The “Face Value” of a certificate is important to consider when you are calculating your ROI as an idle investor. It is meaningless once you pay the “rollup”.
The current “Redemptive Value” is the amount needed to redeem a tax lien certificate at any given time.
The “Redemptive Value” is the amount that I will purchase a lien for, and this will be the amount that I earn interest on going forward.
The “Redemptive Value” of a tax lien is a fixed amount during the Redemptive Period.
When a tax lien is issued in Florida, the interest accrues annually and a minimum 5% penalty is also given to ensure the tax lien investor makes a profit regardless of how soon the lien redeems.
When the redemptive period ends, the tax lien is now considered “foreclosure ready”.
Some institutional investors will sell unredeemed tax lien certificates at the end of the redemptive period instead of foreclosing on the properties.
A tax lien certificate with an interest rate of less than 18% means we won’t make as much money, therefore we should avoid them.
Approximately 98% of tax liens issued in Florida redeem during the redemptive period.
If my lien is used to file a Tax Deed Application, it will begin earning a “true” 18%. But if it redeems in 6 months, I will only collect 9%.
A parcel that has multiple tax lien certificates issued against it indicates that the property owner doesn’t care about the property.
If the “Redemption History” shows a pattern of redemption in previous years, it is more likely that the outstanding tax liens will also be redeemed by the property owner.
In Florida, a tax lien will expire seven years from the date I purchase it, even if I purchase it outside of the redemption period.
In Florida, to foreclose on a property through a tax lien, I must pay the rollup and file a Tax Deed Application with the court.
The “total rollup” is the total of all outstanding tax liens held against a parcel.
One reason to buy tax liens in Florida is the simplicity of their foreclosure process, which is administrative.
In Florida, if I want to apply for the tax deed the “rollup” includes only the money needed to pay any subsequent tax liens, but does not include any older certificates than my own.
If I want to acquire a property through a tax lien, I must also roll up other outstanding liens such as mechanics' liens, nuisance liens, and HOA liens.
The only way I will earn a true 18% annually on a tax lien certificate purchased on the Secondary Market is by initiating the tax foreclosure.
When doing my due diligence on a portfolio of Florida tax liens, it is always necessary to research factors such as the crime rate, school ratings and comparable sales in the surrounding area.