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Author: trmcosker Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 52  
Subject: Tax liens as collateral Date: 9/28/2007 4:53 PM
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Greeting to my fellow Fools. I am new posting here, however I have been reading the site forever. I have recently begun investing in Tax Lien Certificates, and concur with my colleagues that they are a worthwhile investment if one can conduct the painstaking and proper due diligence. Otherwise you set yourself up for quick failure.   With that said, could one of the more seasoned investors please tell me whether I can borrow against a tax lien certificate. (use it as collateral). I have heard three scenarios, and am wondering which are correct. The 3 scenarios are: 
1)      One may use the tax lien certificate (lets say with a face value of $1,000) to borrow x percentage (say 60%) of the value. That is I could borrow $600 at the going market rate by using the $1,000 certificate as collateral, thus leveraging my $1,000 investment into $1,600 of working capital.

2)      One may use the tax lien certificate (again lets say with a face value of $1,000) to borrow x percentage (say 60%) of the value OF THE PROPERTY. That is, if I buy a $1,000 tax lien on a property who’s value is appraised at $200,000 I could borrow $120,000 on my $1,000 investment (assuming 60%). This seems more than a bit wrong, but if it’s true then please let me know. Yay leverage.

3)      One may not use tax lien certificates as collateral. Ever.   Your responses would be greatly appreciated. Thanks!
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Author: DrTarr Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50 of 52
Subject: Re: Tax liens as collateral Date: 11/13/2007 11:24 AM
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What happened, is this board dead? What about my Ute brother - Lucky are you out there????

Over a month and no answer?

To start with you did not specify where you wanted to use thes as collateral. Meaning at some private money firm or at a financial institution? But,

Well lets see - Number two is right out. You will not get a loan on a tax lien for 60% of the value of the property. From either a bank or any kind of reputable money source..!

So it is between 1 and 3, and my answer is it depends on your relationship with the banker. Can it be done, yes! But the bank will probably ask for a track record, a personal guarantee, that sort of stuff. You may actually read the OCC circular posted earlier. Good read and gives you a take on the bank perspective. Although as a bank examiner I never saw the institution actual hold the lien.


d(TLC Leverage)dT

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