Florida 2012 Tax Lien Auction Results

Florida was the state I was most interested in investing in as it seemed to provide the simplest way to get a great return from interest only. An 18% maximum interest rate and laws that make it easy to recover your money where what attracted me. A foreclosure is a home-run in some states, but it would require you to hire the right lawyers to go through the process. I wanted to keep it simple to start off.

I looked at the results of some prior years and saw something disturbing. Was it really possible that one to two million bids at the minimum rate of 0.25% were being submitted for every lien on my radar? This did not seem reasonable to me. First, are there really that many people competing? Second, why in the world would someone accept a 0.25% return when you can easily find a 0.75% return at an online bank? Florida does have a 5% minimum rule that I have heard about, but I was not sure how it works. I had set a goal for myself of getting a better return in Florida than I did in Arizona, so I was aiming to get a little better than a 6% return. If the past history was correct, it did not look like I would meet my goals.

I put another $7,000 into my tax lien bankroll. With the money left over from my original $6,000, and the money from the redeemed Arizona certificate, I now had about $9,500 to invest in Florida tax liens. I knew I wanted to participate in the Citrus county auction as I have access to a house there, and based on the fact that it was the earliest internet auction, I also signed up for Pasco County auction. I figured I would buy up to $5,500 in Pasco, and save the rest of my powder for Citrus. If things went well in Pasco, I was even thinking of augmenting my bankroll prior to Citrus.

The Pasco auction was on May 15^th. Pasco uses “Direct” bidding instead of “Proxy” bidding. I'll get more into those details in a later post, but in theory, Proxy bidding is better. I took more of a “cast a wide net” approach than I did in Arizona due in part to the differences in the state laws, so I bid on over 500 liens. My bids ranged from a low of 6.25% up to 7.5%. I checked the results after the first four of a total of ten batches were finished, and every lien I had bid on had gone for 0.25%, and there were over a million bidders on each of them! I did not know enough about the 5% rule to feel completely comfortable counting on it, but if everybody else was jumping off a bridge, I figured maybe I should too. I dropped 60 of my remaining bids down to 0.25%. Considering there were over one million bidders at 0.25% on each, not surprisingly, I was shut out.

The Citrus County auction was June 1 – 3. I put in 425 bids at 0.25% for single family homes, and another ten bids at 6.75% for multifamily homes. I did some more reading on the 5% rule first as I was convinced this could be the only reason why the rates would go so low. I was still not comfortable enough with my understanding of the 5% rule, but I figured the best way to really learn it was to experience it first hand by winning at least one bid.

Worried I would be shutout again (pretty good odds if there really were to be millions of bidders), I also looked into the Gilchrist County auction. History looked a little more promising here as past years showed winners in the 5-6% range. Gilchrist is a rural county, and seems to get much less attention. There were not many appealing liens, though. I ended up placing only18 bids. In the early batches, I bid 6.25 – 6.75%, but I also placed five bids at 0.25% in the later batches. I checked in at the end of the day only to find I was shut out again. It seemed a little fishy that my low bids were mostly two way ties (far cry from 2 million) and I lost them all. Especially fishy was the fact that one of them was “won” at 3.75% due to Proxy bidding. With a tie, it should have been awarded at 0.25%. I actually thought of writing an email questioning the results, but decided against it.

On Monday morning, I check the site again. It was now locked with a message that results were being audited. Hmm. Then I checked my email and found I had won three bids! The site remained locked all day Monday, though, so I was not sure if I won or not. The balance was due by the end of the day on Tuesday. By noon on Tuesday, I was worried I would lose my bids if I did not pay. I called online support and left a voice message. I followed up with an email. They did resolve the issue and called me back. I logged in and paid for my 0.25% liens:

0.25% $2,276.12

0.25% $1,969.49

0.25% $1,596.49

Totals: 3 $5,842.10

Now that I had “won” the right to collect 0.25% on my investment, I went back and changed my Citrus County bids to 5.75 – 7.25%. That auction was held from June 1 – 3. I was again shut out with all the liens I bid on going for 0.25% and having one to two million bidders.

Now that the 2012 Arizona and Florida tax lien auctions are over, I have three goals for the rest of the year:

First goal: really learn tax liens. By that, I mean learn the laws and strategies. Most of my posts for the rest of this year will be focused on technical and legal topics around investing in tax liens.

Second goal: find a better return. Let's say I am getting a 5-6% return on my tax lien investments. That is not so bad considering the current interest rate on other investments, but I am not sure yet I am actually getting that rate. Even if I am getting that rate, I am not sure it is worth the effort.

Third goal: find opportunities with less competition. This may mean other states, or counties not doing online auctions. I am not sure opportunities are out there, but I will certain look.