Where Should I be Looking? by Tony Martinez
Tony Martinez is the Founder and Chairman of the US Tax Lien Association, which is an organization that is committed and dedicated to helping others achieve total financial freedom through the power of investing in Tax Lien Certificates. With over 30 years of expert experience, Tony is the world's #1 authority on the subject of creating enduring wealth through the little know strategy of investing in Tax Lien Certificates, which gives anyone the opportunity to earn guaranteed fixed rates of returns of 18% – 36% interest per year, and acquire valuable real estate for approximately 10% of market value.
One of my goals for this blog is to introduce you to markets that you may not have previously considered for your tax lien and tax deed investments. In this post I would like to introduce you to the great state of Nebraska. There are ninety-three counties in Nebraska.
Many of the counties in Nebraska have very small populations and are considered rural. Many of you are aware that I do not recommend investing in rural counties, unless there is something unique about the economy that has created a robust real estate market. For example due to the current oil boom in North Dakota otherwise stagnant real estate markets have become quite robust. I am not aware of any counties in Nebraska that fall into that category. Best practice would be to focus on a few counties with the largest population such as Douglas population 531,265, Lancaster population 293,407, or Sarpy population 165,853.
If you are not a Nebraska resident and you are not planning on traveling there for a tax sale then I can narrow your focus to a single county. Douglas County is the largest county and it is the only county scheduled to hold their tax sale online this year. For the fourth consecutive year Real Auction will be conducting the Douglas County tax lien sale online. Registration for the sale is now open on Real Auction’s website. The list of properties will be available for review and early bidding on the Real Auction website starting the first week of February. The sale ends in March. In years past Douglas County has offered over 7,000 liens for purchase at their annual tax lien sale.
Tax lien certificates in Nebraska offer an interest rate of 14%. The redemption period in Nebraska is three years. Once the 3-year redemption period has expired, you must begin foreclosure proceedings within 6 months. Failure to start foreclosure within 3 years and 6 months of the original tax sale date will result in cancellation of the sale due to the statute of limitations.
Nebraska statutes dictate that the counties use the bid down ownership method to determine who the successful bidder is at the tax sale. Due to the fact that the bid down ownership method is rather cumbersome the counties holding live sales (all except Douglas) use a round-robin bidding method.
The round-robin bidding method eliminates the bid down the ownership bidding process on the tax liens. Instead, each investor is given a turn to select one lien that they would like to purchase. Once everyone has had an opportunity to select and purchase a lien, the process starts over again and continues until all of the liens are sold or no one shows an interest in any remaining liens. Holding a round-robin sale on the Internet would be very difficult. Therefore Douglas County utilizes the bid down ownership method for their online tax lien sale.
The bid down the ownership auction method is confusing for many potential tax lien investors. The concept is really quite simple. The bidder willing to accept the lowest percentage of property ownership is the winning bidder. For example if the winning bid is 55% in the case of foreclosure on the property the original property owner would retain 45% ownership in the property with the winning bidder retaining 55% ownership. That means in order to sell the property the bidder would be required to pay the original property owner 45% of the property’s value. Keep in mind that this only becomes a factor if the property owner does not redeem the tax lien certificate during the three-year redemption period. The redemption rate in Douglas County is not significantly different than that of any other county in the state.
My number one strategy for Nebraska is to attend the live sales that incorporate the round-robin sales method. This enables me to get a great 14% interest rate and my investment cost is only the back taxes plus the advertising fees. If the property owner does not redeem during the three-year redemption period I have six months to foreclose and I will receive 100% ownership of the property.
If you are not able to attend a live auction in Nebraska then you still have the Douglas County online sale as an option. You still get a 14% return on your money and the investment cost is only the back taxes and advertising fees. Just remember that it is best to keep at least a controlling interest of 51% or more in the property should you have to foreclose on the lien. That means in a worst case scenario you would be purchasing the property for 49% of market value leaving you a potential resale profit on 51%.
In conclusion, Nebraska obviously offers a very lucrative opportunity for tax lien investors, as well as unique auction methodology that assures a full 14% interest rate.