Tax Liens
Primary Market
Tax lien investing is by no means a new concept but in recent years, its increased popularity has made it a hot topic. Tax lien investing is simply the act of buying a tax lien on a property that has become delinquent. You benefit from it by either earning profit as the property owner pays interest on the certificate or from the liquidation of the collateral securing the loan. In the event that the owner does not pay of the entirety of the loan within a set redemption period, the deed to the property is yours. A typical redemption period is around 120 days. In most situations, these properties have been delinquent for years, far longer than the bidding process. The redemption period doesn't usually change anything about the owner's ability to make payments, and typically the property will default to you, the tax lien purchaser.
The most important thing is to do appropriate research on the city, neighborhood and home itself to ensure this particular lien is a good investment. A bad neighborhood or poor infrastructure could leave you stuck with a bad home for several years.
Tax liens require much less start-up capital, the rate of return is typically rather standardized and in most cases you are paid a lump sum of money when the lien is resolved, something you can calculate from the outset.
Secondary Market
Tax liens have long been coveted assets amongst bankers, institutional investors, and hedge fund managers, who invest hundreds of millions of dollars annually in tax lien certificates. This fervor makes it challenging for smaller investors to compete, especially when these financial titans can, and sometimes do, acquire entire county portfolios. However, a less visible yet vibrant marketplace exists where these heavyweights engage in trading and purchasing from one another. Within this Secondary Market, tax lien certificates worth tens of millions of dollars, initially acquired at auction, change hands through private sales. This arena is not typically accessible to individual investors unless they possess the connections or the capital to buy in bulk.
Acknowledging this gap, Red Oak Real Estate Fund 1 was established, embodying a novel approach to the Secondary Tax Lien market. Our inception was driven by the opportunity to acquire secondary market tax lien foreclosures from the primary market, catering to a niche previously unexplored. We are the pioneers who transform distressed properties into valuable assets by renovating them and finding suitable tenants, thereby reintroducing them into the market.
By navigating this private trading space, we've not only participated but have also facilitated access for our clients. Our strategy involves acquiring substantial portfolios from the Secondary Market and then, through our skilled portfolio managers, offering our clients the chance to invest in these tax lien certificates in smaller, more manageable segments. This approach allows our clients to bypass the competitive auction process, avoid the complexities of county-specific regulations, and invest in previously inaccessible tax lien certificates.