What You Missed April 2018 General Meeting
by Rob Earhart

How to Make Money Buying Tax Certificates

Walter Kaminski – YouAndMeRealty.com

April 3, 2018

Walter started with, “May is the month for tax sales, beginning in the northern counties, and Miami brings up the tail in June.”

The interest rates have been decreasing because, in the 80’s, interest rates got up to 20%. CD’s were going for 16% at that time, and now they pay almost zero. Since about 2009 to 2015, the graph has dropped drastically. Walter exclaimed, “If this was your heartrate, you would be dead.”

The markets have been controlled by the big banks and the Federal Reserve and now they are increasing. One-half percent return has been the norm on CD’s and is considered high yield.

The market is hot now, inventories are lower, and the banks control the appraisal companies. You cannot use your own appraiser and the prices are coming in lower than they should be. The lenders, the person who has the money, makes the rules.

The banks and the hedge funds are the biggest buyers in the tax certificate markets.

Walter showed a graph showing the relative returns and risks of different investments. Tax certificates fare better than most other investments.

“The power to tax is the power to destroy,” said John Marshal, Supreme Court Justice. Walter showed a list of the many taxes we already pay; the list was lengthy. The taxes that are hidden are the utility taxes.

All property values are set once at the beginning of the year. Taxes are delinquent on March 31st and then they are putting together the list of delinquent taxes. If you buy the certificates, you can get up to 12% return on your money.

Once you reach two years from the date of purchase you can force the tax sale.

Walter explained that 40+ of the 67 counties’ sales are done online; the rest are done on the courthouse steps.

Tax Certificates are reverse bids from 18% to 0% and then you have a lien on the property.

Most auctions are proxy and, if there is a gap, the interest will be higher than you bid. If you bid 15% and the next higher was 18%, you will get 17.75% as your interest rate.

If it’s a direct bid like Hillsborough, then whatever you bid, you get.

You must register and file a W-9 and put up a deposit. The deposit varies: Hillsborough is $2,000, and Miami is $5,000.

Simple interest accrues monthly, and you get a minimum of 5% over the life of the certificate, even if they pay it off early.

There are two types of ROI: Return on investment and return of investment. With Madoff, you never got back your principle.

Walter described a great book for explanations of the process in Florida: An Investor’s Guide to County Tax Sales in Florida, by Reid Tillery.

There is a newspaper that lists the tax sales. You can pick it up at Hillsborough’s tax office at Dale Mabry and Martin Luther King. It lists the section, township, range, etc., which is one square mile and makes it easy to follow. As an investor or Realtor, you can farm these areas of interest. It is available up to three weeks before the end of the sales.

Florida statute 501.1377 mentions foreclosures and tries to protect consumers from greedy investors.

You can buy from May through June. If you buy in May and they redeem it by May 31st, you will only get your money back. If they do not redeem until June, you will get 5%. It will be redeemed when they pay the taxes.

Your tax certificate is the lien; when it goes to tax sale, you will get paid back.

Grant Street Group lists the auction sites and gives you a way to budget your expenses. There is a deadline to register and to deposit, but it varies from county to county. Real Auction is another site.

I try to buy homesteaded properties because I know someone is there. I try not to buy vacant properties but have ended up with some accidentally.

Key criteria for best tax certificates:

• Homesteaded
   
• Property type, single family, multi-family (not many), vacant land
   
• Certificates outstanding – How many others are out there? Zero is best, but you may get a higher return and they could foreclose and you will be paid off
   
• Redeemed Certificates - 99% will be redeemed.
   
• Face Value of the property
   

Some of the bigger players have thousands of people bidding and you get one bid, so you can see you are up against a lot of bidders. “But even a blind squirrel gets a nut sometimes,” quipped Walter.

Beware of government liens, which are called super liens, and especially of the “Special Assessment” liens. They will not negotiate them. Codes cases may be negotiated down sometimes.

Walter remained to answer questions about tax certificates and tax deed sales, and explained that he had classes available, coming up in May.