Quote:
Originally Posted by shadow191
It can work, but it's risky and you will need more capital than you think. You also need to be prepared for things to go sideways because these aren't "clean" transactions like buying/selling stock, there is a lot of grey area.
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Yup, like anything else, there are pitfalls. I think the biggest aspect that is under-represented is that while you can make up to 36% annually in states like Illinois, you do so only on the value of the lien itself, not the property behind it. You still need to do your homework before purchasing to know you are not getting a lien on a crack house or a place with a toxic oil spill, but if you get your 36%, it will be on the few thousand of the lien, not 36% on the 400K of property. Even at 36% annual return, you need to buy a LOT of liens at 1K each to generate serious cash flow, and each purchase should be accompanied by some due diligence. They are not a commodity like like stocks where my share of XYZ corp is just as risky as your share of XYZ corp. So, it's not necessarily a 1-hr a week, get rich quick scheme.
No party would let a 400K property go for a few K in back taxes, so usually, the only time you end up with the property itself is if it is an ex-crackhouse. You can't count on getting cheap property that way, you need to assume the money will come from the penalties of the liens themselves, which will be closed off by some party ( the mortgage holder if not the property owner themselves.)