or tax deeds. These highways have different final destinations but both have similar on-ramps and are issued by the county government. There are numerous opportunities to travel on either highway. Knowing the right routes and using some pothole avoidance techniques will reduce risk and maximize profit. The cost for traveling the tax certificate highway is a small amount of money compared to travel via the tax deed highway. Normally, expect to invest 2-4% of a property’s value in a certificate compared to 30% of value for tax deed. Yes 30% sounds high, but considering the value of the property a few thousand dollars can equate to substantial gains. Apples to Apples, assuming a property value of $20,000, the investment for a tax certificate might be $300 while the investment for the tax deed may be $6,000. With the assumption all goes well, this tax certificate traveler may receive a nice 1.5% per month or 18% annually, which is great compared to other investments. In fact, banks and retirement accounts frequently purchase tax certificates due to the 5% minimum return on investment, even if redeemed immediately. Buying tax certificates is by far one of the easiest ways to invest money. This tax deed traveler, on the other hand, can expect to allocate time and resources to selling the property and obtaining a clear title. As the tax deed traveler I would expect to have another $2,000.00 in additional expenses and 3 months of investment time. When I sell the property for $16,000 it really equates to a 50% return on investment, a very nice investing opportunity indeed. So for an ultra low risk and a passive investing opportunity, seek tax certificates. For higher returns and a more active investing opportunity, tax deeds should be sought. Need some clarification on which Florida investing opportunity is right for you? Hopefully this explanation of tax certificates by the Tax Collector of Hillsborough County will help.
Investing opportunity Tax Certificate Highway
The tax certificate highway can inevitably lead you towards gaining excellent interest on your investment, 18%. Being a highway in Florida, the toll keeper is the county Tax Collector. Finding an on-ramp for the tax certificate highway is easy due to Tax Collectors across Florida selling hundreds of thousands of certificates annually. The risks are slight and are limited to dollars invested, but knowing and avoiding the risks will create better returns. There has been much exaggeration of the potential for property ownership by traveling the tax certificate highway. I have seen ads over the years claiming they paved the road to riches from tax lien certificate investing. Yes, there is a very slight chance of ownership via the tax certificate highway but the true nature of tax certificates is to obtain interest. If you know the directions and have a good vehicle the road will be profitable, achievable and you will happily reach your final destination.
Once on the highway, potholes make it much harder to reach your final destination and may stall your success. With a strong vehicle and some pothole avoidance, your risks will be small and your final destination can be achieved. Investing opportunity Tax Deed Highway
The tax deed highway will lead you towards property ownership. In most cases, it won’t be for the pennies on the dollar promised and exaggerated by others. In most areas, you can expect to win a property at 30%+ of property value (depending upon area, property condition, comparable property values, zoning, and utility availability). In Florida, outside of 2005-2006, paying 30% of value at a tax deed auction has been the norm. To purchase a property for 30% of value is a nice day and you should always smile when you get property tax deeds for less.
There are many opportunities in Florida to travel this highway with numerous counties auctioning hundreds of properties per year. The toll keeper on the tax deed highway is the county Clerk of Circuit Courts or Tax Deed Office. Properties most often auctioned at the tax deed sale are vacant residential lots and lots with mobile homes. I typically don’t purchase tax deed lots with mobile homes unless I can easily resell or remove the mobile home, but my objective may be different from yours.
Common potholes found in the tax certificate highway are also found here, but on the tax deed highway they are much more severe and may create an impassable obstacle. Having the right vehicle is very important when traveling the tax deed highway, without an avoidance system, a single unknown pothole could wreck you. This is a key difference between the two highways. Certificate investing worse case scenario, you lose your investment which is rare and typically a small amount. Tax deed investing, the risk is greater but so are the rewards. How great are the rewards? Here is an article from the Herald Tribune about an investor
who has taken advantage of a Florida investing opportunity. If traveling the tax deed highway is especially attractive to you, consider direct owner purchasing. It is less risk than tax deed highway travel but more expensive than certificate travel. Locating the properties at most risk of being lost due to non payment of taxes, is the key. While I don't consider this an investor-option for purchasing tax delinquent property, it is an excellent way of finding bargains. I frequently use the tax certificate file archives to locate property and owners. Likewise, I also send flyers to property owners that appear in the listing of tax deed sales. One element, proper due diligence, can make the difference between spending time and resources on an unworthy property and one that can easily be obtained with clear title.
It may seem like a lot of information is being thrown at you right now, but no worries. The big picture will soon come into focus by adding some detail. So step back, reflect and then refocus. Sometimes to get a clear view you just need a picture. Here is one of thirteen properties we purchased via tax deed in the month of October, 2008.
The type of Florida investing opportunity you choose should be determined by your need and objective. By knowing the direction the investment is going you can make an informed decision. Some investors, believing they would gain property title by holding a tax certificate were disappointed, despite making a substantial gain in interest. By having the right knowledge and knowing where you want to go, it makes the path to success easier to find regardless of which investing opportunity you take or highway traveled.
Tax Liens, Strategy, Free Information The portal for the best return with Florida tax lien"certificates". Free information from a second generation investor to guide you. (Tax Lien Investor on Nav Bar)
Tax-Foreclosure Properties, lists, resources, info.
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