By Charles Sells
In Cecil County, Maryland, the local airport has a new owner and the local government is nearly $1 million more flush in paid property taxes than it was before the county’s June tax sale. The sale attracted a mere 37 bidders on more than 1,300 unpaid tax liens, but those bidders were active and purchased in high volumes. Purchase prices far exceeded the value of the tax liens, with good reason.
One of those purchases was the local airport, a private operation that has been up for bid at tax sales in Cecil County more than once throughout the years. At present, the airport has an assessed value of more than $2 million and has a tax lien valued just under $10,000. That lien was sold at auction for $850,000 this month. Another notable purchase was $825,000 for a $22,000 tax debt on a 15-acre property with a waterfront on the local Elk River. That property value is assessed at $1.69 million. A local golf club’s lien of $16,000 went for $135,000 to Equity Trust Company. That club has an assessed worth of about $1.27 million.
Of course, those were only the “headliners.” Many properties with lower values and much, much lower tax liens also had their debts transferred from the municipal government to private buyers, a good situation for every party involved since the government no longer must pursue the debt; the investor now has a variety of options for creating high returns, and the homeowner has, in Maryland, at least six additional months in which to pay their property taxes plus, in some cases, a lot of additional fees and interest. In some counties, interest rates may run as high as 20 percent. However, it is important to note that the bidding in these tax sales is for the right to collect, not the property itself. That means Equity Trust, for example, paid $135,000 for the right to collect and, theoretically, foreclose on a lien that, ultimately, will be $16,000 plus some amount of interest if the golf course owner pays it off before the company can foreclose. It’s a strategic risk, and it’s not for everyone.
Maryland can be a tough state in which to invest in tax liens because the bidding is, as you can see, highly competitive and often big players like Equity Trust can drive up prices because they have completely different levels of scale than individual investors. For this reason, many investors opt to invest in funds that purchase tax liens or through intermediaries who are also “big fish” in the tax lien and tax deed investing pond, so to speak. Having an experienced, powerful investor with powerful financial wherewithal and reputation on your side can be a game-changer that exponentially increases the power of your investment capital.
To learn more about strategic tax lien investing and why you might invest in one state over another, contact PIP Group at PIPGroup.com for a free consultation. We factor in your investing goals, your capital constraints, your personal risk tolerance, and your return timeline to identify the best real estate investing strategies for you.