Links: Tax Liens, Budgeting, Diamonds, Time, and Carnivals

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Here are some posts from other bloggers that caught my eye:

Guzzo the Contrarian writes about Arizona tax lien certificates. I remember these being vaguely mentioned as superior to bank CDs in the Rich Dad, Poor Dad book series. I’m sure these involve more risk, so while I don’t believe that, it would be interesting to see how much these pay in my area.

Madame X shares how she successfully tracks her spending by using a PDA. I found it amusing that her old unsuccessful method is pretty much my current one – buy everything with a credit card, and count all the ATM withdrawals as either food, coffee, or beer. She lists some useful PDA financial software.

Jane Dough brings up the always-controversial subject of engagement rings and has some wise and practical thoughts. You can read my opinion on diamonds here. In short, like everything else in relationships, it all boils down to communication! There is no right or wrong. Every couple should do what’s right for themselves.

Mighty Bargain Hunter counts out 16 ways being disorganized costs you money. I think the main way disorganization costs you money is because it costs you time. Time that could be spent improving your career, executing money-making ideas, or learning more about investing.

If you haven’t been keeping up, the Carnival of Investing has been chugging along, with #55 at Binary Dollar, and #56 at Sun’s Financial Diary. New hosts are always welcome.

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  1. I’ve found my cash withdrawals to be small enough that I don’t even really bother tracking those. In my case, though, I know what the major expense is – food. I eat out way too often!

    I’m with you, I’m the obsessive compulsive expense tracker. I reload money data daily at the minimum. Even sometimes on the go with Yodlee mobile. I’m never surprised by what shows up, just sometimes how much it all adds up to can be a shock.

  2. Boston Gal (aka Jane Dough) says

    Thank you for the mention and the link 🙂

    I agree – communication is the biggie – but perhaps I should wait until at least the second date to mention the ring 😉

  3. Jonathan,

    Regarding the tax lien certificates – Rich Dad Poor Dad oversimplified it greatly when he compared it to a CD. The book he recommended, 16% Solution, also oversimplified this investment in my opinion, and is very dated.

    I learned a lot from this book by Larry Loftis and highly recommend it.

    It’s not fair to compare tax lien investing to a CD, because while both are safe fixed rate investments, a CD is very easy and tax lien certificates require not only a learning curve but also legwork on the part of the investor.

    To invest in these things, short of making it almost a profession like the author of that book does, you need to become an expert on the tax lien rules for not only a specific state but also a specific county. Every jurisdiction is different, and I’m not kidding. If you’re in a hot county for real estate, you might find it easier to do this in a less hot neighboring county where the financial institutions will be less dominating at auctions, and get to know the rules there.

    The safety in tax lien investing comes not from FDIC like a CD, but from your research determining that the property securing the loan isn’t worthless, as well as willingness to go through the legal steps on the secured property if the borrower fails to pay. Money can be made that beats CD’s handily, and it’s safer than stocks if done correctly, but the bottom line is doing it correctly involves work on your part.

  4. Thanks for linking to the Carnival.

  5. Yeah I only go to the ATM about once a month or less for cash. I usually even use credit cards for food, but many smaller places don’t take cash or I am splitting the tab with others.

    Is is Boston Gal now? I thought you got it back. Ha, talk about the top 10 worst things to bring up on a first date!

    Dan – Thanks for the book recommendation. It is officially on my reading list now. I’ve actually always wanted to learn more about them but keep forgetting, that’s why Mike’s post caught my eye.

    Actually, the fact that it takes skill is a good thing. The fact that people make it sound like it doesn’t take skill is a bad thing, as it probably drives down the returns at these auctions.

  6. Jonathan,

    Like Dan said, tax liens are very county specific. I used to do tax liens with my dad in Florida. Some Florida specifics to give you an the state max rate is 18%. The auctions all begin around the first of May for all the counties, so unless you have a bunch of partners its nearly impossible to hit all the counties. Prior to the auction all the counties would release a paper form of all the properties, very minimal details. I believe only towards the end of when we did it were electronic records available. If you think you could grab your list and walk into one of these without having some program run a search against all these properties you were wrong. The first year we did it like that but ended up with one bad piece of property, which I’ll get into later.

    The auctions are also very specific for whats a hot country, how the foreclosure rate is doing in that country. Each auction on each property starts at 18% and you bid down. For example, Broward County auction (Ft. Lauderdale) was overrun with all the banks, Wachovia, Wells Fargo, Bank of America, etc. Their opening bid was always 3% or lower. Now this meant 3%/12 per month with a guarantee of at least 2 months. So basically I sat with my dad at this auction from 9am until noon. We broke for lunch and resumed at 1pm, however the bankers didn’t come back until nearly 1:45pm. This is where my dad and I got all of our tax liens, sans one. After sometime the auctioneer said let’s give some time to the little guys and the banks stopped bidding. Picked up one property during this time where the owner NEVER paid their taxes. In Florida you must wait 22 months (most states are equal or longer) before you can file for a tax deed. Filing for a tax deed is no easy matter. While I was filing for a tax deed, I learned that this property was a small piece of land divided off the main property because the home owner was having a dispute with the home owners association that this land should have been common land since it was apparently being used as such and did not want to pay for water and taxes on it. So the home owner broke it off and let the taxes be delinquent. Getting the tax deed for this land would have been worthless so I let it expire.

    On the upside however, once you learn at your first auction and are able to get some basic data (this can be purchased off countless websites each year) about the properties you can be armed with a lot more information on which ones you absolutely should not bid on. Also you can learn which counties are hot and which counties are not. The bankers told me that essentially they were protecting their mortgage investments with their bids, they would all trade later on back at the office.

    Why? Because a tax lien is essentially the 0th lien/mortgage against the house. It comes first before your mortgage, so if you fail to pay your taxes, whoever buys the lien can potentially win the property and owe $0 on your mortgage. This is where the ads for “pennies on the dollar homes… I bought this beautiful home for $230” come from.

    Another caveat, that I had heard of is that if you go to a tax lien auction this year, you would purchase their 2006 tax debt. However, if that homeowner didn’t pay their 2005 taxes, their tax lien would be before yours and if the homeowner didn’t pay them back in a reasonable amount of time. They would get the property and owe you nothing, and there would be nothing you could do about it. However, this varies by the laws of each state and each county.

  7. Thanks for the mention! I may have an old palm or two I could sell you if you want to cross over to the dark side!

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