Recommendations for Future Purchases
Bid on higher value properties
Higher value properties have lower premiums, the people who are involved in the auctions seem to see the dollar value of the premium as being more important than the percentage of the premium. For example, the highest value lien in 1995 was around $22,000, the final purchase of the lien was $23,100. This was a $1,100 premium, but the percentage was only 5%. The total dollar value risk was high (if someone came in and paid off the lien) however, the break even point was about two months compared to almost four months with an 8% premium. Also, in my current investments, the higher value properties take longer to be paid off. This means that you are making a larger dollar value return and a higher percentage return.
Purchase a wide variety of properties
It should be noted that the risk should be spread over a number of properties to guard against a quick redemption of a lien and the loss of the premium. If everything is invested in a single $20,000 lien that is paid off in one month, you will lose about $900 and be out of the investment until the next year. If you purchase four $5,000 liens and two are redeemed before the first July, you may lose as much as $450 however, the other two properties have earned $1,050 and you have the funds to endorse the certificates for another year.
It is also recommended that we not purchase liens on vacant land. These are too easily redeemed.
This is a generally safe, though very long term investment. For a hard copy of the full proposal please send three dollars (to cover postage) to:
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