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Investing/Strategies / Tax Lien Certificates


Subject:  Re: TLCs as the RE market drops Date:  1/29/2007  4:43 PM
Author:  LuckyUte Number:  45 of 52

There's been talk of funds that I've seen, in terms of why no one does "tax lien funds" cause it shaves the margins to the point that the risk:reward isn't worth it. But it does seem a bit surprising that there isn't a business built around this sort of thing. For instance:
Say I get a tax lien for $10k @ whatever interest to be paid over 10 years @ $2k per year. That stream has an NPV of $14,720 @ 6%, but it's a $20k cash flow net. It seems surprising that there isn't anyone out there buying up this lien and immediately trying to flip it for $12k.

Is there a market for this sort of flipping? Seems like it'd be a good play to get into...

There are businesses built around it. The institutional investors I mentioned earlier are some of these. For instance, look at these guys...

Also, when I buy and sell in bulk for larger investors (such as the above), I do the kind of analysis you mention. However, most NPV analyses would be at much higher rates than 6%.

Does that sort of answer your question?

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