Weld County Treasurer John Lefebvre

Transcription

1 Presented by John Lefebvre Weld County Treasurer PO Box 458 Greeley, CO (970) x3290

2 Purpose Explain tax lien sales Dispel myths Present risks Describe the opportunity

3 Scope What is a tax lien How and why it is sold How can you profit from them What are the risks How does the investor get their money back

4 Treasurer ss Duties 1) Collect property p taxes ($386 million) 2) Disburse funds to 300+ underlying districts 3) Invest the difference ($100 to $200 million) The underlying tax districts, as well as the county, depend on full tax collection each year. Selling tax liens helps meet that goal

5 According to the county treasurers I interviewed, 98% of all tax lien certificates are paid off by the property owner within two years. What if the property owner doesn't pay the taxes and redeem the certificate??? This could be your change to win the lottery!! If the property owner doesn t pay the taxes, then your attorney, with the help of the county government, can perform a foreclosure. You'll own the property for only the taxes, and a small fee. The tax foreclosure wipes out (removes), Yes, clears all the mortgages off the property. You own it free and clear This Is The Perfect Investment Pennies on the dollar EXPECT TO DOUBLE YOUR MONEY This little known armored care safe investment pays two to three times what you can earn on T-Bills or CDs and more than twice what you earn on other government bonds. If your CDs are making 6% it will take 12 years to double your money. If you owned government sponsored Tax lien certificates yielding 18% you could double your money in four years or less. UNBELIEVABLE YIELDS! WHAT THE BROKERAGE HOUSES ARE TERRIFIED YOU'LL DISCOVER TAX LIENS WILL PAY YOU New Jersey, 18%. City of Baltimore, 24%. Florida, 18%. Michigan (year one), 15%. Arizona, 16%. Michigan, (year two) 50%. Iowa, 24%. Cook County, Illinois auctions 100,000 certificates every year. You can buy small certificates at $500 or spend $10,000, it's up to you. This program is brand new and there is nothing else like it! Guidebook, National Directory, software - Cash Flow interest rate, manual and software - and 7 separate videos of the auctions, plus access to our new, exclusive TAXSALE.COM Internet site and Tax Lien Strategies Newsletter. FOR YOU To duplicate the airfares, hotels and expenses to visit the auctions would cost well over $10,000. The manuals are professionally produced. Every page of the guidebooks were designed for easy understanding and readability. A professional computer graphic designer developed each page. Thousands of hours were spent developing this comprehensive program, all to teach you on e of the most exciting investment opportunities I have ever seen. Adding together the research, editing, cover designs professional graphics on the guidebooks amounted to more than $30,000, plus the seven video shoots at $8,500 per session and you have almost $100,000 and that doesn't count my time. I have invested more than 2,000 hours of my time to learn how to be a tax lien expert. If you see what a fantastic investment opportunity this is and recognize how small, inexpensive $842 investment could change your future, then call me today for a risk free trial. My guarantee is simple. If you don t think you'll make 10 times the cost of the course in the first year you own the program, that's $2970, simply send it back.

6 If it sounds too good to be true? Tax liens can be good investments. This presentation acquaints you with the process in Colorado and helps you make an informed decisions before you invest.

7 What are they? Tax Liens They are liens placed against real property for the amount of unpaid taxes. Is this a way to acquire real estate? No. We issue roughly 4 to 6 deeds each year usually on unimproved property. Is this a way to get rich quick? No. Be careful of misleading information.

8 Why Would Someone Let Property Go To Tax Sale? Land developers use it as a line of credit Undesirable property that people don t want to retain Inability to pay the taxes Miscommunication on who is to pay the taxes usually in estate situations

9 Property Tax Timeline Taxes are collected in arrears January The statements of taxes due are sent. February - First half taxes are due the last day of the month - if paying in installments. April 30 - Full payment py due. June 15 - Second half of taxes are due. June 16 - All unpaid taxes are delinquent. July - Delinquent properties are sent tax statements.

10 Property Tax Timeline August - Endorsements September-October b - All delinquent real properties are advertised in a local paper for purchase at the tax lien sale. Prior to December - Delinquent real property tax liens in Colorado are sold to investors at annual tax lien sales. This is the final effort to collect taxes due for each tax authority. The tax lien sale is generally held in November.

11 Tax Sale Certificates Tax Year Certificates t Vl Value Rt Rate Sold $1.37 mill 10% $1.76 mill 11% $1.74 mill 12% $1.78 mill 14% $1.88 mill 15%

12 Tax Sale Certificates Tax Year Certificates t Vl Value Rt Rate Sold $2.59 mill 10%? $4.25 mill 11% $6.50 mill 10% $3.84 mill 10% $3.99 mill 10%

13 Redeeming Certificates How are certificates redeemed? Owners pay the delinquent back taxes and interest due to the Treasurer. The tax lien certificate may be redeemed at any time until a Treasurer s deed is issued.

14 Rate of Redemption 1 Month 7% 3 Months 22% 6 Months 38% 12 Months 64% 24 Months 80% 36 Months 90% 48 Months 96% After 12 months over half of the certificates are redeemed. -1 in 5 certificates are redeemed after just 3 months. - Depending on your bid, you could LOSE money!

15 Premiums Premium is the amount bid at the sale over and above the tax lien. NOTE: Premiums are not returned nor do they earn interest. Premiums - How much to bid? Calculate l the premium you are willing to pay before the sale. Know when to stop.

16 Return on a $1,000 Based on a 12% yearly coupon rate Tax Lien Redemption (Maturity) Premium 1 Month 6 Months 1 Year 10%-$100 ($90) ($40) $20 5%-$50 ($40) $10 $70 2%-$20 ($10) $40 $100

17 Rate of Return How is the interest rate determined? It is 9 percentage points above the discount rate on September 1 st, to the nearest full percent, bringing the rate to 10% for this year. Is it constant? t? Yes - through the life of the tax lien certificate.

18 Difference Between Rate and Yield Yield is the total amount of true profit. $1200 Taxes paid + $50 Premium = $1250 Total paid out Resulting in a 7% Yield $ yr. of 12% interest - $50.00 Premium = $70 Net Amount Earned

19 Investment Examples (Examples are based on a 12% yearly coupon rate and $1,000 tax lien) November 8, 2005 You buy the tax lien and pay a 5% premium $1, November 12, 2005 The property owner pays the taxes and 1 month s interest for a total of $1,010. You lost $40 in 4 days. It is possible to lose money if an owner redeems the tax lien before enough time has passed to recoup the premium.

20 Investment Examples November 8, 2005 You buy a $1,000 tax lien and pay a 5% premium, investing $1050. August 2006 The taxes remain unpaid and you endorse (pay the second year). You now have a total of $2, invested. In this second example, a profit is earned on a typical transaction. ti September 2006 The property owner pays the taxes for a total of $2,150. The Treasurer s office pays the investor. You made a profit of $100.

21 Endorsement Is the option for the current lien holder to buy the current year s lien on the same property prior to the tax lien sale.

22 Advantage of Endorsements No need to pay a premium. Draws interest t from endorsement date (August) rather than from tax sale in Otb October or November. If discount rate drops, p, endorsing locks in higher rate from the earlier tax sale.

23 Deeding When to apply A Treasurer s Deed cannot be issued until after a minimum of three years from the date of the original tax sale. Often, lien holders apply for deeds in September (prior to the three-year point in November) after they endorse the third year. The deed process takes approximately 6 months.

24 Deeding Applying for a Treasurer s Deed Pay application fees in the Treasurer s office. Complete Deed application.

25 Costs Associated with Deeds Deed Costs - $400 - Any remaining balance (usually small) is refunded. d Included in the Deed Cost: - Treasurer s fee of $75 - Owners & Encumbrances (reports follow chain of title) - Notice to Parties - Plus advertising - usually $80+

26 Possible Additional Costs with Deeds Costs not tincluded dthat t could ldbe incurred dto obtain a good title - Survey - Quiet Title - secures a clear title A Treasurer s deed is NOT a warranty deed and can be contested

27 Deeding Priority of the Treasurer s Deeds A Treasurer s s deed is superior to encumbrances such as: Mortgage Lenders Judgement Creditors Mechanic Liens

28 Deed Process Receive Deed March 2013 Buy November 2009 Endorse Aug 2010 Endorse Aug 2011 Apply for Deed September 2012 Endorse Aug 2012

29 Treasurer s Deeds Issued Year Deeds Begun Deeds Issued

30 Investigate properties before investing!

31 Property Information Tax Lien Sale List: reasurer/taxlieninformation/index.ht ml Assessor s Office: /D t t / Assessor/index.html

32 Possible Problems Contamination

33 Possible Problems Minerals

34 Possible Problems Special Improvement Districts - SIDs

35 Possible Problems Strips

36 Possible Problems Property Value Inaccuracies Drainage ditch and is unbuildable. New Subdivision - All lots valued at $30,000 Unless brought to the Assessor s attention, this lot will probably be valued at $30,000

37 Registering as a Tax Buyer Who can register? Anyone except a County employee and their immediate families Register with the Treasurer For tax sale see web site

38 The Auction The Treasurer has discretionary power in conducting the sale Sales are FINAL! Know what you are buying remember Caveat Emptor let the buyer beware Purchases must be paid for at the end of the sale Buyer receives a Certificate of Purchase

39 The Physical Auction Tax liens are sold in property schedule number order to the highest bidder. The amount bid is OVER and above the tax lien and applicable fees. It is called a premium and is nonrefundable and does not earn interest. Determine the maximum premium you are prepared to pay prior to bidding.

40 Important Considerations This is not a way to obtain real estate Tax liens are not a liquid asset, your money will be tied up for an unspecified amount of time Early redemption may result in a loss on your investment There is no guarantee it will be paid

41 Profit Potential Potentially high-yielding investment. After 3 years, the lien holder has the right to apply for a Treasurer s Deed to the property. You could end up owning the property! The interest rate is fixed for the life of the investment.

42 Conclusion Tax Liens are an investment You buy the lien not the property. Watch Out for the Pitfalls Severed Minerals, S.I.D., Strips, and Outlots Know what you are buying Buy in a familiar location and investigate beforehand Same Buyers Year After Year Many buyers come back year after year.

43 2012 Tax Lien Sale October 31 Online, see web site for details

44 Weld County Treasurer John Lefebvre ebv e jlefebvre@co.weld.co.us x3290 A special thanks to the Jefferson County Treasurer s office for their contributions to this presentation.