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Tax Liens OR Real Estate Fund

VintageFreakVintageFreak
in Fund Discussions
Just heard this from a friend of mine. I had no clue anything like this existed. My friend said he invested around $50K across 10 liens. It's really an auction where you can bid for how much you willing to pay (equal / over to tax owed) and how much interest you accepting to collect. I could keep explaining, but article below will no doubt do much better job.

https://www.bankrate.com/investing/investing-in-tax-liens-fraught-with-risk/

Wanted to ask if anyone diversifies their portfolio investing in tax liens and / or if any real estate funds out there we know invest significantly in them (since it falls in RE investment category).

Thanks much for any insight / advice.

Comments

  • LewisBraham
    edited April 2020
    @VintageFreak Aside from the fact it's difficult to invest in liens well as the article you've linked explains, do you want to be the one who forces people to be evicted in the midst of an economic crisis to collect on your lien? I feel like it's one of the worst sorts of investment activity ethically:

    Why do you think taxing authorities don't want to be part of that process and sell the liens off? It looks and feels terrible to throw someone out of their home.
  • TheShadowTheShadow
    I had a co-worker that bought tax liens. He did it for a while; he even ended up living in one of the tax lien properties that he bought only to sell it later. Eviction is the hard part with state laws varying state to state. Better have an attorney on retainer.
  • VintageFreakVintageFreak
    @LewisBraham Now when you put it that way...
    I didn't think this would hasten / force eviction. I assumed that would happen anyways. Instead of government owning the property, same government who takes OUR money to bail out banks, how about we own something for a change? That was how I was thinking.
  • VintageFreakVintageFreak
    edited April 2020
    @TheShadow I understood the probability of it coming to eviction was low and tax gets paid because that's the FIRST thing that gets paid even before mortgage. However based on @LewisBraham comment, maybe this fact makes it even harder for family to meet mortgage payment and therefore indirectly hastens foreclosures.

    Unfortunately I do have scruples including in investing.
  • rsorden
    One of our former clients managed some tax lien funds on the side, they did quite well (Kislak is the name if you wanna google them). There are also a host of other funds available, like Voyager Pacific. I never pulled the trigger on any of those, as I too have scruples & think this kind of stuff is just wrong & predatory. I have, however, had lots of success with trust deed investing through Ignite Funding...nice easy 10% returns, just try to be selective & pick investments from folks that have done several past offerings & have 100% payback...I don't wanna mess with the default stuff, though Ignite does all that, it just would take extra time.
  • LewisBraham
    @VintageFreak Of course, it can and often does lead to eviction: https://finance.zacks.com/can-evict-someone-own-pay-tax-lien-property-3784.html
    You're not doing a public service or saving us from the big banks by buying this. The banks wouldn't evict through a tax lien, but a mortgage one. It's rationalizing to think otherwise.
  • VintageFreakVintageFreak
    @LewisBraham That settles it. Thank you very much for your explanations.
  • Nick637
    The town I live in depends on people paying their property taxes.
    If the taxes are delinquent there is an 8% fee due to the delinquent tax collector. If the property goes to a tax sale the owner will owe the 8% fee plus the associated costs of the tax sale, (lawyer, notices in paper) and will now owe another 8% to the person who bought the property at the tax sale. The homeowner has one year to pay the back taxes, the 8% fee, cost of the tax sale and 8% to the person who bought the property at the tax sale.
    Our delinquent tax collector makes an effort to work with people to get them to make payments toward their back taxes. Sometimes the letter telling people there will be a tax sale is the only way to get them to pay.
    If there is a hardship, as defined in state statute, the homeowner can go in front of the Town's board of abatement to have all or a portion of their taxes abated.
    If there is a mortgage the bank will pay the back taxes and fees. If no one bids the town buys the property. Eventually the town gets the back taxes. This is not unethical.
  • LewisBraham
    @Nick637 It has proven totally unethical and cruel in many other parts of the country:

    https://washingtonpost.com/sf/investigative/collection/homes-for-the-taking/?utm_term=.61cb93babcea

    https://citylab.com/equity/2015/06/how-the-black-tax-destroyed-african-american-homeownership-in-chicago/395426/

    And now in the current environment, it could prove a particularly vicious time for such sales and evictions unless the government steps in to stop them: https://inquirer.com/health/coronavirus/coronavirus-eviction-foreclosure-philadelphia-gym-council-resolution-20200312.html
    A lot of people are going to miss their mortgage and property tax payments in the current environment.
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