The process of buying tax liens here in Colorado can be summarized in a nut shell: The county collects property taxes annually and if those are not paid, the properties go to auction so the county can recover what is owed and maybe a little bit more.
From the bidder's standpoint this is a three-year plus 105-day potential investment. To have the winning bid you must offer at least what is called “face value” or the amount of the taxes. You may enter a “premium” if you really want any particular property. The county benefits by that premium in that there is money available to cover fines, penalties and other costs that may have accrued.
You must pay the amount you bid in verifiable funds such as a cashier's check, and the document you receive is called a tax sale certificate. If you want to own the property, it will not become yours until a Treasurer's Deed is issued three years after the sale date. Even then the “owner” who failed to pay their taxes has, by Colorado law, 105 additional days to redeem and reclaim the property.
Here is where you are guaranteed to make money. Most people, who bid on tax liens, Ms. Henderson explained, do not intend to “own” the property. Rather, they are investing the money with the guarantee that they will be paid interest on that money if/when the property owner decides to reclaim their property.
Your money will have paid the taxes when the county wanted them and for that you will be rewarded with a 10% annual interest rate. The catch for you is for how long a period your money gets to work earning interest. If the property owner redeems their right to ownership by paying up on the taxes after 10 days, or six months or the full three years that is the time your interest earnings are paid on.
With that 10% annual rate, you could potentially make a 30% return on investment if the redemption does not take place for three years; or, you could make less than 1% if the owner redeems, say one month, after the sale. About 1% of the expected 1,300 properties that go to auction next month will eventually be owned by you or others who pay off the property taxes this year.
For more information I suggest you visit the website www.mesataxsale.com. There is a FAQ page, registration and access to training and tutorials on how to navigate the auction software being used locally for this year.
So guaranteed return on investment? Yes. How much return is out of your control? How you want to invest your money, only you can decide.
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