Illinois Property Tax Lien Forum

How many members that are active buying Illinois tax lien certificates? Do they make few dollars profit on their investments with in one yera time? I am new to tax lien certificates and I want to know if it is possible to make few dollars on $1,000 investment. Answer is very much appreciated.

Thanks,
viewsonic

Sorry to say that it is very difficult to make much money on a $1000 investment. Even if you can get a certificate at 18% that is only $18 in six months or $36 in an entire year, and there is significant risk if you are new to tax liens.

I have been reading up on tax certificates.  I now that there are risks associated with purchasing them.  I have found there are a couple of problems with these items:

1.  Not checking the land - could be swamp land.
2.  Property is an EPA worst case scenario and valuless.
3.  The potential that this property going at 0% and not making any money and technically losing money due to inflationary matters.

My questions are:

1.  Am I missing things here?  I understand that due diligence needs to be conducted and that you cannot just go in and purchase certificates without doing your homework.

2.  I also heard that if you get a property let us say for tax year 2007 and the property owner fails to redeem the taxes.  The following year I was told that you being the previous owner of the taxes would have 1st right to the 2nd year of taxes and they would default to 12% interest even if the first year was say 0%.  Is this true?  If so, there seems to be a great potential for making money if you can forgo for the first year.  Further, you could then acquire a tax deed if the property taxes are not redeemed.  Am I missing something here?

3.  I read somewhere on this site that if you do not turn a certificate into a tax deed in a proper amount of time then you lose everything.  Does this mean I loose the tax certificate.  I would think that this item would still be on a deed search and would need to be paid prior to sale of the property and would never be lost.  Secondly, what time frame must you convert it in......I thought you could just hold it and continue to collect more money and interest on this property.

Any help would be appreciated.

Mike

kikboxr777 - 14 April 2009 10:14 PM

I have been reading up on tax certificates.  I now that there are risks associated with purchasing them.  I have found there are a couple of problems with these items:

1.  Not checking the land - could be swamp land.
2.  Property is an EPA worst case scenario and valuless.
3.  The potential that this property going at 0% and not making any money and technically losing money due to inflationary matters.

My questions are:

1.  Am I missing things here?  I understand that due diligence needs to be conducted and that you cannot just go in and purchase certificates without doing your homework.

You pretty much have a handle on it.  The processes after the tax sale are just as important if not more important than the research you do prior.  Any errors and your lien will expire worthless. Oh… Don’t forget if the property is occupied you will have to evict the occupants according to Illinois State Law which takes up to 6 months.

kikboxr777 - 14 April 2009 10:14 PM

2.  I also heard that if you get a property let us say for tax year 2007 and the property owner fails to redeem the taxes.  The following year I was told that you being the previous owner of the taxes would have 1st right to the 2nd year of taxes and they would default to 12% interest even if the first year was say 0%.  Is this true?  If so, there seems to be a great potential for making money if you can forgo for the first year.  Further, you could then acquire a tax deed if the property taxes are not redeemed.  Am I missing something here?

Not entirely.  It is true that if you own a lien on the 2007 taxes and the owner fails to pay the 2008 taxes you have the ability to have the subsequent taxes applied to your 2007 certificate.  The subsequent tax penalty is a fixed 12% per year.  The owner can pay the 2008 taxes without ever redeeming the 2007 tax certificate.  Many people believed you could make money buying at 0% and waiting on the subsequent taxes at 12% - most of them took their losses and are bidding higher now.  You can acquire a tax deed after 2 to 2½ years depending on the type of property.  You must satisfy all legal requirements including multiple take notices, sheriff services, publication, and a tax deed case.

kikboxr777 - 14 April 2009 10:14 PM

3.  I read somewhere on this site that if you do not turn a certificate into a tax deed in a proper amount of time then you lose everything.  Does this mean I loose the tax certificate.  I would think that this item would still be on a deed search and would need to be paid prior to sale of the property and would never be lost.  Secondly, what time frame must you convert it in......I thought you could just hold it and continue to collect more money and interest on this property.

This absolutely means you loose the certificate.  If a certificate reaches the period of redemption and you have not taken the appropriate steps to acquire a tax deed - it is worthless.

Thanks for the response.  Now I have additional questions.

1.  I thought the period of redemption was for the property owner had to satisfy the delinquent tax problem.  Now there is a redemption time period for the certificate owner also?  How long is that to turn it into a tax deed.  I thought you could just continue purchasing the tax certificate on the same property year after year.  Now it seems that my hand is being forced into movement to take the property as a tax deed.  My original intent was to purchase the taxes of a relative of my friend who can no longer pay the taxes.  I want to make sure that the taxes are paid but do not want that person to lose the property to someone else on a tax deed and I wanted to secure the monies that I paid with a lien on the property.  Where can I get that information because I did not see that in any of the reading (or it was sketchy and I did not pick up on it).

2.  It seems that it might be better to do this tax certificate business in the non-collar counties of Cook because there seems to be more competition which drives down the rate of return.  I am not sure how people make money with 0-3%.  Am I missing something here?

3.  Now a scenario (I can tell you are excited).  Let us say that I purchase these taxes for 2007 at 0% I then get ability (is it a right or do I have to bid them down).  Then I get the 2008 taxes but they pay them or pay them late with a minor penalty.  They do the same in 2009 and 2010.  Now does my 2007 tax lien go stale or become worthless?  Can I ever get a tax deed or does it have to be two years consecutive meaning I would have to get 2011 and 2012 before I could get a tax deed.

Sorry about the compound questions and more questions but I am curious about this and would like to invest in these types of debts.

Thanks again.

Mike

kikboxr777 - 16 April 2009 08:39 PM

1.  I thought the period of redemption was for the property owner had to satisfy the delinquent tax problem.  Now there is a redemption time period for the certificate owner also?  How long is that to turn it into a tax deed.  I thought you could just continue purchasing the tax certificate on the same property year after year.  Now it seems that my hand is being forced into movement to take the property as a tax deed.  My original intent was to purchase the taxes of a relative of my friend who can no longer pay the taxes.  I want to make sure that the taxes are paid but do not want that person to lose the property to someone else on a tax deed and I wanted to secure the monies that I paid with a lien on the property.  Where can I get that information because I did not see that in any of the reading (or it was sketchy and I did not pick up on it).

The period of redemption is for both the property owner and the tax investor.  You need to read what the statutes say about this. You can continue purchasing the same certificate year after year, but to do so you must not pay the subsequent tax - instead you would have to let it go to the tax sale again at which point you would have to bid against other buyers again. In regards to the information on the site, it doesn’t touch the complexity of how all of this works.

kikboxr777 - 16 April 2009 08:39 PM

2.  It seems that it might be better to do this tax certificate business in the non-collar counties of Cook because there seems to be more competition which drives down the rate of return.  I am not sure how people make money with 0-3%.  Am I missing something here?

You are not missing anything.  Remember though that the penalty applies the day after you buy the certificate so if buy a certificate at the tax sale on Monday for 3%, and then the property owner redeems the certificate with the county clerk on Tuesday.  You made %3 on your money in one day. Just another thing to be aware of.

kikboxr777 - 16 April 2009 08:39 PM

3.  Now a scenario (I can tell you are excited).  Let us say that I purchase these taxes for 2007 at 0% I then get ability (is it a right or do I have to bid them down).  Then I get the 2008 taxes but they pay them or pay them late with a minor penalty.  They do the same in 2009 and 2010.  Now does my 2007 tax lien go stale or become worthless?  Can I ever get a tax deed or does it have to be two years consecutive meaning I would have to get 2011 and 2012 before I could get a tax deed.

I am excited!!! I put this forum and site up for people like you, its good to see someone is finally using it.  Ok, let me address your example in two ways:

Scenario #1

Buy a 2007 tax certificate $100 @ 0%/6 months
Elect to apply the 2008 taxes to the 2007 certificate at a fixed rate of 12%/year
Property owner redeems tax certificate (since the 2008’s were applied to the 2007 the owner must pay the full amount)
All of your liens against this property are now satisfied. You no longer have any rights to future taxes of this property and all future taxes will have to purchased at the treasurer’s annual tax sale where you will bid against competition.

Scenario #2

Buy a 2007 tax certificate $100 @ 0%/6 months
Do NOT pay the 2008 taxes (these are referred to as Subs, ie. 2008 Sub)
The taxes are sold again to you at the treasurer’s annual tax sale where you bid against competition. Say for $120 @ 2%/6 months.
You now own two certificates, but the 2007 certificate will still expire in 2½ years. 

A few notes…
You do not have to buy all 3 years of successive taxes, but it is highly recommended if you wish to protect your lien.  If another tax buyer were to purchase the next years taxes, i think you would essentially have to pay them when you tried to take a tax deed.
Also realize that most professional tax buyers consider taking tax deed to a property a failure. This is because very few properties of any value actually go all the way to deed.  In most counties over 90% of the tax certificates sold redeem.

LOL.  When I originally looked into this, I read all these “tell all” books which told the tall tale of 18% interest and how easy it was and a couple years down the road you own the property....All this while you are sleeping.  The crowds roar with approval and your pockets become lined with gold.

The funny thing now is that the more questions that I ask the more questions that I come up with regarding these things.  This leads me to continue my search on the internet and treasurer’s websites.  I now am seeing Joseph E. Meyer and Associates slinging around terms like scavenger’s sales and people “reselling” tax certificates.

Since we seem to be having a private yet public conversation....You seem full of information on how to do tax lien purchases.  I only learned of them about one month ago (before that I never knew this type of market existed).  Of course when you do some research on it there are plenty of people that want to have you buy their book on “how to do it”.  How long have you actually done this type of investment and why share the information for free for dingalings like myself who are going to fumble around and purchase the proverbial swamp land for the basement price of 10x what it is truly worth?  Even with a property owner that redeems after a short period of time you can turn and make a small profit even if is a small interest rate.

What about the dumb investor (well probably smarter than myself) that does a 0% bid on a property (even a 1 or 2% bid).  You are almost better putting in the stock market and getting a better return on a stock than being potentially locked in a property that is giving you such a low return on investment.  Where is the true benefit of doing this program?  A warm feeling in your belly?

I am not trying to become “King Land Baron” of Illinois (although that has a nice ring to it) but at the same time, I am looking to make a decent return on investment and 0 to 3% seems pretty low in the scheme of things unless most people redeem their taxes in a very short period of time (because of brain fart or short term cash flow problems).  Obviously the rate of return becomes a lot higher on an annual basis.

My concern scenario is that I purchase a tax lien on a property for say 1% in 2008.  Property owner does not redeem on that year but then goes on a “winning” streak and never has a problem again with paying his property taxes.  Here I am sitting in limbo with a 1% return rate for 10 years.  Not so great in the grand scheme of things for the long haul (hopefully because the market rebounds).  There is no way to get that money free (liquid) on that property until the property owner sells and has to pay off the lien.  Are you seeing a shift from people that are low balling it to a more decent rate or are most investors goofy with these low bids thinking (according to the nonsense told in countless publications) that they will own property for next to nothing?

Okay my last question is....Do you want to impart knowledge on these matters on a person like myself in a real life scenario??  I can repay you in the nicest pair of shined shoes, I can walk dogs pretty good, cats seem to shy away from me and I can put a hell of a polish on car (just like the Karate Kid).

kikboxr777 - 17 April 2009 12:00 AM

How long have you actually done this type of investment and why share the information for free for dingalings like myself who are going to fumble around and purchase the proverbial swamp land for the basement price of 10x what it is truly worth?

I have worked in the tax lien industry for 4 years.  I work for Joseph E. Meyer & Associates and therefore do not directly purchase tax certificates.  So as apposed to someone who would be bidding against you at the tax sale, I’m often times on the phone with “dingalings” (your word) like yourself who are out to get rich buying tax liens.  I thought this site would help people get a better understanding of how all of this works.  I do admit though that i need to expand the articles, just hard to get motivated when you don’t have many visitors.

kikboxr777 - 17 April 2009 12:00 AM

What about the dumb investor (well probably smarter than myself) that does a 0% bid on a property (even a 1 or 2% bid).  You are almost better putting in the stock market and getting a better return on a stock than being potentially locked in a property that is giving you such a low return on investment.  Where is the true benefit of doing this program?  A warm feeling in your belly?

At those low rates I don’t see much of a benefit either. 

kikboxr777 - 17 April 2009 12:00 AM

My concern scenario is that I purchase a tax lien on a property for say 1% in 2008.  Property owner does not redeem on that year but then goes on a “winning” streak and never has a problem again with paying his property taxes.  Here I am sitting in limbo with a 1% return rate for 10 years. 

You can’t keep a lien for more than 2½ years… You either have to attempt to take a deed or let it die.

kikboxr777 - 17 April 2009 12:00 AM

Are you seeing a shift from people that are low balling it to a more decent rate or are most investors goofy with these low bids thinking (according to the nonsense told in countless publications) that they will own property for next to nothing?

Rates were higher this past year.  We will be posting a list on ramsauctions.com of the average rates for the tax sales we conducted.

In regards, to mentoring you i would prefer to continue doing so on the web site and forum.  This way all of the community can benefit from it.  I’m working on a free E-book that gives a basic understanding of how all this works - probably won’t be ready for a many more months though.  Please feel free to create new threads in the forum with your individual questions.

Okay things are starting to gel so far on the process although I plan on reading more in some books that I ordered so I can get a stronger feeling toward it.

When does Joseph E. Meyer & Associates get involved.  It seems Cook County handles its own tax sales.  Do all the small counties do it differently?  I’m sure it is different in different counties.  Do you get them after the first non-payment or is it after a scavenger sale.  After Joseph E. Meyer & Associates becomes the trustee they then provdie a tax deed.  Are these properties the worst of the worst that no one wants?  Are they mostly problematic pieces of property (ie) unbuildable, EPA’ violations or just garbage in general?  It seems that a tax deed property (that is for the most part free and clear) is a great buy for only a several hundred dollars BUT as my father once told me If it seems to good to be true....It is!

Please let me know when the stats come out with the sales that were done because I am curious to see what penalty rates were obtained on tax liens that you deal with.  This would probably give me more of an easy feeling in my stomach than having to see a 0% property.

What would your suggestion be for me at this point in time with no auctions occurring anywhere in my area to participate in?

Thanks again for all your help.

Mike

kikboxr777 - 17 April 2009 10:51 PM

Okay things are starting to gel so far on the process although I plan on reading more in some books that I ordered so I can get a stronger feeling toward it.

Sorry to say i’m not aware of any books worth reading on the topic.  If you really want to learn, read the compiled statutes.  There is a link to the statutes on the site.  Also a strong background in Illinois Real Estate is very helpful i would recommend getting at least an Illinois Real Estate Salesperson’s license if not a Real Estate Broker’s license.

kikboxr777 - 17 April 2009 10:51 PM

When does Joseph E. Meyer & Associates get involved?

For counties that Meyer & Associates is trustee, they get whatever is not sold to a private tax buyer at the tax sale.

kikboxr777 - 17 April 2009 10:51 PM

It seems Cook County handles its own tax sales.

This is correct, Cook also does not have a trustee program they do scavenger sales.

kikboxr777 - 17 April 2009 10:51 PM

Do all the small counties do it differently?

Not really, you either operate a trustee program or have scavenger sales.  Meyer & Associates operates in 80 counties.  The other counties either have scavenger sales or use other companies as their trustee and the really small counties probably don’t do anything since they only sell 50 certs each year.

kikboxr777 - 17 April 2009 10:51 PM

After Joseph E. Meyer & Associates becomes the trustee they then provdie a tax deed?

Meyer & Associates does everything a regular tax buyer would to do obtain a tax deed. If after 2½ years the owner has not paid, then they take a tax deed and sell it at public auction.  Those are the auctions advertised on iltaxsale.com

kikboxr777 - 17 April 2009 10:51 PM

Are these properties the worst of the worst that no one wants?  Are they mostly problematic pieces of property (ie) unbuildable, EPA’ violations or just garbage in general? 

Yes and No, there are many reasons professional tax buyers pass on items at the sale although the reasons you mentioned are usually why.  But one of the greatest thing about the trustee program is that it cleans up properties that have years of backtax.  Meaning that a property might have 10,000 in back taxes plus this years tax due, lets say the property is only worth 5,000, no reasonable tax buyer would invest in this property.  But if no one buys it, it is sold to the county as trustee, after the redemption period expires a tax deed to is taken and all prior taxes are wiped clean. It is then sold at public auction with a starting price of around $600.

kikboxr777 - 17 April 2009 10:51 PM

What would your suggestion be for me at this point in time with no auctions occurring anywhere in my area to participate in?

Take my advice above and read the revenue code, it’s where i learned nearly everything.  Then consult an attorney about the stuff you don’t understand. I know this may sound like a pain but you’ll need an attorney anyway if you take a certificate all the way to tax deed.

This has been a great dialog, please keep the questions coming and tell your friends, you see after 4 years of working in the industry it is easy to take for granted what people know and understand.  This will really help me finish the free E-Book.