florida tax certificates v tax deeds

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 Good morning gang. This is Alfred from the pockets of specialized knowledge studios coming to you from beautiful Broward county, Florida, actually Bravard county kinda only missed by 300 miles. So today's topic is the main differences between tax liens and tax deeds in Florida. They are significant to their big differences. There we go. Look at that tax lien versus tax deed. First of all, in Florida tax lien is referred to as a tax certificate. So I'm going to describe tax certificate investors here. So tax certificate investors are cash investors. They are trying to put their cash to work. They prefer not to own real estate. They prefer not to get their hands dirty. They probably have enough money for the balance of their lives. And as a side note, these investors would probably make wonderful private money lenders. And there's a little tip for you guys that know what you're doing. Contact these tax certificate investors and see if you can put them to work as your lender. In any event, these guys are comfortable in life. They're not looking to earn an income. They're looking to earn a return big difference. It's almost as big as the difference between the lean and the deed itself. So let's see if I can get their chain look at that. Okay. I don't know what that I'm at the I'm at the move over here because I can't read this slide. Okay. Now, tax deed investors, these guys are property investors. They prefer to own real estate. They too also prefer not to get their hands dirty, but they've, they will. And they frequently do. And any of you guys at, by tax deeds and know exactly what I'm talking about, uh, they're usually still making their mark in the real estate industry, and they're not looking to make they're looking to make money, not just to return. So a tax deed investor in my mind, and in my experience are guys that want to buy property. They're trying to earn a living, whether it's earning, living by selling the property that they buy at a tax deed or selling the property to another investor, taking the short money versus a long money doing their rehab. These guys are the guys that own property versus the tax lien guys, the tax certificate investors. You're not going to see a tax lien investor at a tax deed sale and vice versa. You're probably not going to see that because they're different creatures. Okay? Tax certificates, tax certificate specifics. It's easy for you to say, right? Okay. Tax liens are referred to in tax certificates in Florida. The purchaser of the tax certificate must A minimum of two years in order to enforce recovery of their investment to enforce recovery of their event. I'm going to change sides and get I'm sorry, gang. I hope you're not hooked on having me on one side or another to enforce our investments, have a tax deed and a taxi. The application has to be initiated. Okay? And the certificate life is seven years. So what that means is you buy a certificate. You must wait a minimum of two years. And then as the certificate holder, you make application for a tax Dee to go to the clerk's office. You actually fill out application. You turn in your certificate, you have to pay off all the other certificate. It's a big rig and my role to do it, but the clerk will help you through it because their clerk is going to earn some nice fees based on your filing. And by the way, if you don't make your application for tax deed within seven years, it goes away. So if you thought you were compounding interest on top of the interest, forget it. It goes away after seven years. Okay. Tax deed specifics. It's a lot easier than the last one. Okay. So the issuance extinguishes all non-governmental liens. So gang is a mortgage, a non-governmental lien. You bet. It sure is. So the best thing about a tax deed is that when it struck off in extinguishes, all the mortgages, isn't not great. That's the reason I first started looking into tax deeds because the biggest problem, when you're buying a house off a homeowner is the mortgage got paid that thing off. But here the tax deed eliminates that mortgage. The next thing is the grantee or the person that receives the deed. Remember he receives is entitled to immediate possession. What could be better? Compare that with foreclosure, where you have to go through a writ of possession. If the homeowner won't move out or the occupant won't move out, it's a, it's a big mess and foreclosure versus tax deed. You knock on the door and they say, and you show them the deed. Oh yeah, I'm an okay. And they get out, it doesn't happen. And like, oh, sorry. I didn't mean to drag you down that road. It don't happen like that. It says you're entitled to immediate possession, but you don't generally get it. Now I buy in Florida. So most of the people in Florida are going to be obstructive to the law. And there's a, there's a statute 1 9, 7 that says I'm entitled to meaty possession, but the occupant didn't read the statute. So I'm not going to get immediate position. I'll tell you about, I do that in a minute, but you also have to clear title in order to sell the acquired property. So you have to clear the title. And why do you have to clear title and gang that's right? Because nobody in the title tax deed action auction was given due process. Nobody was served with a document to appear in front of a judge and nobody had the chance to state their case. That's why you have to clear, okay. Tax lien versus taxi tax certificates are available to purchase only one time a year in Florida. One time, that's it. You buy it during the month of June only. That's when they all go to sale online sales only you have to register, you have to bid. And if you win, you pay within 24 hours. And I don't even believe it's been so long since I've been on tax certificates. It's funny because you've been on texted bits between you have money. Well, a thousand years ago I had money. So online sales only. And I don't remember whether you get the certificate physically mailed to you, or whether it's an online certificate now, but that really doesn't matter because their county records, uh, will have you purchasing the certificate. Uh, okay. The next line is tax deed sales. This is when you buy tax, deeds are regularly scheduled throughout the year. Smaller counties hold them less often, maybe once a quarter, if you're in a real small county and larger counties like Miami Dade hold tax deed sales, two times a month, just to give you an idea how many people are paying their taxes in south Florida, uh, here in Bravard county, uh, I believe there's tax deed sales that occur once a month. And just like every other tax deed sale. There's a hundred and something properties that are scheduled. And usually about between 15 and 20 actually go, okay. So, uh, tax deed sales it's online sales only, you have to register open an account and you bid, but you first have to make your, the positive 5%. You pay the balance within 24 hours, you receive instruction from their clerk on how to do it, um, about final payment. But what I wanted to point out here is a tax are available only once a year and tax tech certificates are only available once a year. And tax deeds are scheduled to sales, uh, throughout the year. And more often, if your county is a big county, okay. Once issued tax certificates immediately moved to the top of the title, food chain, their priority for payment exceeds every other non-governmental lien. So the minute that tax certificate is struck to you as the buyer, it moves right to the top of the chain of priority for a title search. So it runs right past every mortgage, every lien, every judgment, every everything goes right to the top except governmental liens. Okay? Okay. This it's this tax certificate priority, which allows the issuance of the tax deed to extinguish mortgages, which is generally the largest lien amount on every property. That's true. And I told you, that's what got me excited about buying tax deeds is that I could buy a piece of property without the mortgage being attached to it. And it wasn't until I bought my third or fourth one that I realized, Hey, wait a minute. These guys in the government, these code guys, they want their money. Well, but wait, I got a tax deed. It doesn't matter, sir. I'm very sorry. Governmental liens are not extinguished, but is that an expensive lesson? And I hope you'll learn it here from my words. And don't have to actually go through it. Okay. How are these tax certificates purchased? Tax certificates are purchased through an auction format and the lowest bidder wins. So this is in Florida that you start out at 18% and then you bid 17, 16, 15, 15, 14, and a half. And you go down, down, down, down, down until you settle on the number that you're willing to accept the interest rate, you're willing to accept, to pay off the property owner's taxes in full that's, what it is. So you bid it down. Uh, the amount of the certificate is equal to the taxes that are owed. So if the taxes are 10,000, $110, the certificate is $10,110. That's what it costs. You pay every penny. And that's the opening bid. And for tech certificates via the amount that you're bidding has to be in, in your, in your comfort zone. But it really doesn't matter. It's more the property being sick. It's the security of the property. Uh, there's certain things that you can do to mitigate the risk factors in tax certificates, uh, on my website, I think it's at the bottom of the page here, but on my, on the website, it has, uh, a little, a little manual that I put together many years ago after I learned all my hard lessons on tax certificate sales. I think it's on my website for like 40 bucks or something like that. If you're going to buy certificates, just pick it up, it's going to help you. Okay. So investors bid on the interest rate that they're willing to accept for payment of the real estate taxes due on a specific property. Now here's, what's fun, Florida statute 1 9 7 said the minimum interest on a tax certificate is going to be 5%. See what he says next, unless you bid 0%. Now, I don't know how many investors are going to bid 0%, because if you're been 0%, you're bitten it for spite. Um, it could be the property owner. That's bidding it at 0% and they just missed the payoff window. And I really don't know why I can't. I can't conceive a reason why that an owner would pay what would allow a certificate to be issued instead of just paying it off. Anyways, what's fun about it is that if you watch the auction in Florida, it'll go four and a half, then it'll go to four. Then it'll go to three and a half. And I'm thinking to myself, what are these people doing? What are they doing? Just bid down to one, half a percent. And the auction is over because your minimum is five. The only thing they could do is they could want to waste the rest of their day, bidding down from four and a half to four to three and a half to three to, to stop it. The bid to a half you win. You're going to get paid five. The worst thing that's ever happened to tax certificates, Florida is bank lenders. Big money. Lenders are coming in and they're happy taking 5% because they're making 5% on money that they're not paying for because of your deposits. So they make 5% for nothing just by sticking these, these, uh, their money in certificates work are generally considered to be one of the safest investments that you can make. Okay, let's continue. Before I got to get off my soap box on this one, a tax certificate has no property rights. You will never get a deed by owning a tax certificate, except there's one exception. And if you get the deed on the property, because of this exception, you don't want it. You don't want it. And I'm going to, I'm going to tell you what it is right now. If you buy a tax certificate, you make application for a tax deed sale, the sale goes off and nobody buys it. Guess what? It's yours. You own that property. So the word of caution with this comes from making sure that when you buy your tax certificates, be sure to buy them in a couple of separate names. I don't know how many certificates you want to put in one name. I don't know how many want to batch it together, but the problem is going to be, if somebody does have nobody bids on a sale, especially in Florida, where the investors are very savvy and very aggressive. If somebody doesn't, if an investor doesn't bid on your certificate, you don't want it, but you're gonna get it. And the problem is if you buy it an ABC Corp, every single lien that's on that property from the government is going to attach to every other property that you own in the name of ABC Corp. So you're going to have to be very careful how you structure this. And I also do not know if you have a tax deed struck off to you as a tax certificate applicant. If you're allowed to change the name, I will talk to the clerk about that just as a precaution and 90%. This is the, this is the bad thing about certificates is 90% of certificates will pay off it in six months. Why is this is because either a mortgage company who knows they're going to lose their position, if they don't pay it or a homeowner is going to get petrified. So the homeowner Mr. Tax payment, they're going to get that notice and they're going to run down. Cause the warning is stern. The warning is scary. So they're going to run down to the, and they're going to pay it off. So 90% of tax certificates, I might be a little heavy handed on that. It might be 80%, but still a very, the vast majority of tax certificates that are issued will pay off in the first six months. Now, of course, unless you did it with me, I didn't care because I couldn't borrow money at 5% to pay it off. It would cost me more. So I let it run. Didn't bother me. I just pay it off on the, on the last day. So, okay. So that's an attack certificate. Let's see what we've got at tax deeds. And I'm sorry, again, I have to move my pitcher and you know what said, I generally didn't, I didn't use to use these photos on the thing, but I heard from somebody saying that it helps peak keeps the people engaged. And I believe him because my first time, so, okay. Tax deeds, they are purchased in an auction format, but unlike certificates, the highest bidder wins, which is the auction format that most of us are accustomed to. The opening bid is established by the county based on the amount owed to the tax deed applicants. So for example, if you have a tax deed that you paid 1,004 and your tax deed is three years old, so you waited an extra year, you have to pay off certificates two and one in order to make, make, get your, get your tax deed application accepted. And they say they're each a thousand bucks. So you paid a thousand for years, you have to pay the other two off plus there's costs. So the opening bid for this property, and this elementary example will probably be about 36, 30 $700, because it includes all the fees. The tax deeds do have property rights. So when you buy it, you buy it warts and all, everything comes with it. And title must be cleared in order to sell it. And why is that? Once again? It's because there was no due process. That's right. Thank you, Timmy. From Omaha. I appreciate that. It was no service. Okay. So let's move to the next one. Next slide, please. Here we go. Okay. Which is better. Okay. Now this is a question you're going to have to ask yourself. It depends on your personality. If you like the game, then you want to bid on tax deeds. If you don't like the game or you appreciate the cane for what it is, but you want to sit in the couch and watch TV all day and earn 5% on your money. Good for you. Because 5% on my money is not going to do me any good. I need to make money. Okay. So how much cash do you need to put the work? Uh, I got to put all my cash to work, but I got to do it aggressively. I like the game. So what does that tell you? That's right gang. I'm a tax deed investor. You have to also talk to yourself and answer, honestly, what is your tolerance for risk? If you're a scaredy cat, you need to buy certificates. If you have a little bit of a spine, even a little bit of a spine, you'll do okay with tax deeds. But you have to understand, take a look at your business model, which you should have written down somewhere and been painfully truthful with yourself while you were filling it out. But like I said, tolerance for risk is very important, willingness or ability to do the work. There's some people that don't want to do any work. Those are the guys that should be in certificates. If you have the willingness and the ability to put whatever you have to work by tax deeds, because your return in the long run is going to be much greater, but so is your risk because you have to deal with market forces a lot more often than certificate buyers do. And it's also going to be based on your real estate education level. Banks generally don't have any real estate education yet. They can buy certificates safely because it's an easy event. But if you're going to buy tax deeds, you need to have some experience. You need to have some education. You need to know what you're doing with certificates. You really don't. So let's see if what I do on the next slide. Okay. That's it. We're all done. Happy investing. Thank you for watching. Again. This is Alfred Einstein with four pockets of specialized knowledge. Remember attend your real estate club meetings. Very important that you connect with other investors. See what they're doing out there. And remember, you don't know what you don't know until next time. See again,