Eric, let me ask you a couple of questions about tax liens, and so as I'm looking at that, how long is the process? When do I start making money?
OK, so on a tax lien, remember the term that new language we were talking about called redemption, and that's when you get paid. You could initially go in right away and know if you pick up that tax lien or that tax lien certificate; what happens if you could have an owner. You're kind of waiting.
You know there are two approaches that you can take. One is more of a passive approach, and then one is more of an active approach. And the passive approach is to buy that tax lien and wait. Either wait for the owner to redeem it, or you wait for another investor to come to pay us off as it goes through—but you're kind of waiting on someone else to take action.
Now, if you were more on the active side as an investor, and your tax lien has passed that two year redemptive period in the state of Florida, you can actually file the TDA and be more aggressive and get 18% on your money during that window when you file the TDA until it is sold at the tax deed auction. And so you can influence when you get paid, or you can invest and be more passive.
So it just depends on what you want as part of your investing strategy.
And so I buy that tax lien, and the owner pays it in 6 months. Am I happy?
That's why you want to pay attention to the interest rate that you're picking these up on. They can be different interest rates. What happens is that the tax lien's initial offer is offered beginning at 18% and then through the bidding process, they actually bid down the interest rate.
And so, let's say your bidding against others, and let's say it goes to 12% and you become the owner of the tax lien at 12% well, you're going to get 12% interest during that six months until the owner pays you. And if you're satisfied with that 12%, btw that's a whole lot more than your getting in your savings account, wouldn't you agree? I mean really, 12% is a great return. And so that's how that process is figured out and that's one of the ways you get paid on tax liens.
So one of the reasons we love tax liens is you got that interest rate, and you're like, wow, that's good, and if it can roll into me doing something and getting that property in a tax deed sale, then that's fantastic.
You have to love that because it takes it from good to fantastic. It's like good to even better, right. And so yes, you can get paid, and there's nothing wrong with a 12%. But if you want to be more aggressive, that's when you can file more of those tax deed applications. The unique thing is when you file that tax deed application, you're automatically going to go to 18% so that the entire amount that you've paid of those back taxes will be collecting 18% from the day you file it.
And so what happens is until that property is sold at auction, you're going to collect 18% on that. Now maybe you're happy with that and that works, or even better, you could potentially pick up the property if no one invests in it and the tax deed auction.
Let's suppose I buy this tax lien. Can I go knock on the door and talk to the owner?
No. In all of the resources and tools that we talk about later, that's a big no. I will say it again, no.
So don't go knocking on that door and cut a deal directly?
No!
And owning that tax certificate is the line; before it goes on sale, I can knock on the door and talk to the person and say, hey I'm wondering about your property?
Yeah and see if that might want to sell. Maybe they might be a flexible seller. They may have some challenges. But up until you cross over and own that certificate, no.
Excellent, and so if I want to be a real active investor and jump right in, then I'm looking at tax deed sales cuz then I get ownership right away.
Immediately.
And so that's the beauty of tax certificates. I can get in for a relatively low-value amount, and boom, I've got upside. Tax deeds, OK, I'm ready to either flip this house or do something with it.
Right, and find out what fits your personality and your strategy. You may do all three approaches. You might purchase it and wait.
