Tax sales are great ways for real estate investors to make a huge profit. When a homeowner defaults on their property taxes in Florida, the county will auction tax lien certificates for the amount of back taxes which an investor can hold for 22 months and collect interest up to 18% on from the municipality. The investment is safe because the municipality is guaranteeing your payment. The taxpayer has a redemption period of two years to pay the back taxes and interest to you to redeem their home. If they do, you just make a high rate of return on your investment. If they don’t, you can foreclose on the property, and apply for a tax deed with full ownership rights. This means you bought a property for pennies on the dollars.
Florida Tax Lien and Tax Deed Auctions Work?
Typically, the way a tax lien certificate auction in Florida works is on or before June 1 each year, the county tax collector conducts an online auction. You can purchase the tax lien certificate by bidding on it and paying the amount of taxes owed and any interest and costs due. The sale is conducted in what is known as reverse auction style which means the bidders bid down the interest rate starting at 18%. The certificate is awarded to the bidder that bids the lowest interest rate. This means the county pays you the interest rate for two years. The good thing is tax lien certificates have priority over mortgages so if you foreclosure after the redemption period, the borrower’s mortgage lien gets wiped out. Many times the lender will bid for the tax lien certificate though.
Benefits of Florida Tax Sales
Tax sales are good for everyone because it gives the owner two years to come up with the back taxes even though it’s a high interest rate they must pay. The county gets paid their taxes so they have money for municipal services and the investor gets paid a high rate of return on their investment. You can pick up Florida properties really cheap at tax sales. If you decide that this is something you want to do on a longer term basis, then you should invest in a good tracking system to track the sale dates, redemption periods and when your property taxes are due.
Investing in tax sales is an inexpensive and risk free way to receive a high rate of return on your money in a short time span. It is a safe investment because the municipality pays you interest and you have an opportunity to purchase a property for pennies on the dollar giving you a property with a high rate of return and built in equity. You can get up to 18% interest in Florida on your investment. Since Florida tax lien certificate sales are conducted online, you don’t have to leave your state or your area to participate. If you buy a tax deed or foreclose on your tax lien property, you get a property at a deep discounted bargain price.