Florida: Tax Lien Certificates
Learn how to purchase tax lien certificates in Florida and how easy and inexpensive it can be.
Tax lien investing in Florida. Although each state is somewhat similar, there are important differences in each one that may be favorable to you. Some counties are different as well. For example Miami-Dade county does an online auction and requires a $5,000 min. deposit. Broward county (right next to Miami-Dade) only requires $1,000. Most other counties only require 10% of what you plan to purchase.
In Florida taxes are due November 1, and are late if not paid by April 1 of the following year. The tax collector in every county sends out notices to all owners stating that a tax certificate will be created and auctioned if they don’t pay by a certain date. This doesn’t mean they will lose there property at the auction. That happens in Tax Deed States. Florida is a tax lien state. The certificate once sold to an investor becomes the first lien on the property (in most cases) but there is a waiting period. (2 years)
The Amount $$
of the certificate contains the following: late tax (unpaid amount), interest (1.5% for each month), Tax Collector’s commission (5% on the delinquent amount), and the newspaper’s advertising charge. Don’t think because you don’t have a lot of money you can’t invest because you can. Often times you’ll find certificates where the owner paid the balance but not the fees associated with being late. So you could find a tax lien certificate for $50 dollars that is on a property that’s work $250,000. The full tax balance may have been $5,000, but since it was paid late, they now owe $5,050.
The Wait/Foreclosure
period in Florida is 2 years from the certificate creation date. That means if you win a certificate dated June 1, 2009, if its not redeemed (paid in full) by June 1st 2011, you can start the foreclosure process on the property. Redeemed meaning the owner of the property paid all the taxes, fees, etc.
Earning
You’ll be earning a percentage between 18% down to 0% yearly until the owner pays (if they ever pay). The winner of the certificate is the investor willing to accept the least amount of interest. That means the $ amount of the bid stays the same, but the interest goes down. If no one bids on a certificate, it is held/purchased by the county. All tax liens not sold at the auction are held by the county and carry 18% interest. They are sold first come, first serve on a date announced by the county.
Each certificate expires in 7 years and you lose your investment at that time. You may be thinking, “if I can foreclose on the property in 2 years why would I wait 7 years?” Here’s a brief answer; You may have bidded on something that no one wants, not even you. That’s why its very important to do your research before you spend your money on a tax lien certificate.
Due Diligence/Research
This very important in this process. As with all investments, your risk can be minimized by doing your homework. Use the Internet, to find out as much information as you can on your potential investment. Use Google Maps, County websites, census website. Gather what you can about neighborhoods especially if you can’t travel to Florida every single year (yet).
Remember to look at the money you invest and grow in percentage not $ amount. My wife used to laugh at me when I was excited about earning 10% on $50. I tell you what, go to any bank with $50. Your lucky if thats enough to open a account. If it is it will be impossible to earn 10% a year. Simply put, if you have a $50 savings account you’d be lucky to earn more than 2%. If you have a Certificate of Deposit with $10,000 you’d be doing great to earn 5%. Making your money work for you should be the primary goal in tax lien certificate investing. If you just want a cheap property, you should look into tax deed states. Although you can end up with a property in FL you have the waiting period and as of 2008 numbers 85% are paid off before the certificate is eligible for foreclosure.
Happy investing.
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