Investing in tax lien certificates may result in a better than average rate of return, however the real deal is NOT the 18% that you may get in NJ. Consider the ROR if you went after the Tax Deed, not the TLC.

    If you purchased or optioned the property prior to the tax sale from this motivated seller, then you have an excellent chance at getting a healthy return of 200% or more.

    Example:

    The Fair Market Value (FMV) of the property is $70K. The outstanding taxes are $40K. Because the tax auction is looming, the tax delinquent owner accepts $1200 for the interest in his property. The minor clean up and fix up costs are $800. As the investor, you have $42K invested. You market the property, selling it for $70K in this strong market and get your money back within 90 days (one calander quarter).

    Figure the Rate Of Return (ROR)?

    $70K sale - $42K cost = $28K profit

    $28K profit / $42K = 66.7% (the % profit) X 4 quarters ( you must annualize the % profit) = 267% ROR

    If it took 120 days tosell, then the annualized ROR = 201%

    If it took 180 days tosell, then the annualized ROR = 134%, still not too bad

    If it took 365 days tosell, then the annualized ROR = 66.7%, and your $28K profit was equal to the after tax wages of the average NJ worker. Imagine, you did one transaction, and it resulted in a profit equal to the  wages of the average worker for an entire year!

    The key is to be able to get the property for well under the market value so that you can sell at a price that will move the property quickly, while still allowing you a healthy profit. The most motivated of sellers are owners of tax delinquent properties where the tax auction is looming.

    BTW, this was a real live example from one one my students. It was his first transaction. It occured within 60 days of his having engaged my services as a Coach.

    The average first transactions profit of a student is currently over $20K.

    I do not even consider investing in a property unless I feel that I will make at least a 200% annualized Cash On Cash return.

Good luck in your investing,

Mitchell Goldstein - Coach Mitch

518-439-6100 until midnight EST