Buying a Tax Lien And Financing a Tax Lien


Process to Buying a Tax Lien

Process to Buying a Tax Lien

 

 

My best friend has been studying tax-liens for about a year now.  He recently bought one, but has gone to multiple auctions.

The whole process could fill a book.  In this blog post, I want to talk about financing a tax-lien and some funny stories that have happened to both of us along the way.

Here are a couple of absolute truths we have both learned:

  1. Be prepared to go through phone-tree hell (I was personally transferred to a judge…in the middle of a court session)
  2. Be prepared to go through Bureaucratic hell (Rules change at the last minute, there are no standard guidelines by county)
  3. NOBODY really knows what’s going on (the county tax commissioner just called my best friend and asked how much interest had accrued on the lien he bought from HIS COUNTY!)

 

 Buying a Tax Lien and Financing a Tax Lien

Although he is my best friend we have a fundamentally different view when it comes to growing a real estate portfolio.  Hence, he is a follower of Dave Ramsey and I’m a banker!  He bought his tax-lien using cash, I am buying mine using a line of credit ($100 origination fee).

Look at the cash-on-cash return profile of the different ways to buy a tax-lien.  Note, the collateral value of the lien is around $80,000.

Tax-Lien 19% Interest
Earned
6% Interest
Cost
Cash On Cash
Return
Cash-Purchase $2,500 $475 $0 19%
LOC Purchased $2,500 $475 $150 225%

 

Would love to hear your thoughts on the above subject in the comments section!